United States District Court, N.D. Illinois, Eastern Division
Matthew STRAIT, et al., individually, and on behalf of himself and all others similarly situated, Plaintiffs,
BELCAN ENGINEERING GROUP, INC. d/b/a Belcan Corp., Defendant.
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Aaron Benjamin Maduff, Walker R. Lawrence, Maduff & Maduff, LLC, Chicago, IL, for Plaintiffs.
Gregory Michael Utter, Rachael Anne Rowe, Thomas Frost Hankinson, Keating, Muething & Klekamp, Cincinnati, OH, Michael Lawrence Sullivan, Goldberg Kohn Ltd., Chicago, IL, for Defendant.
MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Judge.
On February 24, 2011, Plaintiff Matthew Strait (" Strait" ) filed a Complaint, for himself and on behalf of similarly situated others, against Defendant Belcan Engineering
Group, Inc. (" Belcan" ) pursuant to the Fair Labor Standards Act (" FLSA" ), 29 U.S.C. §§ 201 et seq., the Illinois Minimum Wage Law (" IMWL" ), 820 ILCS 105/1 et seq. , and the Day and Temporary Labor Services Act, 820 ILCS 175/1 et seq. (R. 1, Compl.) Plaintiff Scott Brooks (" Brooks" ) later opted in to this lawsuit. ( See R. 25-2.) Specifically, Plaintiffs Strait and Brooks (collectively, " Plaintiffs" or " Named Plaintiffs" ) allege that Defendant Belcan deprived them of an overtime premium for all hours worked in excess of 40 hours in a week. Before the Court are two motions: (1) Plaintiffs' motion for collective and class certification (R. 80, Pls.' Cert. Mot.); and (2) Defendant's motion for partial summary judgment (R. 63, Sum. Jgmt. Mot.). For the reasons explained below, the Court denies Plaintiffs' motion, denies as moot Defendant's motion with respect to the collective and class claims, and grants the remainder of Defendant's motion.
Defendant Belcan is an Ohio corporation and one of the country's largest providers of third-party contracting services of full-service engineering contractors, employing thousands of contractors throughout Illinois and the United States. (Compl. ¶ 1.) Belcan employs dozens or even hundreds of engineers, designers and/or other employees working on outsourced projects. (Undisputed Resp. Facts ¶ 1.)  Belcan classifies certain employees as exempt under the FLSA and therefore pays them only straight-time overtime, rather than time and a half, for all hours worked over 40 in a week. (Compl. ¶ 1.) Full-time exempt employees work for customers at more than 20 Belcan facilities and about 30 customer facilities nationwide. (R. 100-3, Pls.' Sum. Jgmt. Opp. Ex. 1, 2011 Wirth Decl. ¶ 6.) Belcan's full-time exempt employees include most internal IT staff, some human resources personnel, many administrative personnel, top-level General Managers and Operations Managers at Belcan locations, Belcan Vice Presidents, engineers and designers. (R. 99-2, Wirth Aug. Decl. ¶ 4)
Plaintiff Strait is currently an employee of Belcan. (Undisputed Facts ¶ 1.)  He began working at Belcan in March 2009. ( Id. ) Plaintiff Brooks is a former employee of Belcan, who worked for Belcan from March 19, 2009 to March 18, 2011. ( Id. ¶ 2.) As explained below, both Strait and Brooks worked as employees at a Caterpillar facility in Aurora, Illinois. ( Id. ¶ 3.) Belcan classified Strait and Brooks as direct, exempt, full-time employees paid on a salary basis. ( Id. ¶¶ 7, 9.)
The Court discusses additional facts, where relevant, within the context of the analysis below.
I. FLSA Collective Actions
Pursuant to the FLSA, " employees are entitled to overtime pay ( i.e., one and one-half times the regular rate) for any hours worked in excess of forty hours per week, unless they come within one of the various exemptions set forth in the Act." Schaefer-LaRose v. Eli Lilly & Co., 679 F.3d 560, 572 (7th Cir.2012) (citing 29 U.S.C. §§ 207, 213). The FLSA " gives employees the right to bring their FLSA claims through a ‘ collective action’ on behalf of themselves and other ‘ similarly situated’ employees."
Alvarez v. City of Chicago, 605 F.3d 445, 448 (7th Cir.2010) (citing 29 U.S.C. § 216(b) (2006)). District courts have broad discretion in managing collective actions under the FLSA. Id. at 449.
The Seventh Circuit has not established criteria for determining whether employees are " similarly situated" for purposes of the FLSA, but " ‘ the majority of courts ... have adopted a two-step process for determining whether an FLSA lawsuit should proceed as a collective action.’ " Franks v. MKM Oil, Inc., No. 10 CV 00013, 2012 WL 3903782, *9 (N.D.Ill. Sept. 7, 2012) (quoting Jirak v. Abbott Labs., Inc., 566 F.Supp.2d 845 (N.D.Ill.2008)); see also Frye v. Baptist Memorial Hospital, Inc., 495 Fed.Appx. 669, 671-72 (6th Cir.2012) (recognizing that the second stage warrants a " stricter standard" than conditional certification); Zavala v. Wal Mart Stores Inc., 691 F.3d 527, 533 (3d Cir.2012) (finding that a more stringent standard applies to final certification compared to conditional certification); Myers v. Hertz Corp., 624 F.3d 537, 554-55 (2d Cir.2010) (recognizing that a two-step method is sensible); Camilotes v. Resurrection Health Care Corp., 286 F.R.D. 339, 345 (N.D.Ill.2012); Medina v. Happy's Pizza Franchise, LLC, No. 10 C 3148, 2012 WL 1094353, *2 (N.D.Ill. Apr. 2, 2012).
At the first stage, a named plaintiff " can show that the potential claimants are similarly situated by making a modest factual showing sufficient to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law." Franks, 2012 WL 3903782, at *9 (citation and quotation marks omitted); see also Medina, 2012 WL 1094353, at *2. At the second stage, however, the court's inquiry becomes more stringent. Franks, 2012 WL 3903782 at *9 (citing Jirak, 566 F.Supp.2d at 848); see also AON Corp. Wage & Hour Employment Practices Litig., No. 08 C 5802, 2010 WL 1433314, *5 (N.D.Ill. Apr. 8, 2010) (" The second stage analysis requires the court to employ a much stricter standard in making a final determination on the similarly situated question considering a number of factors including the disparate factual and employment settings of the individuals plaintiffs and the defenses available to defendants that are individual to each plaintiff." ). At the second stage, the court considers " ‘ (1) whether the plaintiffs share similar or disparate factual and employment settings; (2) whether the various affirmative defenses available to the defendant would have to be individually applied to each plaintiff; and (3) fairness and procedural concerns.’ " Franks, 2012 WL 3903782, at *9 (quoting Mielke v. Laidlaw Transit, Inc., 313 F.Supp.2d 759, 762 (N.D.Ill.2004)). Plaintiffs bear the burden of demonstrating that they are " similarly situated." See Medina, 2012 WL 1094353, at *2 (citing Russell v. Illinois Bell Tel. Co., Inc., 721 F.Supp.2d 804, 811 (N.D.Ill.2010)).
Both parties acknowledge that the second stage standards apply to Plaintiffs' certification motion because the parties have completed fact discovery on the issues relevant to this motion. (R. 86, Pls.' Cert. Mem. at 26; R. 99, Def.'s Cert. Opp. at 23); see also Medina, 2012 WL 1094353, at *2 (" After discovery is completed and the opt-in plaintiffs are identified, the more stringent second step occurs." ).
II. Federal Rule of Civil Procedure 23
Federal Rules of Civil Procedure (" Rule" ) 23(a) contains four prerequisites for class certification: numerosity, commonality, typicality, and adequacy. See Fed.R.Civ.P. 23(a); Wal-Mart Stores, Inc. v. Dukes,
__ U.S. __, 131 S.Ct. 2541, 2550, 180 L.Ed.2d 374 (2011). In addition to satisfying the Rule 23(a) requirements,
Plaintiffs must show that the proposed class satisfies one of the three requirements set forth in Rule 23(b). See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997); Oshana v. Coca-Cola Co., 472 F.3d 506, 513 (7th Cir.2006). Here, Plaintiffs seeks certification pursuant to Rule 23(b)(2) or 23(b)(3). For certification under 23(b)(2), Plaintiffs must show that a single injunction would provide relief to each member of the class. See Wal-Mart, 131 S.Ct. at 2557. To certify a class pursuant to Rule 23(b)(3), they must show that " questions of law and fact common to members of the class predominate over questions affecting only individual members of the class" and that the " class action device is superior to other available methods for fairly and efficiently resolving the dispute in question." Messner v. Northshore Univ. HealthSys., 669 F.3d 802, 808, 814 n. 5 (7th Cir.2012); see also Fed.R.Civ.P. 23(b)(3).
In order to grant class certification under Rule 23, the Court must be " satisfied, after a rigorous analysis" that the rule's requirements are met. Dukes, 131 S.Ct. at 2551 (citation omitted). Because " ‘ [t]he class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action,’ " the court's rigorous analysis frequently " entail[s] some overlap with the merits of the plaintiff's underlying claim." Id. at 2551-52 (quoting Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)). Plaintiffs bear the burden of proving each disputed requirement by a preponderance of the evidence. Messner., 669 F.3d at 811. District courts have broad discretion in determining motions for class certification. See Reiter v. Sonotone Corp., 442 U.S. 330, 345, 99 S.Ct. 2326, 60 L.Ed.2d 931 (1979); Messner, 669 F.3d at 811.
III. Summary Judgment
Summary judgment is appropriate " if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A genuine dispute as to any material fact exists if " the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). In determining summary judgment motions, " facts must be viewed in the light most favorable to the nonmoving party only if there is a ‘ genuine’ dispute as to those facts." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing that there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). After " a properly supported motion for summary judgment is made, the adverse party ‘ must set forth specific facts showing that there is a genuine issue for trial.’ " Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (quotation omitted). " [D]istrict courts presiding over summary judgment proceedings may not weigh conflicting evidence or make credibility determinations, both of which are the province of the jury." Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704-05 (7th Cir.2011) (internal citations omitted).
I. The Court Denies Plaintiffs' Motion for Collective Action
Plaintiffs seek to certify the following collective pursuant to 29 U.S.C § 216(b): " All Full Time Direct Exempt Employees employed by Defendant from June 10, 2008 to present." (Cert. Mot. at 1.) Plaintiffs never define " Full Time Direct Exempt Employees," however, in their
motion for certification or supporting memorandum. ( See Pls.' Cert. Mot.; Pls.' Cert. Mem.) In Plaintiffs' Complaint they seek to certify " all current and former Belcan employees who performed contract or temporary work for Belcan's third-party clients in the United States and did not receive overtime compensation for all hours worked in excess of 40 at any time during the last three years." (Compl. ¶¶ 32-33.) Belcan's Exempt Direct-Full Time classification, however, includes administrative personnel who never work on customer projects, meaning that Plaintiffs' request in its motion to certify a collective of " all Full Time Direct Exempt Employees" is potentially broader than the group defined in their Complaint. (Defs.' Cert. Opp. at 40.) Plaintiffs' Motion for Judicially Supervised Notice sought to notify " any employee Belcan has classified as a ‘ Direct’ employee that was full time and subject to a policy and/or practice that paid only straight time for hours recorded over 40." (R. 38, Mot. Jud. Not. at 2.) In that motion, Plaintiffs claimed, without citation, that Belcan classifies such employees as " Exempt Direct-Full Time." ( Id. at 4.) For purposes of the present motions, the Court assumes that " Full Time Direct Exempt Employees" means all employees that Belcan classifies as " Exempt Direct-Full Time," who are paid only straight time (not time and a half) for hours recorded over 40 each week.
Under the FLSA, an employer must pay every non-exempt employee at " a rate not less than one and one-half times the regular rate at which he is employed" for every hour over 40 that he works each week. See 29 U.S.C. § 207. Plaintiffs allege that Belcan has violated the FLSA by not paying Full Time Direct Exempt (" FTDE" ) employees time and a half for overtime they work. (Compl. ¶ 1.) Belcan counters by claiming that the FTDE employees are exempt from the FSLA overtime requirements under the professional or administrative employee exemptions. (Def's. Cert. Opp. at 21-22.; R. 18, Def.'s Ans. at 18; R. 63, Def.'s Sum. Jgmt. Mot. at 3); see also 29 U.S.C. § 213(a).
Proving that an employee qualifies under the professional or administrative employee exemptions requires evidence of the employee's primary job duties along with evidence that the company pays the employee on a salary basis. See 29 C.F.R. § 541.300; 29 C.F.R. § 541.200; 29 C.F.R § 541.600. Plaintiffs and Belcan agree, however, that the defining issue of this litigation is whether Belcan pays the FTDE employees on a salary basis. (Pls.' Cert. Mot. at 2; Pls.' Cert. Mem. at 1 (" In this case, there is a common question as to whether or not these employee are paid on a salary basis as required by the FLSA." ); Def.'s Cert. Opp. at 21-22; Def.'s Sum. Jgmt. Mot. at 2-3 (arguing that the collective and class claims fail if Belcan pays its exempt employees on a salary basis).) The Court, therefore, only addresses issues relating to the salary basis requirement of the exemptions.
Although Plaintiffs dedicate twenty-two pages of their memorandum supporting their certification motion and nineteen pages of their reply brief to the issue of whether Belcan pays the FTDE employees on a salary basis under the FLSA, the Court need not resolve this issue in order to reach the question of certification. (Pls.' Cert. Mem. at 2-24; Pls.' Cert. Reply at 1-20.) Rather, the issue for certification is whether the Plaintiffs are similarly situated— whether a common question exists that can be answered without individualized inquiries. See 29 U.S.C. 216(b); see also Fed.R.Civ.P. 23(b)(3). The answer to any common question is a matter for summary judgment or trial, not for certifying a collective.
Although Plaintiffs are correct that the question " Are Full-Time Direct Exempt Employees paid a salary?" is common to the entire proposed collective, the universality of that question does not end the inquiry into whether the proposed collective members are similarly situated for purposes of certification. ( See e.g., Pls.' Cert. Reply at 1.) Rather, the Court must determine whether it can resolve that question based on common inquiries and proof or will need to conduct individualized inquiries.
The Court, in its discretion, finds that Plaintiffs are situated differently enough that the Court would need to undertake individualized factual assessments to determine whether Belcan pays all FTDE employees a salary, as defined by the FLSA. As such, proceeding as a collective action is not appropriate.
A. The Salary Basis Test
Under the FLSA, an employee is salaried if he " regularly receives each pay period ... a predetermined amount ... which is not subject to reduction because of variations in the quality or quantity of the work performed." 29 C.F.R. § 541.602(a). A court deems an employee's pay " subject to reduction" if the employer either: (1) has an " actual practice of impermissible deductions" ; or (2) has a " clear and particularized policy" that " creates a likelihood of deduction" and " effectively communicates that deductions will be made in specified circumstances." Auer v. Robbins, 519 U.S. 452, 461, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997); Kennedy v. Commonwealth Edison Co., 410 F.3d 365, 371 (7th Cir.2005) (" The phrase ‘ subject to’ does not require proof that ...