California Supreme Court Stabilizes The Law In California Misclassification Class Action Cases

In a long-awaited decision, the California Supreme Court in Duran v. U.S. Bank National Association, S200923 (May 29, 2014), clarified California's standard for certifying class actions in employee misclassification cases. In doing so, the Court issued badly needed guidance to trial courts deciding whether employee wage class actions may be certified (or remain certified) as class actions. While the Court's standard is not identical to that set forth in the U.S. Supreme Court's recent decisions, Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct 2541 (2011) and Comcast v. Behrend, 133 S. Ct. 1426 (2013), Duran is a major step in bringing California's law on class certification in line with the standards prevailing at the federal courts and in other states.

Duran's effect will be far-reaching. The Court's rigorous and sensible analysis requires trial courts to conduct a far more thorough analysis at the time of class certification concerning the practical means by which individual defenses to class claims can be resolved, including a realistic trial plan that permits employers to litigate individual liability defenses. Although the decision did not expressly overrule any prior authority, its reasoning suggests that many cases in recent years applying vague and soft standards for certification of employee wage class actions may no longer be good law. The result will likely be a fairer playing field for employers in litigation over certification of employee class actions.

Background

Duran arose from a complaint alleging that loan officers working for USB were misclassified as exempt outside salespersons under California Labor Code § 1171. Relying heavily on the California Supreme Court's 2004 decision in Sav-On Drug Stores v. Superior Court, the trial court certified the case as a class action based on evidence that the loan officer position was "standardized," that the company had classified all loan officers as exempt without examining each employee's duties or work habits, and that the company allegedly failed to train or monitor employees to ensure that the exemption requirements were satisfied.

Duran is particularly significant because, as the Court put it, it was "an exceedingly rare beast: a wage and hour class action that proceeded through trial to verdict." Because of this, the trial court in Duran was actually required to implement a trial plan.

Hence, the problem. From the time of certification onward, the company had shown with...