The case of Carrera v. Bally Total Fitness Corporation is a class action case for labor law violations. The basic allegations are the Ballys is violating various provisions of the labor laws, but mainly overtime and meal breaks. The issue is that there is an arbitration agreement in place that attempts to disallow class actions. In the recent case of Gentry v. Superior Court 42 Cal.4th 443 (2007), the California Supreme Court ruled that class actions can only be prohibited based on an evaluation of the following factors: (1) the modest size of the potential individual recovery, (2) the potential for retaliation against members of the class, (3) the fact that absent members of the class may be ill informed about their rights, and (4) other real world obstacles to the vindication of class members' right to overtime pay through individual arbitration.
The attorney for the employees argued that because wage and hour claims are typically small, it would be difficult for these employees to find individual representation. I am not certain why he made this argument because it was picked up on by the defendants and exploited.
The brief for the Defendant was written by Paul Coady, an attorney with Winston & Strawn, LLP. For those that listen to my pod cast, you are used to me making fun of various defense attorney arguments. However, this brief was actually well done. It focused the Judge's attention on an issue that should not have been relevant had the Plaintiff's attorney not made it the hallmark of his case. In addition, the attorneys actually did some original research to back up their claims. A lot of these defense firms just cut and paste the same arguments over and over again. In most cases, I could write their brief for them in a fraction of the time it takes them to write it. So, it is good to see some members of the Defense bar stepping up and giving us Plaintiff's attorneys a challenge.
In any case, Mr. Coady and his associates combed through all the wage and hour filings in Los Angles County, Central Distinct (the main Los Angles Courthouse, or Stanley Mosk). They found 127 of these smaller overtime cases, and specifically noted one of my cases and cited it as an example of a firm willing to take small cases (they also mentioned 4 other firms). Now, 127 cases is not a lot for Los Angeles. I did a simple query on my database and found out that I had filed 23 cases in Los Angeles Central Distinct in 2007. I had actually filed a couple more, but those got removed to Federal Court, so they were not counted in the query. In any case, this makes up about 1/5th of the total filings for Los Angeles. My goal is to get up to 1/2 of the total filings in Los Angeles County, and so far 2008 is off to a good start.
What all of this shows is that firms such as mine can and do represent employees who have smaller claims. However, just because you have small claim does not mean that you will get a small recovery. Frequently, there are various penalties that can be assessed that can dramatically increase this amount. My firm currently is using the Private Attorney General Act to help with these types of cases. In addition, arbitration agreements can dramatically increase your potential recovery in a small case, but listeners to my podcast already know that.
This does not mean that class actions are not necessary. In the case mentioned above, it was really just a mistake to mention anything about attorneys not being willing to take small wage and hour cases. The better argument would be to focus on the economic reality that if a large company is not subject to class actions, they will have an economic incentive to violate the law. The reasoning is simple: if you have 100 employees, can you can save $1,000 per year by not paying them overtime, this is saving the company $100,000 per year. Now, every year, a couple of them will sue for overtime, and they will need to be paid. This might cost the company, with attorneys fees any everything $20,000 per year. What company would not pay $20,000 per year so that they can save $100,000 per year?
The simple fact is that many employees do not assert their rights to be properly paid. This is not necessarily because of retaliation, but probably because many people do not want to be involved with a lawsuit. I probably talk to 5 people a week that have valid claims against a company that will never pursue them, even when they no longer work for the company, and even if the matter can be resolved privately in arbitration. Thus, the class action is still needed to properly vindicate the rights of these employees and ensure that all employers are playing on a level playing field.
Though I completely disagree with the reasoning in Winston & Strawn's brief, their legal writing was very well done. This will definitely help them in the soon to be released Employment Defense Firm Rankings.