California Appellate Court Affirms Denial Of Class Certification In Wage And Hour Case

November 3rd, 2010
By: Erich Schiefelbine, Stephens Friedland LLP
and Evan Rothman, Stephens Friedland LLP

 In Arenas v. El Torito Restaurants, Inc., 183 Cal.App.4th 723 (2010) the California Court of Appeal upheld the trial court’s refusal to certify a class of restaurant managers who claimed they were mis-classified as exempt.

Factual Background

Overtime pay is required under Labor Code section 510, subdivision (a).  The Welfare Commission, however, is authorized to establish exemptions from this requirement so that certain employees do not earn overtime pay.  (Labor Code, § 515, subdivision (a))  Section 515 allows the Commission to establish exemptions for “executive, administrative, and professional employees, provided that the employee is primarily engaged in the duties that meet the test of the exemption, customarily and regularly exercises discretion and independent judgment in performing those duties ….”  The Industrial Welfare Commission’s Wage Order No. 5-2001 deals with the restaurant industry overtime pay exemptions.  This order states that “[t]he following requirements shall apply in determining whether an employee’s duties meet the test to qualify for an exemption… (1) Executive Exemption[. ]  A person employed in an executive capacity means any employee: (a) Whose duties and responsibilities involve the management of the enterprise in which he/she is employed or of a customarily recognized department or subdivision thereof; and (b) Who customarily and regularly directs the work of two or more other employees therein; and (c) Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as to the advancement and promotion or any other change of status of other employees will be given particular weight; and (d) Who customarily and regularly exercises discretion and independent judgment; and (e) Who is primarily engaged in duties which meet the test of the exemption.”  (Cal.Code Regs., tit. 8, §11050).

The Plaintiffs in Arenas alleged that they routinely spent more than half of their hours performing duties other than those delegated to exempt employees and that the “exercise of discretion and independent judgment on matters of significance was given to employees on a level above that of Plaintiffs.”  Arenas v. El Torito Restaurants, Inc., 183 Cal.App. 4th at 728.  

The parties presented conflicting evidence regarding these issues.  Plaintiffs presented evidence, consisting mainly of individual testimony, that they spent the majority of their time performing non-exempt work, did not exercise discretion, were required to follow company policy and procedure as to virtually every aspect of their job, and that these conditions did not vary from location to location.  Defendants presented evidence that they conducted two surveys of managers’ activities to determine their exempt status, that the volume of an individual store impacts the operations of the store, and that the managers’ job duties and time spent on particular activities varied greatly between locations. 


Was the trial court reasonable in finding that common questions of law and fact did not predominate over individualized issues?  If so, was it an abuse of discretion by the trial court to deny class certification on these grounds?


Under Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, the trial court could reasonably decide that common questions of law and fact did not predominate over individualized issues and, therefore, it did not abuse its discretion.


Class certification is governed by Code of Civil Procedure section 382 which authorizes a class action when a plaintiff meets his or her burden to establish the existence of an ascertainable class and a well-defined community of interest.  The California Supreme Court has established that, “The community of interest requirement embodies three factors: (1) predominate common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.”  (Richmond v. Dart Industries, Inc. (1981) 29 Cal.3d 462, 47)  Trial courts are better situated to evaluate the efficiencies and practicalities of permitting a group action and so its predominance findings are reviewed for an abuse of discretion.  Arenas v. El Torito Restaurants, Inc., 183 Cal.App. 4th  723 (2010).  When the trial court’s decision turns on disputed facts, as it did here, the reviewing court cannot substitute its judgment for that of the trial court.  (Id.)  If the trial court’s decision was supported by substantial evidence, the decision will not be disturbed unless the trial court relied on improper criteria or improper legal assumptions were made. 

“A reviewing court is not authorized to overturn a certification order merely because it finds the record evidence of predominance less than determinative or conclusive.  The relevant question is whether such evidence is substantial.”  (Id. at 733, citing Sav-On Drug, 34 Cal.4th at 328)

This case suggests that the Court of Appeals will defer to a trial court’s determination as to whether commonality exists.  It also demonstrates that a trial court is justified in requiring that the plaintiffs proffer more than just individual testimony regarding their duties.  Instead, there must be a sufficient showing to “support extrapolation from individual experiences to a class-wide judgment that is not merely speculative.”  As such, relevant factual distinctions can lead to denial of certification.

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