Al Mohajerian

Wages label sticking out from a brown folder

PLAINTIFFS CANNOT DEPEND UPON A STATISTICAL SAMPLING OF EMPLOYEES WHERE INDIVIDUAL QUESTIONS ARE AT ISSUE

July 3, 2016

In anticipation of Plaintiffs attempting to submit to the court a small number of employees who will claim to have suffered violations of wage and hour law, the defense should rely to a great extent upon the case of Duran v. U.S. Bank, decided in 2014 by the California Supreme Court, 59 Cal.4th 1 (2014), as well as other supporting case law which prohibits “biased” sampling to prove liability. The case of Duran v. U.S. Bank is summarized below.

In 2014, the California Supreme Court unanimously upheld an intermediate appeals ruling that struck down a $15 million judgment in a class action case against U.S. Bank. The court reversed an employee class action win, finding that the Alameda County trial judge mismanaged a wage and hour class action where the court relied on flawed statistical sampling by relying on testimony of just 20 employees in extrapolating damages that had a 43 percent margin of error. The class involved 260 current and former business banking officers who claimed they were misclassified as exempt.

Writing for a unanimous court, Justice Carol Corrigan criticized the trial court’s flawed reliance on statistics:

As even the plaintiffs recognize, this result cannot stand. The judgment must be reversed because the trial court’s flawed implementation of sampling prevented USB from showing that some class members were exempt and entitled to no recovery. A trial plan that relies on statistical sampling must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced. Statistical sampling may provide an appropriate means of proving liability and damages in some wage and hour class actions. However, as outlined below, the trial court‘s particular approach to sampling here was profoundly flawed.

The court further noted, “[s]tatistical sampling may provide an appropriate means of proving liability and damages in some wage and hour class actions,” but “after a class has been certified, the court’s obligation to manage individual issues does not disappear.” 59 Cal.4th 1 (2014)

The decision is critically important in highlighting the challenge by the trial court certifying class actions, particularly in the misclassification context, and the obligation of the court in determining not just whether common questions exist, but also whether it will be feasible to try the case as a class action. Duran makes clear that class certification is not appropriate, unless these individual questions can be managed with an appropriate trial plan. Thus, depending on the nature of the claimed exemption and the facts of a particular case, a misclassification claim has the potential to raise numerous individual questions that may be difficult, or even impossible, to litigate on a classwide basis.

Detailed Discussion of Duran

The California Supreme Court in Duran highlighted the challenges in certifying class actions, particularly as related to calculation of damages at trial. The well-reasoned decision makes it more challenging to certify a class, as the court called on trial judges to consider whether a class action is manageable and can withstand a trial – at the class certification stage. The court criticized the trial court’s reliance on flawed statistical sampling, as a substitute in determining damages at trial, and noted:

After certifying a class of 260 plaintiffs, the trial court devised a plan to determine the extent of USB’s liability to all class members by extrapolating from a random sample. In the first phase of trial, the court heard testimony about the work habits of 21 plaintiffs. USB was not permitted to introduce evidence about the work habits of any plaintiff outside this sample. Nevertheless, based on testimony from the small sample group, the trial court found that the entire class had been misclassified. After the second phase of trial, which focused on testimony from statisticians, the court extrapolated the average amount of overtime reported by the sample group to the class as a whole, resulting in a verdict of approximately $15 million and an average recovery of over $57,000 per person.

The court explained that in marshaling through these types of cases, the trial court must consider the issue of “manageability,” separate and apart from whether common questions predominate, to determine whether it is possible to litigate on a classwide basis:

Although predominance of common issues is often a major factor in a certification analysis, it is not the only consideration. In certifying a class action, the court must also conclude that litigation of individual issues, including those arising from affirmative defenses, can be managed fairly and efficiently. In wage and hour cases where a party seeks class certification based on allegations that the employer consistently imposed a uniform policy or de facto practice on class members, the party must still demonstrate that the illegal effects of this conduct can be proven efficiently and manageably within a class setting. (Brinker, at p. 1033; Dailey v. Sears, Roebuck & Co. (2013) 214 Cal.App.4th 974, 989.)

Trial courts must pay careful attention to manageability when deciding whether to certify a class action. In considering whether a class action is a superior device for resolving a controversy, the manageability of individual issues is just as important as the existence of common questions uniting the proposed class.

The court also cautioned that reliance on a single policy cannot circumvent the aforementioned requirements, to justify certification. It took note of U.S. Bank’s well-written policies and noted that class certification is more likely to be appropriate in cases where the job is highly standardized, and if the corporate policy uniformly requires overtime work, noting that “[w]here standardized job duties or other policies result in employees uniformly spending most of their time on nonexempt work, class treatment may be appropriate even if the case involves an exemption that typically entails fact-specific individual inquiries.” However, the court explained that the employer’s “blanket” classification of a group of employees as exempt is not sufficient to justify certification of a class based on common questions.

The court acknowledged that the way to defeat certification remains by demonstrating that individual issues will swamp the common ones: USB’s exemption defense raised a host of individual issues. While common issues among class members may have been sufficient to satisfy the predominance prong for certification, the trial court also had to determine that these individual issues could be effectively managed in the ensuing litigation. (See Brinker, supra, 53 Cal.4th at p. 1054 (conc. opn. of Werdegar, J.); Sav-On, supra, 34 Cal.4th at p. 334.) Here, the certification order was necessarily provisional in that it was subject to development of a trial plan that would manage the individual issues surrounding the outside salesperson exemption.

In general, when a trial plan incorporates representative testimony and random sampling, a preliminary assessment should be done to determine the level of variability in the class.  If the variability is too great, individual issues are more likely to swamp common ones and render the class action unmanageable. No such assessment was done here. With no sensitivity to variability in the class, the court forced the case through trial with a flawed statistical plan that did not manage but instead ignored individual issues.

Notably, the court stated that if a court does not find that the class is manageable through a uniform trial plan at the certification stage, then the certification is reversed:

Although courts enjoy great latitude in structuring trials, and we have encouraged the use of innovative procedures, any trial must allow for the litigation of affirmative defenses, even in a class action case where the defense touches upon individual issues. As we will explain, the trial plan here unreasonably prevented USB from supporting its affirmative defense. Accordingly, the class judgment must be reversed. The trial court is of course free to entertain a new certification motion on remand, but if it decides to proceed with a class action it must apply the guidelines set out here.

The trial court could not abridge USB’s presentation of an exemption defense simply because that defense was cumbersome to litigate in a class action. Under Code of Civil Procedure section 382, just as under the federal rules, “a class cannot be certified on the premise that [the defendant] will not be entitled to litigate its statutory defenses to individual claims.” (Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. __, __ [131 S.Ct. 2541, 2561].) These principles derive from both class action rules and principles of due process. (See Lindsey v. Normet (1972) 405 U.S. 56, 66; Philip Morris USA v. Williams (2007) 549 U.S. 346, 353.

  1. Duran prohibits “cherry picking” or biased selection of a “sample” 

A sample must be randomly selected for its results to be fairly extrapolated to the entire class. A random sample is one in which each member of the population has an equal probability of being selected for inclusion in the sample. Even when selection procedures appear to be random, errors may arise that undermine randomness. Nonresponse bias can occur if a sample is chosen randomly from a group containing only survey respondents. The potential for bias arises because those who do not respond have no probability of inclusion in the sample. Thus, although the participants are randomly selected from among respondents, the sample will not reflect the characteristics of members of the population who chose not to respond to the survey. Duran, 59 Cal.4th 1 (2014)

Selection bias occurs when members of the population are chosen based on a nonrandom criterion or are selectively included or excluded from the sample group. In litigation, selection bias can occur when members of the population are allowed to opt out of the class. If plaintiffs with high-value claims opt out, the sample will be skewed toward low value claims and may result in an unfairly low estimate of damages. Conversely, if the opt-outs represent mainly low-value claims or plaintiffs with no valid claim, the sample results will be unfairly inflated. Self-interest may motivate class members to act in ways that will maximize the class award. Thus, one must always suspect that any nonrandom method of picking sample cases will be skewed and therefore will be an inaccurate estimate of the population average. Selection bias can also occur if named plaintiffs are included in the sample based not on random selection but on their status in the litigation. Class counsel are entitled to select named plaintiffs in a manner that enhances their position. However, that tactical choice should not compromise the statistical approach required for random sampling. Duran, 59 Cal.4th 1 (2014)

A sample that includes even a small number of interested parties can produce biased results. The impact of this error is magnified when the biased results are extrapolated to the entire population. Selection bias cannot be cured simply by increasing the size of the sample. When a selection procedure is biased, taking a large sample does not help. This just repeats the basic mistake on a larger scale. A sample that is representative of a population when first drawn may become less so over time. In class action litigation, such changes can occur with opt-outs or other events that change the class composition. Attention must be paid to possible changes that could render a previously representative sample unrepresentative. When that occurs, sampling will not accurately reflect what needs to be known about a population. Duran, 59 Cal.4th 1 (2014).

AL MOHAJERIAN – MOHAJERIAN APLC

Filed Under: Class Action (Employment)Labor & EmploymentLitigation

A man in a blue suit looking at a black board

WAGE AND HOUR CLASS ACTIONS GENERALLY

July 3, 2016

To summarize, California courts have long viewed class actions as a means whereby claims of many individuals can be resolved at the same time.

“Section 382 of the Code of Civil Procedure authorizes class suits in California when ‘the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court.’

“Class certification requires proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods.”

“The ‘community of interest’ requirement embodies three factors:  (1) predominant 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.”

  1. Question of “common issue” 

California law requires that the complaint contain a “common” issue to all putative class members. In our case, we will argue that there is not a common issue, as the employee records will indicate the individualized time entries, break times, and compensation for each employee. These are individualized disputes, and cannot be resolved by a class action lawsuit since all employee time records differ, and there is not a “uniform” policy or common error in place to make this action suitable for a class action lawsuit.

Below is supporting case law to this point.

On the issue of whether common issues predominate in the litigation, a court must “examine the plaintiff’s theory of recovery” and “assess the nature of the legal and factual disputes likely to be presented.”  (Brinker, supra, 53 Cal.4th at p. 1025.)   The court may consider the elements of the claims and defenses, but should not rule on the merits unless necessary to resolve the certification issues.  (Ibid.;  Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1106;  Linder, supra, 23 Cal.4th at pp. 439–440.)   “The ‘ultimate question’  is whether ‘the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.’ ”  (Brinker, at p. 1021.)  “ ‘As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.’ ”  (Id. at p. 1022.)

For class certification purposes, a plaintiff is required to present substantial evidence that proving both the existence of an employer’s uniform policies and practices and the alleged illegal effects of such conduct could be accomplished efficiently and manageably within a class setting.  (See Sotelo v. Medianews Group, Inc. (2012) 207 Cal.App.4th 639, 654 [“A class may establish liability by proving a uniform policy or practice by the employer that has the effect on the group of making it likely that group members will work overtime hours without overtime pay, or to miss rest/meal breaks.” (italics added) ].)  [See more at: http://caselaw.findlaw.com/ca-court-of-appeal/1626126.html#sthash.CFaIVhYB.dpuf]

“Critically, if the parties’ evidence is conflicting on the issue of whether common or individual questions predominate (as it often is), the trial court is permitted to credit one party’s evidence over the other’s in determining whether the requirements for class certification have been met,” the appeals court said in Dailey v. Sears Robuck and Co. (2013).

  1. The existence of Company “guidelines” does not support certification absent an employer’s application of a uniform policy

Often, there is no uniform application of a company policy or guideline, other than to clock in and out for work time, and break times.

Further support for the proposition that merely stating  a company has “guidelines” which violate California law, does not in itself support class certification, is in the case of Koval v. Pacific Telephone Co.

A recent case decided in January 2014 is  Koval v. Pacific Bell Telephone Co., 232 Cal.App.4th1050 (2014), where plaintiffs alleged “systematic company guidelines” restricted employee activities during meal and rest breaks and “prevented employees from fully realizing the [meal and rest] breaks to which they were entitled.”  Following Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012), the trial court held the mere existence of a uniform policy does not mandate class certification, concluding that variations in the employer’s application of policy created “serious doubt as to whether the rules were consistently applied so as to allow adjudication of the liability issues on a class-wide basis.”  The California Court of Appeal affirmed, in a published decision.

The plaintiffs in the case sought to certify a class of approximately 6,700 current and former field technicians employed at company locations throughout California.  Plaintiffs alleged the company failed to relinquish control over their activities during meal and rest breaks and thus violated California law.  They argued that, collectively, an array of more than a dozen employer manuals contained “systematic company guidelines” prohibiting employees from doing any of the following during breaks:  meeting up with their colleagues; going home; leaving their work vehicles; riding in other vehicles; sleeping in their work vehicles, or driving their work vehicles outside normal work routes to get a meal.  Further, a company representative had testified that employees were “expected to adhere to the expectations” contained in a number of the manuals and that failure to do so could result in disciplinary action.

Opposing certification, the company submitted evidence that the manner in which supervisors enforced and/or orally conveyed the information in the written policies was highly variable, and therefore “determining whether the policies were so restrictive as to have transformed break time into work time would necessitate individualized inquires.”

The trial court denied certification, reasoning: “What is important, and ultimately fatal to Plaintiffs’ bid for class certification, is the manner in which the six rules reflected in the written materials were applied, and that in turn begins with the question of how the rules were communicated.”

On appeal, the court first recognized that, under Brinker, an employer is only obligated to make uninterrupted meal periods and rest breaks available to its employees, “but is not obligated to ensure they are taken.”  The court then emphasized Brinker’s recognition that claims may be suitable for class treatment where (i) a uniform policy (ii) is consistently applied to a group of employees.

On this basis, the appellate court rejected plaintiffs’ argument that, under Brinker, plaintiffs did not need to “introduce facts showing both uniform policies and consistent application of those policies.”  The court also rejected plaintiffs’ argument that the trial court had committed legal error by assessing “how the allegedly unlawful policies were implemented.”  The failure of plaintiffs to demonstrate that the allegedly unlawful policies were consistently applied, the appellate court reasoned, “create[d] a shifting kaleidoscope of liability determinations that render this case unsuitable for class action treatment.”

Koval joins post-Brinker state court decisions such as Dailey v. Sears, Roebuck & Co. 214 Cal. App. 4th 974, 1002 (2013)(“the absence of a formal written policy explaining [employees’] rights to meal and rest periods does not necessarily imply the existence of a uniform policy or widespread practice of either depriving these employees of meal and rest periods or requiring them to work during those periods”) and In re Walgreen Co. Overtime Cases 231 Cal. App. 4th 437, 443(2014) (“under the Brinker’ make available’ standard, you additionally must ask why the worker missed the break before you can determine whether the employer is liable”) in requiring more than a uniform policy to support class certification. These cases strengthen employers’ hand in opposing class certification where the plaintiff cannot establish both (i) the existence of a uniform unlawful policy and (ii) the consistent application of that policy to a putative class.

The above mentioned cases support a deeper pre-certification analysis, which seems to be the trend in California over the last year or two, as courts attempt to halt the class action epidemic.

AL MOHAJERIAN – MOHAJERIAN APLC

Filed Under: Class Action (Employment)Labor & EmploymentLitigation

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DEFEATING CERTIFICATION OF A CLASS

July 3, 2016

Class certification is most often defeated where there is no “community of interest”, and most often for failure of commonality, or “predominance” grounds, rather than on the grounds of typicality, adequacy, ascertainability, and numerosity.

The  ‘community of interest’ requirement embodies three factors:  (1) predominant 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.

In opposing class certification defense has to show plaintiff would not be able to establish liability on the merits, i.e., there is no substance to the allegations complained of.  Thus there is no commonality or predominance of class issues. There may be individualized issues but the common issues do not predominate.

Following is a synopsis of California law as it pertains to class certification:

In 2011, the United States Supreme Court raised the bar for plaintiffs seeking class certification by requiring lower courts to conduct a “rigorous analysis” to determine whether the prerequisites for certification are met. Wal-Mart, 131 S. Ct. at 2551 (reversing the grant of class certification due to a lack of commonality under Fed. R. Civ. P. 23(a)(2)). This “rigorous analysis,” the Court explained, often will “entail some overlap with the merits of the plaintiff’s underlying claim.” Id. In the words of the Court, a merits-entwined inquiry for purposes of class certification “cannot be helped.” Id. at 2551-52 (collecting cases).

Two years later, the Supreme Court doubled-down on its “rigorous analysis” requirement for class certification, applying the teachings of Wal-Mart to prospective Rule 23(b)(3) classes as well. See Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (reversing the grant of class certification due to a lack of predominance under Fed. R. Civ. P. 23(b)(3)). In Comcast, the Court criticized the lower court’s “refus[al] to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination.” Id. at 1432-33. Rather, the Court’s precedents “flatly” require a determination that Rule 23 is satisfied, “even when that requires inquiry into the merits of the claim.” Id. at 1433.

The third installment in the Supreme Court’s class-action trilogy came in 2014 in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014). There, the Supreme Court opened the door even further to merits-based defenses at the class-certification stage—this time in the context of securities class actions. In Halliburton, the Court held that securities defendants can rebut the presumption of reliance under a fraud-on-the-market theory not only during the merits phase but also during class certification. Id. at 2414-15. Securities defendants, moreover, can rebut this presumption through the use of direct and indirect evidence alike. Id. at 2417.

The Wal-Mart/Comcast/Halliburton triumvirate marked big wins for class-action defendants, enabling them to raise merits-based defenses that might otherwise never be presented to a court. That is so because many class cases are settled following certification, given the high stakes of merit-stage proceedings. Now, those merits issues are ripe for consideration at the class stage, to the extent they inform the certification analysis.

Other courts have also followed these decisions discussed above. To the extent the propriety of certification depends upon disputed threshold legal or factual questions, a court may, and indeed must, resolve them”); Bartold v. Glendale Fed. Bank, 81 Cal. App. 4th 816, 829 (2000) (“when the merits of the claim are enmeshed with class action requirements, the trial court must consider evidence bearing on the factual elements necessary to determine whether to certify the class”). Wal-mart Stores, Inc. v. Dukes , 131 S. Ct. 2541, 2551-52 (2011) (citing Gen. Telephone Co. of S.W. v. Falcon, 457 U.S. 147, 102 S. Ct. 2364, 72 L. Ed. 2d 740 (1982)); see also Ellis v. Costco Wholesale Corp., 657 F.3d 970, 984 (9th Cir. 2011) (holding the district court erred by failing to conduct a “rigorous analysis” of the merits to determine whether the plaintiffs had established commonality under Rule 23); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 318 (3d Cir. 2008) (class certification requires “thorough examination” of factual and legal allegations; “rigorous analysis may include a preliminary inquiry into the merits” and consideration of “the substantive elements of the plaintiffs’ case in chief).

To be fair however, many courts in California are reluctant to quickly dismiss a class certification effort. The abuse of class action lawsuits however, has caused many California courts to direct more attention to the actual facts underlying Plaintiffs’ claims in a class action, to determine whether Plaintiff can produce any substantive claim, prior to a lengthy and costly class action lawsuit.

Filed Under: Class Action (Employment)Labor & EmploymentLitigation

Tagged With: class actionlabor employment law

Stack of old books and pen holder

EMPLOYER LAW: REST BREAKS – GENERALLY

July 3, 2016

California law provides that for every four hours of work, an employee must be allowed  a ten minute rest break.  The employer is not obligated to ensure one is taken, and the employee may opt to not take a rest break. An employer also may require an employee to remain on work premises during a rest period.

It is unclear when the rest period should be taken. It is not required by law that a rest period be taken after a four hour work period, only that a rest period is permitted for every four hours worked.

In 2012, the California Supreme Court decided an important meal and rest break case, Brinker Restaurant Corp. v. Superior Court.  The question of whether employers must ensure breaks are taken or must simply provide breaks has been a source of significant litigation in both federal and state courts.  The California Supreme Court  ruled in Brinker’s favor on the most critical part of the decision – holding that employers do not have to ensure employees take their meal breaks. Once the meal period is provided, there is no duty to police meal breaks to ensure no work is being done.  This case has been, in an usual act by the court, “depublished” pending subsequent filings.  Although depublished, California courts have followed the decision and cited to the Brinker decision.

EMPLOYER ATTORNEYS: MOHAJERIAN LAWYERS REPRESENT EMPLOYERS THROUGHOUT CALIFORNIA

Filed Under: Labor & EmploymentLitigation

Tagged With: labor employment law

Small papers clipped to the rope

WAGE AND HOUR CLASS ACTIONS GENERALLY

July 3, 2016

To summarize, California courts have long viewed class actions as a means whereby claims of many individuals can be resolved at the same time.

“Section 382 of the Code of Civil Procedure authorizes class suits in California when ‘the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court.’

“Class certification requires proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods.”

“The ‘community of interest’ requirement embodies three factors:  (1) predominant 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.”

  1. Question of “common issue” 

California law requires that the complaint contain a “common” issue to all putative class members. In our case, we will argue that there is not a common issue, as the employee records will indicate the individualized time entries, break times, and compensation for each employee. These are individualized disputes, and cannot be resolved by a class action lawsuit since all employee time records differ, and there is not a “uniform” policy or common error in place to make this action suitable for a class action lawsuit.

Below is supporting case law to this point.

On the issue of whether common issues predominate in the litigation, a court must “examine the plaintiff’s theory of recovery” and “assess the nature of the legal and factual disputes likely to be presented.”  (Brinker, supra, 53 Cal.4th at p. 1025.)   The court may consider the elements of the claims and defenses, but should not rule on the merits unless necessary to resolve the certification issues.  (Ibid.;  Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1106;  Linder, supra, 23 Cal.4th at pp. 439–440.)   “The ‘ultimate question’  is whether ‘the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.’ ”  (Brinker, at p. 1021.)  “ ‘As a general rule if the defendant’s liability can be determined by facts common to all members of the class, a class will be certified even if the members must individually prove their damages.’ ”  (Id. at p. 1022.)

For class certification purposes, a plaintiff is required to present substantial evidence that proving both the existence of an employer’s uniform policies and practices and the alleged illegal effects of such conduct could be accomplished efficiently and manageably within a class setting.  (See Sotelo v. Medianews Group, Inc. (2012) 207 Cal.App.4th 639, 654 [“A class may establish liability by proving a uniform policy or practice by the employer that has the effect on the group of making it likely that group members will work overtime hours without overtime pay, or to miss rest/meal breaks.” (italics added) ].)  [See more at: http://caselaw.findlaw.com/ca-court-of-appeal/1626126.html#sthash.CFaIVhYB.dpuf]

“Critically, if the parties’ evidence is conflicting on the issue of whether common or individual questions predominate (as it often is), the trial court is permitted to credit one party’s evidence over the other’s in determining whether the requirements for class certification have been met,” the appeals court said in Dailey v. Sears Robuck and Co. (2013).

  1. The existence of Company “guidelines” does not support certification absent an employer’s application of a uniform policy

Often, there is no uniform application of a company policy or guideline, other than to clock in and out for work time, and break times.

Further support for the proposition that merely stating  a company has “guidelines” which violate California law, does not in itself support class certification, is in the case of Koval v. Pacific Telephone Co.

A recent case decided in January 2014 is  Koval v. Pacific Bell Telephone Co., 232 Cal.App.4th1050 (2014), where plaintiffs alleged “systematic company guidelines” restricted employee activities during meal and rest breaks and “prevented employees from fully realizing the [meal and rest] breaks to which they were entitled.”  Following Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012), the trial court held the mere existence of a uniform policy does not mandate class certification, concluding that variations in the employer’s application of policy created “serious doubt as to whether the rules were consistently applied so as to allow adjudication of the liability issues on a class-wide basis.”  The California Court of Appeal affirmed, in a published decision.

The plaintiffs in the case sought to certify a class of approximately 6,700 current and former field technicians employed at company locations throughout California.  Plaintiffs alleged the company failed to relinquish control over their activities during meal and rest breaks and thus violated California law.  They argued that, collectively, an array of more than a dozen employer manuals contained “systematic company guidelines” prohibiting employees from doing any of the following during breaks:  meeting up with their colleagues; going home; leaving their work vehicles; riding in other vehicles; sleeping in their work vehicles, or driving their work vehicles outside normal work routes to get a meal.  Further, a company representative had testified that employees were “expected to adhere to the expectations” contained in a number of the manuals and that failure to do so could result in disciplinary action.

Opposing certification, the company submitted evidence that the manner in which supervisors enforced and/or orally conveyed the information in the written policies was highly variable, and therefore “determining whether the policies were so restrictive as to have transformed break time into work time would necessitate individualized inquires.”

The trial court denied certification, reasoning: “What is important, and ultimately fatal to Plaintiffs’ bid for class certification, is the manner in which the six rules reflected in the written materials were applied, and that in turn begins with the question of how the rules were communicated.”

On appeal, the court first recognized that, under Brinker, an employer is only obligated to make uninterrupted meal periods and rest breaks available to its employees, “but is not obligated to ensure they are taken.”  The court then emphasized Brinker’s recognition that claims may be suitable for class treatment where (i) a uniform policy (ii) is consistently applied to a group of employees.

On this basis, the appellate court rejected plaintiffs’ argument that, under Brinker, plaintiffs did not need to “introduce facts showing both uniform policies and consistent application of those policies.”  The court also rejected plaintiffs’ argument that the trial court had committed legal error by assessing “how the allegedly unlawful policies were implemented.”  The failure of plaintiffs to demonstrate that the allegedly unlawful policies were consistently applied, the appellate court reasoned, “create[d] a shifting kaleidoscope of liability determinations that render this case unsuitable for class action treatment.”

Koval joins post-Brinker state court decisions such as Dailey v. Sears, Roebuck & Co. 214 Cal. App. 4th 974, 1002 (2013)(“the absence of a formal written policy explaining [employees’] rights to meal and rest periods does not necessarily imply the existence of a uniform policy or widespread practice of either depriving these employees of meal and rest periods or requiring them to work during those periods”) and In re Walgreen Co. Overtime Cases 231 Cal. App. 4th 437, 443(2014) (“under the Brinker’ make available’ standard, you additionally must ask why the worker missed the break before you can determine whether the employer is liable”) in requiring more than a uniform policy to support class certification. These cases strengthen employers’ hand in opposing class certification where the plaintiff cannot establish both (i) the existence of a uniform unlawful policy and (ii) the consistent application of that policy to a putative class.

The above mentioned cases support a deeper pre-certification analysis, which seems to be the trend in California over the last year or two, as courts attempt to halt the class action epidemic.

AL MOHAJERIAN – MOHAJERIAN APLC

Filed Under: Class Action (Employment)Labor & EmploymentLitigation

Strings of numbers

jCode

July 3, 2016

Common Procedure Coding System

J Codes

“J Codes are the Healthcare Common Procedure Coding System (HCPCS) codes for the injection of drugs.[1]  “J Codes are drugs administered other than the oral method, chemotherapy drugs.[2] “The HCPCS “J” codes include the majority of those drugs and biologicals that should be reported with infusions, injections, and supply codes that go hand in hand with CPT procedure based coding.[3] A subset of the HCPCS Level II code set with a high-order value of “J” that has been used to identify certain drugs and other items.”[4]  For example: Herceptin has J9355, Privigen has J1459, Epogen has J1459, Epogen has J0885 and Humira has J0135. We have confirmed with one of the members of the CMS Work Group that J Codes also cover compound drugs.

Miscellaneous Codes

“ National codes also include “miscellaneous/not otherwise classified” codes. These codes are used when a supplier is submitting a bill for an item or service and there is no existing national code that adequately describes the item or service being billed. The importance of miscellaneous codes is that they allow suppliers to begin billing immediately for a service or item as soon as it is allowed to be marketed by the Food and Drug Administration (FDA) even though there is no distinct code that describes the service or item. A miscellaneous code maybe assigned by insurers for use during the period of time a request for a new code is being considered under the HCPCS review process.[5]

“Because of miscellaneous codes, the absence of a specific code for a distinct category of products does not affect a supplier’s ability to submit claims to private or public insurers and does not affect patient access to products. Claims with miscellaneous codes are manually reviewed, the item or service being billed must be clearly described, and pricing information must be provided along with documentation to explain why the item or service is needed by the beneficiary.”[6]

Level II HCPCS used in billing under the Hospital Outpatient Prospective Payment System (OPPS)

.           “The American Hospital Association (AHA) and the Centers for Medicare & Medicaid Services (CMS) have joined together in establishing the AHA clearinghouse to handle coding questions on established HCPCS usage. The American Health Information Management (AHIMA) also provides input through the Editorial Advisory Board.  The AHA’s Central Office will handle the clearinghouse functions and provide open access to any person or organization that has questions regarding a subset of HCPCS coding, particularly hospitals and other health professionals who bill under the hospital outpatient prospective payment system (OPPS).  Specifically, the AHA’s Central Office will handle clearinghouse functions such as providing interpretation, promotion and explanation of the proper use of a subset of HCPCS codes as follows: Level 1 HCPCS (CPT-4 Codes) for hospital providers, Level II HCPCS Codes for hospitals, physicians, and other professionals who bill Medicare for A-Codes, C-codes, G-codes, J-codes and Q-codes (other than Q0163 and Q0181)” [7].

Updates

“The AMA updates and republishes CPT-4 annually and provides CMS with the updated data. The CMS updates the alpha-numeric (Level II) portion of HCPCS and incorporates the updated AMA material to create the HCPCS code file. The CMS provides the file to A/B MACs (A), (B), (HHH), and DME MACs and Medicaid State agencies annually.[8]” “The HCPCS are updated annually to reflect changes in medicine and provision of health care.”

The CMS provides a file containing the updated HCPCS codes to A/B MACS [Medicare Administrative Contractors for Parts A and B] (A), (B), HHH [Home, Health, and Hospice] and DME MACs [Durable Medical Equipment Medicare Administrative Contractors ] and Medicaid State Agencies 60-90 days in advance of the  implementation of the annual date. Distribution consists of an electronic file of the updated HCPCS codes, file characteristics, record layout, and a listing of changed and deleted codes. MACs are required to update their HCPCS codes file and map all new or deleted codes to appropriate payment information no later than three months after receipt of the update.”  There is a 2016 HCPCS Alpha-Numeric Index of 46 pages, which contains many drug products.

“Both the DME MACs and the A/B MACs (B) publish this list to educate providers on which MAC they should bill for codes provided on this list.[9]” “MACs will no longer accept discontinued HCPCS codes for dates of service January 1 through March 31.[10]

“In addition to the major annual update, CMS also updates HCPCS codes quarterly to reflect additional changes or corrections that are emergency in nature. Quarterly changes are issued by letter or memorandum for local implementation.[11]

“Physicians and suppliers must use HCPCS codes on the Form CMS-1500 or its electronic equivalent and providers must use HCPCS codes on the Form CMS-1450 or its electronic equivalent for most outpatient services.[12] A/B MACs (B) and DME MACs must continue to reject services submitted with discontinued HCPCS codes. A/B MACs (A) and (HHH) must continue to return to the provider (RTP) claims containing deleted codes.[13]

“It is important for physicians, practitioners, suppliers, and providers to note that code/modifier recognition does not imply that a service is covered by Medicare.[14]” HCPCS is a system for identifying items and certain services. It is not a methodology or system for making coverage or payment determinations, and the existence of a code does not, of itself, determine coverage or non-coverage for an item or service. While these codes are used for billing purposes, decisions regarding the addition, deletion, or revision of HCPCS codes are made independent of the process for making determinations regarding coverage and payment.[15]

Currently, there are national HCPCS codes representing approximately 6,000 separate categories of like items or services that encompass millions of products from different manufacturers. When submitting claims, suppliers are required to use one of these codes to identify the items they are billing. The descriptor that is assigned to a code represents the definition of the items and services that can be billed using that code.”[16]

[1] Veterans Administration Hospital, J Codes Over Billing Schemes, Chief Business Office Purchase Care, Department of Program Integrity (DPI), October 2013.

[2] HCPro website, Note similarities between HCPCS, CPT Codes, September 5, 2012.

[3] HCPro website, Note similarities between HCPCS, CPT Codes, September 5, 2012.

[4] AAPC website.

[5] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures, November 13, 2015.

[6] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures, November 13, 2015.

[7] Medicare, HCPCS, General Information, HCPCS Coding Questions, Do you have a Coding Question.

[8] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015.

[9] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015

[10] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015

[11] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015

[12] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015

[13] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015

[14] Medicare Processing Manual, Chapter 23-Fee Administration and Coding Requirements, revisions 8-7-15, 10-9-2015, 11-23-2015

[15] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures.

[16] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures.

By Al Mohajerian | Published May 2, 2016 | Posted in FDA  | Tagged General InformationHCPCSHospital Outpatient Prospective Payment SystemJ CodesMedicare Administrative ContractorsVeterans Administration Hospital |

Filed Under: NDCPharmaceuticals

Tagged With: Common Procedure Coding

Food additives

FOOD ADDITIVES

July 3, 2016

“Food additives (direct, secondary, indirect) are essentially chemically derived, do not have a history of use in foods, and there is no general agreement among the scientific community with regard to their safety for the use that is proposed. Direct food additives are added to food for a technical purpose and have a lasting effect in the food (e.g., the antioxidants BHA/BHT). Secondary direct additives are added for a momentary technical effect and have no lasting effect in the food (e.g., antimicrobial agents, ozone, acidified sodium chlorite). Indirect food additives have the potential to become part of a food through processing or packaging but are not intended to be added to food for an intended technical effect (e.g., coatings and adhesives.)

“A GRAS substance is distinguished from a food additive on the basis of the common knowledge about the safety of the substance for its intended use.”  As FDA discussed in a proposed rule to establish a voluntary notification program for GRAS substances (62 Fed. Reg. 18938; April 17, 1997), the data and information relied on to establish the safety of the use of a GRAS substance must be generally available (e.g., through publication in the scientific literature) and there must be a basis to conclude that there is consensus among qualified experts about the safety of the substance for its intended use. Thus, the difference between use of a food additive and use of a GRAS substance relates to the widespread awareness of the data and information about the substance, i.e., who has access to the data and information and who has reviewed those data and information.

1. For a food additive, privately held data and information about the use of the substance are sent by the sponsor to FDA and FDA evaluates those data and information to determine whether they establish that the substance is safe under the conditions of its intended use (21 CFR 171.1).
2. For a GRAS substance, generally available data and information about the use of the substance are known and accepted widely by qualified experts, and there is a basis to conclude that there is consensus among qualified experts that those data and information establish that the substance is safe under the conditions of its intended use. (proposed .170.36 (c)(4)(i)(C)).12

Filed Under: FDA (Food)

Tagged With: FSIS FDA Food

An eye of a person

HEALTHCARE COMMON PROCEDURE CODING SYSTEM

July 3, 2016

HEALTHCARE COMMON PROCEDURE CODING SYSTEM

Healthcare Common Procedure Coding system

“The Healthcare Common Procedure Coding System (HCPCS, often pronounced by its acronym as “hick picks”) is a set of healthcare procedure codes based on the American Medical Association’s Current Procedure Terminology (CPT).  Initially, use of the HCPCS codes was voluntary, but with the implementation of the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which required that CMS [Center for Medicare and Medicaid Services] use HCPCS for transactions involving healthcare information, the HCPCS codes became mandatory.”[1] 

“HCPCS codes are numbers that Medicare assigns to every task and service a medical practitioner may provide to a patient including medical, surgical and diagnostic services.”[2]

HCPCS includes three levels of codes:

Level I Codes consists of a five-digit numeric code that contains the American Medical Association’s Current Procedural Terminology (CPT).”[3]

“Level I of the HCPCS is comprised of Current Procedural Terminology (CPT-4) , a numeric coding system maintained by the American Medical Association (AMA). The CPT-4 is a uniform coding system consisting of descriptive terms and identifying codes that are used primarily to identify medical services and procedures furnished by physicians and other healthcare professionals. These healthcare professionals use the CPT-4 to identify services and procedures for which they bill public or private health insurance programs. Level I of the HCPCS, the CPT-4 codes, does not include codes needed to separately report medical items or services that are regularly billed by suppliers other than physicians.”[4]

Issues related to the application of Level I HCPCS codes (CPT-4) for physicians will be referred to the AMA.[5]”  “The AMA maintains the CPT codes, updates them routinely, and holds the copyright on the CPT codes.[6] 

Level II Codes are alphanumeric and primarily include non-physician services such as ambulance services and  prosthetic devices, orthotics, and supplies (DMEPOS) and represent items and supplies and non-physician services, not covered by CPT-4 codes (Level I).  Level II codes are referred to as alpha-numeric codes because they consist of a single alphabetical letter followed by 4 numeric digits, while CPT codes are identified using 5 numeric digits.” [7]

“Level II of the HCPCS is a standardized coding system that is used primarily to identify products, supplies, and services not included in the CPT-4 codes, such as ambulance services and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) when used outside a physician’s office. Because Medicare and other insurers cover a variety of services, supplies, and equipment that are not identified by CPT-4 codes, the level II HCPCS codes were established for submitting claims for these items.[8]”  These codes are for the use of all private and public health insurers.

 “CMS has the authority to assign HCPCS codes.  HCPCS Level II codes are maintained by the CMS HCPCS Workgroup. Since HCPCS is a national coding system, all payers will be represented in the Workgroup including representatives of the private insurance sector; CMS staff and contractors; representatives of state Medicaid agencies and of the US, DHHS Department of Veteran’s Affairs.[9] The Workgroup includes representatives from private insurance companies, Medicaid, and the Pricing, Data Analysis and Coding Contractor (PDAC). The Workgoup is responsible for all revisions, deletions and additions to the HCPCS codes.”[10]   These representatives will participate in the workgroup meetings and provide input as to what is necessary to meet each party’s program operating needs.[11]

“Level III codes, also called local codes, were developed by state Medicaid agencies, Medicare contractors, and private insurers for use in specific programs and jurisdictions. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) instructed CMS to adopt a standard coding systems for reporting medical transactions. The use of Level III codes was discontinued on December 31, 2003, in order to adhere to consistent coding standard.[12]

[1]. National Assistive Technology Advocacy Project, HCPCS Codes, Diana M. Straube, Staff Attorney, November 2008.

[2] About Health, What are Medicare’s HCPCS Codes.

[3] National Assistive Technology Advocacy Project, HCPCS Codes, Diana M. Straube, Staff Attorney, November 2008.

[4] CMS.gov, Centers for Medicare & Medicaid Services, HCPCS Coding Questions, Do you have a Coding Question.

[5] CMS.gov, Centers for Medicare & Medicaid Services, HCPCS Coding Questions, Do you have a Coding Question.

[6] About Health, What are Medicare’s HCPCS Codes.

[7] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures, November 13, 2015.

[8] CMS.gov, Centers for Medicare & Medicaid Services, HCPCS Coding Questions, Do you have a Coding Question.

[9] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures.

[10]National Assistive Technology Advocacy Project, HCPCS Codes, Diana M. Straube, Staff Attorney, November 2008

[11] Healthcare Common Procedure Coding System (HCPCS) Level II Coding Procedures.

[12] National Assistive Technology Advocacy Project, HCPCS Codes, Diana M. Straube, Staff Attorney, November 2008.

By Al Mohajerian | Published May 2, 2016 | Posted in FDA  | Tagged American Medical AssociationCPT codesHCPCSHealthcare Common Procedure Coding systemNational Assistive Technology Advocacy Project 

Filed Under: FDAHealthcareNDCPharmaceuticals

Mortar and pestle

A STERILE COMPOUNDING PHARMACY LICENSE

July 3, 2016

Violation of California Regulations

Cal. Bus. & Prof. Code § 4300 provides, inter alia,

(a) A pharmacy shall not compound sterile drug products unless the pharmacy has obtained a sterile compounding pharmacy license from the board pursuant to this section. The license shall be renewed annually and is not transferable.
(b) A license to compound sterile drug products shall be issued only to a location that is licensed as a pharmacy and shall be issued only to the owner of the pharmacy licensed at that location.

California makes clear that compounding limitations include: a valid prescription for an individual patient, a limited quantity, of not more than a 72 hour supply, and retail pharmacies are excluded.

16 CFR §1735.2. Compounding Limitations and Requirements, provides:
(a) Except as specified in (b) and (c), no drug product shall be compounded prior to receipt by a pharmacy of a valid prescription for an individual patient where the prescriber has approved use of a compounded drug product either orally or in writing. Where approval is given orally, that approval shall be noted on the prescription prior to compounding.
(b) A pharmacy may prepare and store a limited quantity of a compounded drug product in advance of receipt of a patient-specific prescription where and solely in such quantity as is necessary to ensure continuity of care for an identified population of patients of the pharmacy based on a documented history of prescriptions for that patient population.
(c) A “reasonable quantity” as used in Business and Professions Code section 4052(a)(1) means that amount of compounded drug product that:
(1) is sufficient for administration or application to patients in the prescriber’s office, or for distribution of not more than a 72-hour supply to the prescriber’s patients, as estimated by the prescriber; and
(2) is reasonable considering the intended use of the compounded medication and the nature of the prescriber’s practice; and
(3) for any individual prescriber and for all prescribers taken as a whole, is an amount which the pharmacy is capable of compounding in compliance with
pharmaceutical standards for integrity, potency, quality and strength of the compounded drug product.
(f) The pharmacist performing or supervising compounding is responsible for the integrity, potency, quality, and labeled strength of a compounded drug product until it is dispensed.
h) Health care entity means any person that provides diagnostic, medical, surgical, or dental treatment, or chronic or rehabilitative care, but does not include any retail pharmacy or any wholesale distributor. Except as provided in § 203.22(h) and (i) of this chapter, a person cannot simultaneously be a “health care entity” and a retail pharmacy or wholesale distributor.

By Al Mohajerian | Published April 29, 2016 | Posted in Uncategorized  | Tagged 16 CFR §1735.2compound sterile drug productscompounding pharmacy license |

Filed Under: FDAHealthcarePharmaceuticals

Tagged With: Compounding Pharmacy

Leaves, twigs, and nuts near a mortar and pestle

PROHIBITION ON WHOLESALING BY COMPOUNDING PHARMACIES

July 3, 2016

21 USC 353b provides, inter alia:

“(a) In general Sections 352(f)(1), 355, and 360eee-1 of this title shall not apply to a drug compounded by or under the direct supervision of a licensed pharmacist in a facility that elects to register as an outsourcing facility if each of the following conditions is met:

(8) Prohibition on wholesaling
The drug will not be sold or transferred by an entity other than the outsourcing facility that compounded such drug. This paragraph does not prohibit administration of a drug in a health care setting or dispensing a drug pursuant to a prescription executed in accordance with section 353(b)(1) of this title.

(d) Definitions:
4)(A) The term “outsourcing facility” means a facility at one geographic location or address that–
(i) is engaged in the compounding of sterile drugs;
(ii) has elected to register as an outsourcing facility; and
(iii) complies with all of the requirements of this section.
(B) An outsourcing facility is not required to be a licensed pharmacy.
(C) An outsourcing facility may or may not obtain prescriptions for identified individual patients.
(5) The term “sterile drug” means a drug that is intended for parenteral administration, an ophthalmic or oral inhalation drug in aqueous format, or a drug that is required to be sterile under Federal or State law.”

“Pharmacies cannot compound medications or dosage forms that are commercially available and they cannot sell compounded products to other pharmacies for resale. A pharmacy may, however, sell a compounded product to a practitioner or an institutional pharmacy if it is to be administered to patients in the practitioner’s office or institution.”

“Although an outsourcing facility may send prescription drugs to health care facilities without obtaining prescriptions for identified individual patients, drugs produced by outsourcing facilities remain subject to the requirements in section 503(b) of the FD&C Act. Therefore, an outsourcing facility cannot dispense a prescription drug to a patient without a prescription. ”

By Al Mohajerian | Published April 29, 2016 | Posted in FDA  | Tagged 21 USC 353bcompounding pharmaciesProhibition on wholesaling |

Filed Under: FDAPharmaceuticals