Court of Appeal Affirms Denial Of Class Certification Of Claims By Allegedly Misclassified Restaurant Managers

Today, the California Court of Appeal certified for publication its decision in Arenas v. El Torito Restaurants, et al., holding that the trial court did not abuse its discretion when it denied class certification of the plaintiff restaurant managers' claims that they and other managers were improperly classified as exempt employees.

The plaintiffs were employed as salaried managers at El Torito, El Torito Grill and GuadalaHARRY's restaurants. They alleged that they were improperly classified as exempt employees because their duties did not meet the exemption requirements of Industrial Welfare Commission Wage Order 5-2001 and that they defendants were therefore liable to them and to the alleged class for unpaid overtime, for missed meal periods, for missed rest periods, and for related claims.

The trial court denied the plaintiffs motion for class certification on the ground that the plaintiffs failed to meet their burden of showing that common issues of law and fact predominated over individual issues of law and fact such that litigating the claims on a class basis would be superior to litigating the claims on an individual basis. The trial court found that the evidence presented in support of and in opposition to the motion for class certification showed that the issue of whether the managers' duties met the exemption requirements was not susceptible to common proof. The trial court ruled that findings as to one or a few managers could not be applied to other managers because how managers spent their time varied from store to store. The court stated: "Based on the record presented, the plaintiffs have not demonstrated that resolution of the common issues of act and law will be accomplished by common proof that can be extrapolated to all class members. Instead, the plaintiffs have demonstrated that the case is replete with individual factual issues."

On appeal, the court held that the trial court applied the correct legal standards when it determined that the plaintiffs' claims were not susceptible to common proof and that the trial court's decision was supported by substantial evidence. Further, the court rejected plaintiffs' contention that defendants "cannot on one hand assert they have determined, based on job activities, that all managers are exempt but on the other hand argue a court must examine each individual's tasks to determine whether that person is exempt." In other words, the court held that just because an employer has classified a category of employees as exempt does not necessarily mean that the issue of whether the employees were correctly classified as exempt can properly be adjudicated on a class basis.

The court's decision is welcome news for California employers because it provides trial courts direction about what plaintiffs must show to demonstrate their claims can be decided based on common proof.

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