Supreme Court Protects Class Actions as DOL Fights Wage Theft

It has been a good week for consumers and employees as the Supreme Court protected the right to proceed with a class action and the Labor Department opened up new options for victims of wage theft.

The Supreme Court struck a blow to large corporations hoping to avoid class action lawsuits by rejecting the argument that a settlement offer to pay off the plaintiff for the full amount owed ends the lawsuit.

In the nearly ten year old lawsuit Campbell-Ewald Co. v. Gomez, the plaintiff sought to bring a class action lawsuit on behalf of thousands of similarly situated individuals who were sent text messages without their consent.

Since the cost of a settlement with one plaintiff is relatively trivial compared to the cost of defending a class action, the company argued that its offer to settle the case for the entire amount sought by the plaintiff (without admitting liability) foreclosed the possibility of that plaintiff successfully bringing a class action.

The Supreme Court refused to allow the company to so easily garner dismissal of the suit. If it had ruled otherwise, it would have been a major blow to class actions, which allow individuals to sue when the amount in controversy is not sufficient to make a lawsuit economically viable.

In other news, the Labor Department issued guidance this week on when U.S. companies could be classified as “joint employers” and held responsible for the labor violations of a staffing agency or contractor. The issue has become important in the government’s pursuit of wage theft under the Fair Labor Standards Act.

The DOL guidance provides an explanation of how to analyze both vertical relationships (one company contracts with another) as well as horizontal arrangements where one person is employed by two related companies.

The guidance may receive a test next month, as a case against McDonald’s goes to trial concerning whether it is liable for the labor violations of franchisees. Although the guidance is not-binding on the courts, courts may still pay deference to it.

There has already been speculation that it will open up new avenues for lawsuits over unpaid overtime and other instances of wage theft.