We encounter here an exceedingly rare beast: a wage and hour class action that proceeded through trial to verdict. Loan officers for U.S. Bank National Association (USB) sued for unpaid overtime, claiming they had been misclassified as exempt employees under the outside salesperson exemption. (Lab. Code, § 1171.) This exemption applies to employees who spend more than 50 percent of the workday engaged in sales activities outside the office. (Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785 [85 Cal.Rptr.2d 844, 978 P.2d 2] (Ramirez).)
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.
USB is a nationwide financial services provider. During the relevant period, it operated over 130 branches in California. This class action was brought by USB employees who worked as business banking officers (BBOs).
A May 1997 job description states that BBOs were expected to develop and manage customer relationships and to "grow [USB's] business through prospecting, networking, cross-selling and relationship management." Among several other "essential functions," BBOs were required to "call on customers and/or prospects." They were expected to use a "high degree of creativity and independence in managing account relationships and developing new business." This job description was essentially unchanged until May 2002, shortly after the complaint here was filed. The new job description splits the list of a BBOs essential functions into separate categories for "Outside Sales Activity," "Incidental Activity to Outside Sales," and "Other Activity," and specifies that more than 80 percent of a BBOs time should be spent on "Outside Sales Activity." During all relevant times, USB has classified the BBO position as exempt from overtime compensation, primarily based on the outside salesperson exemption in Labor Code section 1171.
A. Pretrial Proceedings
On December 26, 2001, a putative class action complaint was filed alleging USB had improperly classified BBOs as exempt, denying them overtime pay in violation of Labor Code section 1194.
1. Initial Class Certification Proceedings
On January 6, 2005, plaintiffs moved to certify the case as a class action. At that time, USB employed approximately 40 BBOs in California. There were over 200 current and former BBOs in the putative class. Plaintiffs provided declarations from 34 current and former BBOs, all averring that they worked overtime hours and spent less than half of their workday engaged in sales-related activities outside their branch office. USB opposed certification. It argued that plaintiffs could not establish a predominance of common issues or that the class action device was superior to other methods of adjudication. USB filed declarations from 83 putative class members, 75 of whom
The trial court certified the class. Relying on Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319 [17 Cal.Rptr.3d 906, 96 P.3d 194]
2. Trial Management Plan
About a year after certification, the parties presented competing trial management plans. USB proposed to divide the class into 20 or 30 groups and have special masters conduct individualized evidentiary hearings on liability and damages. Plaintiffs opposed this idea, arguing that USB had no due process right to assert its affirmative defenses against each individual class member.
As an alternative, plaintiffs proposed the use of surveys and random sampling, as described in a declaration from statistics expert Richard Drogin. First, the parties would identify all tasks performed by BBOs and classify which were sales related. Next, the amount of time class members typically spent on outside activities would be assessed using a classwide survey. The parties' experts would then jointly design a random sample of surveyed class members to proceed through focused discovery and a phase one trial. Finally, aggregate, classwide damages would be determined at a phase two trial. Once an aggregate damages figure was established, the parties would agree upon a claims procedure to distribute damages to individual class members.
USB strenuously objected to the use of representative sampling. If the court rejected its proposal for focused trials of all class members, USB proposed that the parties each select an equal number of class members for the trial sample. USB argued that a survey would not yield a truly representative sample because class members who were properly classified as exempt would have no interest in participating in trial or returning the survey. Thus, any survey-based sample would be skewed in plaintiffs' favor.
At a case management conference, the court also expressed concern about the potential for biased survey results and proposed an alternative of its own devising. The court suggested that it could select a random sample of 20 class members to testify at trial. Any findings on liability and damages for this
Notwithstanding these objections, the court decided to proceed with its own plan, taking testimony from 20 randomly selected class members in addition to the two named plaintiffs (hereafter, the representative witness group or RWG). The court directed its clerk to draw names "from the proverbial hat" to select 20 class members plus five alternates.
3. Additional Pretrial Proceedings
a. Dismissal of Legal Claims and Opt-out Proceedings
In November 2006, around the same time the trial court finalized the trial management plan and selected the RWG, plaintiffs moved to dismiss their claims under the Labor Code and proceed solely on a claim for equitable relief under the unfair competition law (UCL). (Bus. & Prof. Code, § 17200 et seq.) The court allowed the amendment but also ordered that class members be notified and given a second opportunity to opt out. USB objected that the randomness of the sample would be compromised if members of the RWG withdrew. In total, nine people opted out: Four were members of the RWG, and five were among the remaining 250 people in the class.
USB then asked the court to readmit the four RWG members. It produced declarations from two RWG members stating they had opted out at class counsel's urging. These declarants believed they had been properly classified as exempt and felt the lawsuit was frivolous. In addition, a declaration from
b. USB's First Decertification Motion
In March 2007, USB moved to decertify the class action. Citing new case law
1. Phase One: Liability
There were many in limine motions, but one was particularly significant. USB sought to introduce declarations
Phase one of the bench trial lasted 40 court days. The two named plaintiffs and 19 of the 20 other RWG members testified.
a. Summary of Evidence Presented
All RWG witnesses worked exclusively on sales. All set their own schedules, deciding when and where they worked. They consistently testified that USB never told them where to work, or that they were required to spend more than half of their work time outside a branch office. USB kept no records of BBOs' working hours or the proportion of time spent either in or outside bank offices. The RWG witnesses all testified that they generally spent more than half of their workday inside bank offices.
The RWG testimony varied somewhat, however, on the subject of overtime work. Some RWG witnesses testified that they typically worked no more than 40 hours per week. Some testified to relatively small amounts of overtime, reporting workweeks of up to 45 hours. Others reported working more overtime. One RWG member, Chad Penza, was something of an anomaly. At one point during the three and a half years he worked for USB, Penza was the top-producing BBO nationwide. He initially worked 10 and a half hours a day, but after a few months he began working 12 to 13 hours a day, including several hours on weekends. Penza explained that he chose to work long hours because he was trying to reach sales goals and succeed. Other RWG witnesses similarly testified that their work schedules and habits were motivated by the desire to meet sales goals and not by any expectation from the bank that they work overtime.
Some of the RWG members were impeached with contrary declarations they had previously signed. For example, top producer Penza executed two declarations, in 2002 and 2004, stating that he spent from 75 to 100 percent of his time making outside sales calls. Another BBO, Adney Koga, signed a declaration and testified in deposition that he typically spent 55 percent of his time away from the office on sales calls.
Managers also described their supervision of those in the RWG. District manager Michael Lewis supervised RWG member Matthew Gediman for over a year. He estimated that Gediman spent from 55 to 70 percent of his time outside the office during the first six months. Later, when Gediman's production waned, Lewis encouraged him to spend more time on outside sales. Similarly, sales manager Pat Collins testified that she hired class representative Sam Duran and told him he was expected to spend the majority of his time on outside sales calls. When Duran failed to meet sales goals, she encouraged him to follow the 15-3-1-1 model and make more outside calls.
b. Posttrial Motions
At the close of evidence in phase one, USB filed a due process motion seeking to introduce deposition excerpts and over 70 declarations from class members outside the RWG. The court barred this evidence as inconsistent with its selected trial plan. The court also denied USB's motion for judgment under Code of Civil Procedure section 631.8.
In anticipation of phase two, plaintiffs moved to amend the declaration of their expert, Jon Krosnick, to permit trial testimony about the results of a telephone survey Krosnick had conducted of class members' work hours. The court allowed the amendment, and USB moved to exclude the survey evidence. In opposition, plaintiffs filed a declaration from their statistics expert, Richard Drogin. Drogin opined that phase one findings of liability and average weekly hours of unpaid overtime could be "reliably projected to the whole class" because they were based on a random sample. Taking the court's indicated findings for phase one, with adjustments for vacation time and other breaks in service, Drogin calculated a weighted average of overtime
Shortly before the formal statement of decision was issued in phase one, USB moved again to decertify the class. USB argued that because trial evidence revealed wide variations among class members, individual issues predominated as to both liability and restitution. The motion was denied. The court decided to extend liability findings for RWG members to the class as a whole. It dismissed as premature USB's objection to the calculation of restitution by extrapolation from phase one evidence.
c. Statement of Decision
The trial court issued a phase one statement of decision on September 22, 2008, approximately a year after the close of evidence. It found that, during all relevant times, USB did not have a policy requiring BBOs to spend more than half their time away from bank locations. Although some defense witnesses testified the bank expected BBOs to spend most of their time away from the office, the court discredited this testimony based on its assessment of the evidence and the lack of documentary support. The court found that BBOs were never told they were expected to spend time outside the bank. USB did not track the time BBOs worked inside or outside of bank offices. Consistent with their classification as exempt employees, the bank kept no record of BBOs' work hours. USB had no compliance program to ensure BBOs were properly classified, and no BBO had ever been disciplined for spending excessive time inside the bank. The trial court also found that it was unrealistic for USB to expect BBOs to work more than half their time outside the bank because many BBO job duties could only be performed, or could most easily be performed, inside bank offices.
Accordingly, the court concluded USB did not carry its burden of proof on the outside salesperson exemption. Based primarily on testimony from RWG witnesses, the court ruled that the entire class of BBOs employed by USB between December 26, 1997, and September 26, 2005, was misclassified as exempt, and all class members were owed overtime in amounts to be determined in phase two of the trial. The court provisionally accepted Drogin's assertion that RWG members worked an average of 11.87 hours of overtime per week but deferred consideration of the number's significance to phase two.
2. Phase Two: Restitution
a. Pretrial Motions
Before the start of evidence in phase two, plaintiffs filed an in limine motion to prevent USB from introducing any evidence pertaining to liability because that question had been resolved in the court's statement of decision for phase one. The court granted the motion, noting that the purpose of phase one had been to resolve USB's liability for misclassification. The court once again denied USB's request to introduce declarations and deposition testimony from non-RWG class members. The court thus barred any challenge to its phase one decision that all class members were misclassified as exempt and all were entitled to overtime compensation.
Plaintiffs' statistics expert Richard Drogin testified that the trial court's methodology in phase one was statistically sound. Drogin conceded, however, that the plan differed from his own proposal. Drogin had suggested that the
As to restitution, Drogin testified that RWG members reported working an average of 11.87 hours of overtime per week. He arrived at this figure by adding the number of overtime hours the court found had been worked by the 21 testifying witnesses and dividing that total by the number of weeks they had worked. If a witness reported a range of overtime hours, Drogin picked the midpoint.
USB's statistics expert, Andrew Hildreth, identified several problems with the trial court's sampling plan. He explained that simply drawing a random sample is not sufficient to produce an unbiased and accurate estimate about an underlying population. To be reliable, the sample must be sufficiently large and free from bias caused by various sampling errors. Here, the sample size was too small. Hildreth explained that, before a sample is selected, a pilot study is typically done to determine the amount of variation in the underlying population. Based on this pilot study, experts can estimate the standard deviation in the population and then, using the desired margin of error, calculate the optimal sample size. Although both sides' experts had proposed such a study, none was done before the court decided to pick 20 class members for the sample.
In Hildreth's opinion, the sample was also seriously marred by selection bias. When the court allowed a second round of opt-outs after random selection of the RWG, it effectively created two groups with different motivations. If RWG members opted out, they would no longer have to testify at trial, and their testimony would no longer influence the sample results. However, if class members outside the RWG opted out, this choice would not change their participation in the trial nor affect the sample results. The two groups did, in fact, behave differently: Less than 2 percent of the nonsample group opted out, whereas 20 percent of the sample group did so. Hildreth explained that the second round of opt-outs gave members of the RWG an opportunity to self-select into the sample group, compromising the randomness of the sample.
Hildreth also opined that there was no statistical basis to conclude from the court's phase one findings that 100 percent of the class was misclassified. Even if all the sampling errors he identified could be ignored, and all those in the random sample were correctly found to be misclassified, it was still statistically possible that 13 percent of the class was properly classified as exempt. For a sample of 19,
c. Statement of Decision
On May 20, 2009, the trial court issued a statement of decision for phase two. Consistent with its remarks at the close of phase one, the court found that the class worked 11.86
C. Posttrial Proceedings
In a motion for new trial, USB argued it was denied due process by the court's refusal to admit non-RWG class member declarations or depositions and its refusal to hear non-RWG testimony offered in USB's defense. The motion was denied.
On appeal, the judgment was unanimously reversed.
During the past decade, California courts have seen an increasing number of class action lawsuits alleging workers were wrongly classified as exempt
Faced with the potential difficulties of managing individual issues in misclassification cases, many trial courts have denied certification or decertified the class before trial. (See post, at pp. 29-31.) Under deferential appellate review for abuse of discretion (see Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436 [97 Cal.Rptr.2d 179, 2 P.3d 27]), such decisions have been routinely upheld. Conversely, other trial courts have granted certification in misclassification actions, and these decisions, too, have been upheld. (See, e.g., Sav-On, supra, 34 Cal.4th 319; Bell, supra, 115 Cal.App.4th 715; see also post, at p. 31 & fn. 28.) As far as we are aware, however, this is only the second misclassification case in California certified as a class action and tried to verdict.
This appeal highlights difficult questions about how individual issues can be successfully managed in a complex class action. After reviewing the requirements of the outside salesperson exemption, we discuss the trial court's obligation to consider the manageability of individual issues in certifying a class action. In particular, we hold that a class action trial management plan must permit the litigation of relevant affirmative defenses, even when these defenses turn on individual questions. Next, we explain how the trial court ignored individual issues here, hamstringing USB's ability to defend itself. Finally, we describe the flaws in the trial plan's implementation of statistical sampling as proof of USB's liability to the class.
A. The Outside Salesperson Exemption
The Ramirez dispute centered on whether the plaintiff spent more than half his working time engaged in sales. (Ramirez, supra, 20 Cal.4th at pp. 802-803; see Walsh v. IKON Office Solutions, Inc., supra, 148 Cal.App.4th at pp. 1445-1446.) Here, the parties agree that BBOs spent most or all of their workday in that fashion. The dispute concerns where they typically did the work. As the courts below recognized, the wage order's approach to this question is just as quantitative as it was in Ramirez. For the exemption to apply, a BBO must "customarily and regularly work more than half the
B. Certification of Misclassification Class Actions
1. Class Certification Principles
a. Predominance of Common Issues
We have observed that the "ultimate question" for predominance 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." (Collins v. Rocha (1972) 7 Cal.3d 232, 238 [102 Cal.Rptr. 1, 497 P.2d 225]; see Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104-1105, 1108 [131 Cal.Rptr.2d 1, 63 P.3d 913].) "The answer hinges on `whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.' (Sav-On, [supra, 34 Cal.4th] at p. 327.) ... `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.' [Citations.]" (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021-1022 [139 Cal.Rptr.3d 315, 273 P.3d 513] (Brinker); see Employment Development Dept. v. Superior Court (1981) 30 Cal.3d 256, 266 [178 Cal.Rptr. 612, 636 P.2d 575]; Vasquez v. Superior Court (1971) 4 Cal.3d 800, 809, 815 [94 Cal.Rptr. 796, 484 P.2d 964].) However, we have cautioned that class treatment is not appropriate "if every member of the alleged class would be required to litigate numerous and substantial questions determining his individual right to recover following the `class judgment'" on common issues. (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459 [115 Cal.Rptr. 797, 525 P.2d 701].)
The granting of class certification thus requires a determination that group, rather than individual, issues predominate. Such a finding, however, does not preclude the consideration of individual issues at trial when those issues legitimately touch upon relevant aspects of the case being litigated.
b. Manageability of Individual Issues
After a class has been certified, the court's obligation to manage individual issues does not disappear. "[O]nce the issues common to the class have been tried, and assuming some individual issues remain, each plaintiff must still by some means prove up his or her claim, allowing the defendant an opportunity to contest each individual claim on any ground not resolved in the trial of common issues." (Johnson v. Ford Motor Co. (2005) 35 Cal.4th 1191, 1210 [29 Cal.Rptr.3d 401, 113 P.3d 82].) In Sav-On, supra, 34 Cal.4th at page 332, we upheld the certification of an overtime class action even though the defendant complained that calculation of each class member's recovery would likely "`degenerate into a multitude of mini-trials.'" There, we found substantial evidence of common issues based on class members' allegations that they were all required to work overtime and perform nonexempt tasks pursuant to uniform company policies and practices. (Id. at pp. 327-328.) We upheld the trial court's certification order even as we acknowledged that individualized proof of class members' nonexempt status and overtime amounts might ultimately be required. (Id. at pp. 332-334.) In so doing, we stressed that "[i]ndividual issues do not render class certification inappropriate so long as such issues may effectively be managed." (Id. at p. 334, italics added.)
2. Management of Individual Issues in Misclassification Class Actions
Employers in misclassification cases typically argue their exemption defense raises issues unique to each individual class member. As a result, misclassification class actions can pose difficult manageability challenges.
However, individual issues will not necessarily overwhelm common issues when a case involves exemptions premised on how employees spend the workday. In Sav-On, supra, 34 Cal.4th 319, for example, we upheld certification of an overtime class action based on a showing that all plaintiffs performed jobs that were highly standardized. As a result, class members performed essentially the same tasks, most of which were nonexempt as a matter of law. (Id. at pp. 327-328.) Further, the defendant's corporate policy required all class members to work overtime. (Id. at p. 327.) Where 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.
Moreover, if sufficient common questions exist to support class certification, it may be possible to manage individual issues through the use of surveys and statistical sampling. Statistical methods cannot entirely substitute for common proof, however. There must be some glue that binds class members together apart from statistical evidence. While sampling may furnish indications of an employer's centralized practices (see Sav-On, supra, 34 Cal.4th at p. 333), no court has "deemed a mere proposal for statistical sampling to be an adequate evidentiary substitute for demonstrating the requisite commonality, or suggested that statistical sampling may be used to manufacture predominate common issues where the factual record indicates none exist" (Dailey v. Sears, Roebuck & Co., supra, 214 Cal.App.4th at p. 998). In addition, as we will discuss, a statistical plan for managing individual issues must be conducted with sufficient rigor.
3. Trial Plan Did Not Manage Individual Issues Arising from USB's Exemption Defense
Evidence presented in connection with the certification motions showed that BBOs enjoyed exceptional independence. The bank did not tell them when, where, or how to do their work. It focused exclusively on whether BBOs achieved their sales targets. Consistent with this independence, declarations offered by both sides showed significant variation in the time individual BBOs worked outside the office. The trial court was of course entitled to discredit USB's declarations. However, it received no evidence establishing uniformity in how BBOs spent their time. (See Ramirez, supra, 20 Cal.4th at p. 802.) Wide variation among class members is a factor informing whether the exemption question can be resolved by a simple "yes" or "no" answer for the entire class.
Thus, 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.
C. Class Action Trial Must Permit Adjudication of Affirmative Defenses
We have encouraged trial courts to be "procedurally innovative" in managing class actions. (City of San Jose v. Superior Court, supra, 12 Cal.3d at p. 453.) We have remained open to the appropriate use of representative testimony, sampling, or other procedures employing statistical methodology. (See Sav-On, supra, 34 Cal.4th at pp. 339-340.) However, the trial plan here was seriously flawed. First, without following a valid statistical model developed by experts, the court improperly extrapolated liability findings from a small, skewed sample group to the entire class. Second, in pursuing this extrapolation, the court adamantly refused to admit relevant evidence relating to BBOs outside the sample group. These rulings significantly impaired USB's ability to present a defense.
Although the trial court's certification decision was apparently influenced by Sav-On, supra, 34 Cal.4th 319, the court overlooked our advisements about the need to manage individual issues in a class action. Although we found substantial evidence of common issues supporting certification in that misclassification case, we also articulated an important caveat: "Unquestionably,... defendant is entitled to defend against plaintiffs' complaint by
For example, in Granberry v. Islay Investments (1995) 9 Cal.4th 738, 742-743 [38 Cal.Rptr.2d 650, 889 P.2d 970], we held that a landlord sued for excess rent by a class of former tenants was entitled to set off amounts the tenants owed for unpaid rent, repairs, and cleaning. (Id. at p. 743.) The tenants objected that "to allow setoff would be inappropriate in class actions... because of numerous practical difficulties," such as the need for setoff amounts to be litigated individually in thousands of cases. (Id. at p. 749.) In rejecting the plaintiffs' argument that these difficulties should bar the landlord from raising the setoff defense, we stressed that "it is inappropriate to deprive defendants of their substantive rights merely because those rights are inconvenient in light of the litigation posture plaintiffs have chosen." (Ibid.)
We voiced similar concerns in Washington Mutual, supra, 24 Cal.4th 906. There, the trial court had certified a nationwide class action challenging a bank's practice of forcing homebuyers to purchase expensive replacement policies when the hazard insurance on their properties lapsed. (Id. at p. 912.) The bank argued common questions did not predominate because choice-of-law provisions in the loan documents would require the application of different state laws to different plaintiffs' claims. (Id. at p. 913.) We held that, when deciding whether to certify a nationwide class, trial courts must consider the potential for individual issues arising from choice-of-law clauses. (Id. at p. 926.) Although the Court of Appeal had suggested businesses should not be allowed to rely on choice-of-law clauses to escape involvement in a nationwide class action, we disagreed. (Id. at p. 918.) Instead, stressing that class action procedure must conform to substantive law,
Similarly 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. ___, ___ [180 L.Ed.2d 374, 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 [31 L.Ed.2d 36, 92 S.Ct. 862]; Philip Morris USA v. Williams (2007) 549 U.S. 346, 353 [166 L.Ed.2d 940, 127 S.Ct. 1057].)
To defend the trial plan, plaintiffs analogize to Teamsters v. United States (1977) 431 U.S. 324 [52 L.Ed.2d 396, 97 S.Ct. 1843] (Teamsters) and argue wage and hour defendants have no right to litigate an exemption defense as to each class member "during the liability phase" of trial. The analogy does not hold. Teamsters was a title VII
Plaintiffs appear to urge a similar approach in misclassification cases, with an initial "liability" phase devoted to classwide evidence of misclassification and a second "remedial" phase addressing the extent of damages or other relief to be provided to the class. In the first phase, plaintiffs assert, "[i]t would be inconsistent with the requirement of common evidence" for the employer to be permitted to litigate its exemption defense against individual class members. Disputes over individual plaintiffs'"entitlement to relief" would have to await the second phase of proceedings, to be considered along with arguments regarding the amount of damages to be paid.
Moreover, the scope of injuries caused by the defendant's conduct differs in the two types of cases. "In a discrimination case, it is a reasonable possibility that all class members, even those who have fared exceedingly well, were subject to this unlawful policy or practice.... [¶] This dimension is absent in a misclassification case. That is, it is meaningless to suggest that an employee who is performing exempt duties would have been even more exempt had the employer not engaged in the standard practice of misclassification. Further, because the employer already bears the burden of establishing that each employee qualifies as exempt, nothing is accomplished procedurally by litigating the pattern and practice claim. The employer still must prove, class member by class member, that the particular employee qualified as exempt." (King & Muraco, Classwide Determinations of Overtime Exemptions: The False Dichotomy Posed by Sav-On and a Suggested Solution (2006) 21 Lab. Law. 257, 268-269 (hereafter King & Muraco).)
Second, plaintiffs' vision of a wage and hour class action trial conflates liability and damages. All phases of the Teamsters model are geared toward proving the defendant's liability for discrimination, which is generally suffered by all group members regardless of their individual circumstances. Decisions about the amount of damages owed for discriminatory conduct are entirely separate; they are not addressed in the burden-shifting framework at all. In plaintiffs' view of wage and hour class actions, disputes about the defendant's liability to any particular employee must be decided in correlation with decisions about the amount of damages owed to the class. In other words, decisions about the fact of liability are reframed as questions about the extent of liability. However, as the trial below demonstrated, once the court has decided against the defendant in phase one, it is all too easy to presume the defendant's liability to all class members in phase two.
D. Sampling Techniques Must Satisfy Realistic Guidelines to Minimize the Risk of Error
Questions about the use of statistical evidence to prove classwide liability and damages are far from settled. The court below adopted a trial plan that sought to prove liability and damages by extrapolation from the testimony of a small sample group. In addition to the undue restrictions this plan placed on USB's ability to support its exemption defense, the court's attempt to implement random sampling was beset by numerous problems.
Sampling is a methodology based on inferential statistics and probability theory. "The essence of the science of inferential statistics is that one may confidently draw inferences about the whole from a representative sample of the whole." (In re Chevron U.S.A., Inc. (5th Cir. 1997) 109 F.3d 1016, 1019-1020.) Whether such inferences are supportable, however, depends on how representative the sample is. "[I]nferences from the part to the whole are justified [only] when the sample is representative." (Kaye & Freedman, Reference Guide on Statistics in Reference Manual on Scientific Evidence (3d ed. 2011) pp. 211, 216-217.) Several considerations determine whether a sample is sufficiently representative to fairly support inferences about the underlying population.
1. Use of Sampling to Prove Misclassification Liability
It is an open question, hotly contested among the parties and amici curiae, whether statistical sampling can legitimately be used to prove a defendant's liability to absent class members. The question has arisen in numerous contexts, ranging from mass torts (e.g., Cimino v. Raymark Industries, Inc. (5th Cir. 1998) 151 F.3d 297, 319-320) to employment discrimination (e.g., Wal-Mart Stores, Inc. v. Dukes, supra, 564 U.S. at pp. ___ - ___ [131 S.Ct. at pp. 2560-2561]). In the wage and hour context, recent decisions from federal district courts have disagreed about whether statistical sampling may be used to prove liability. (Compare Dilts v. Penske Logistics, LLC (S.D.Cal. 2010) 267 F.R.D. 625, 638 [approving the potential use of statistical sampling to prove classwide damages and liability for off-the-clock claims]
One published California case describes the successful use of statistical sampling in the trial of a wage and hour class action. In Bell, supra, 115 Cal.App.4th 715 insurance claims representatives sued their employer for unpaid overtime, recovering a class judgment of over $90 million. The court below relied heavily on Bell in developing the trial plan here. But, in doing so, it failed to note one critical distinction. The statistical evidence in Bell was heard only after classwide liability had been established. At the summary adjudication stage, the court ruled that the administrative exemption did not apply to any plaintiff; therefore, all had been misclassified as exempt. (Id. at pp. 720-721.) The employer unsuccessfully challenged that ruling on appeal. (Bell v. Farmer's Ins. Exchange (2001) 87 Cal.App.4th 805 [105 Cal.Rptr.2d 59], review den. June 20, 2001, cert. den. sub nom. Farmer's Ins. Exchange v. Bell (2001) 534 U.S. 1041 [151 L.Ed.2d 539, 122 S.Ct. 616].) On remand, sampling was used to prove damages only. (See Bell, supra, 115 Cal.App.4th at pp. 721-722.) Because all class members were nonexempt, the only unresolved question was how many overtime hours they worked. After
The issues here were far more complex, encompassing both liability and damages. When the court announced its sampling plan, liability remained disputed, the parties disagreed on a sampling approach, and, as we explain, the court-devised method was statistically flawed.
2. Use of Sampling to Prove Misclassification Damages
Mt. Clemens was a suit for unpaid overtime under the Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 216(b)). As with California's analogous labor laws, the plaintiff in an FLSA action has the burden of proving he or she was not properly compensated for work performed. (Mt. Clemens, supra, 328 U.S. at pp. 686-687.) Such proof is almost impossible to establish, however, if the employer has not kept accurate or adequate records. Recognizing this problem, the Supreme Court held that when an employer's records
Moreover, any compensation awarded to the class must be based solely on overtime hours worked by nonexempt employees. Overtime hours worked by exempt employees are irrelevant. If a sampling plan used to calculate damages cannot distinguish exempt from nonexempt employees, it may be difficult to obtain an accurate estimate of overtime owed to the class. (See King & Muraco, supra, 21 Lab. Law. at pp. 265-266.)
3. Sampling Errors in the Trial Below
Even when statistical methods such as sampling are appropriate, due concern for the parties' rights requires that they be employed with caution. Here, the process failed.
a. Sample Size Was Too Small
For reasons that are not clear, the court here chose a sample size of 20, plus the two named plaintiffs. It did so without input from either side's statistical experts. It purported to rely on Bell, supra, 115 Cal.App.4th 715. Yet in Bell both sides' experts had worked for months to develop a mutually acceptable sampling plan. (Id. at pp. 722-723.) After "`an initial pilot sample'" of 50 depositions, the experts agreed that results with a one-hour-per-week margin of error could be achieved using a sample size of 286 plaintiffs. (Id. at p. 722.) The parties ultimately deposed 295 class members and brought the margin of error down to less than an hour a week. (Id. at p. 723.) The close involvement of the parties' experts in determining sample size led to this low margin of error and the "virtually identical calculations" of total overtime owed to the class. (Id. at p. 724.)
The proceedings here were strikingly different. Neither side's experts had studied the variability among class members on key questions including percentage of hours worked outside or average weekly overtime. The court chose a sample size that would be convenient and manageable. The same could be said of a sample of one. Yet convenience alone cannot justify procedures that substantially curtail the parties' ability to litigate their case. If sampling is used to estimate the extent of a party's liability, care must be taken to ensure that the methodology produces reliable results. With input from the parties' experts, the court must determine that a chosen sample size is statistically appropriate and capable of producing valid results within a reasonable margin of error.
b. Sample Was Not Random
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. Certainly class counsel are entitled to select named plaintiffs in a manner that enhances their position. But that tactical choice should not compromise the statistical approach required for random sampling.
Numerous rulings here undermined randomness and gave class counsel the ability to influence the cases selected to be tried in the sample group.
First, the trial court excluded one person selected for the RWG, Brian Smith, because his work activities differed from those of other BBOs and the court did not consider him to be a "true" BBO. However, Smith's work activities may not have been unique. As a randomly selected member of the class, Smith may in fact have been representative of a sizeable, if unknown, group of BBOs whose job duties differed from the norm. The exclusion of perceived outliers "`is more often associated with conscious, or perhaps unconscious, attempts to make a particular process perform as one would like it to perform rather than accepting the actual performance.'" (Freedman, supra, at p. 103.) By characterizing Smith as atypical and excluding his testimony, the court imposed a greater uniformity on the RWG than its "random" sampling methodology warranted.
Similarly, at the trial stage, one member of the RWG was able to exclude his own case from the sample group simply by failing to appear. Borsay Bryant did not respond to a trial subpoena and gave no testimony that could be included in the sample results. Even so, the court permitted him to recover under the class judgment. If plaintiffs are allowed to opt out of a sample group yet recover from the resulting class judgment, a plaintiff with a weaker case will be motivated to exclude himself and benefit from the higher recovery produced by the stronger cases in the sample. Bryant may not have acted with this subjective motivation, but his failure to appear was yet another instance of selection bias that compromised the randomness of the sample.
Next, after the court drew names for the RWG, it granted plaintiffs' motion to amend the complaint and ordered the parties to give all class members, including those selected for the RWG, a second opportunity to opt out of the proceedings. Nothing prevented class counsel from assessing the strength of cases selected for the RWG and encouraging plaintiffs with weak liability or damages claims to opt out. In fact, two class members who had given favorable deposition testimony for USB submitted declarations stating that class counsel strongly encouraged them to opt out after they were selected for
Based on testimony from the 19 class members who testified and the two named plaintiffs, the court ruled that the entire class of BBOs had been misclassified. In rigid adherence to its sampling plan, the court refused to hear potentially contrary testimony from 10 plaintiffs who would otherwise have been included in the sample: the four previously named plaintiffs, the four RWG members who opted out, the RWG member whose work habits were different, and the RWG member who failed to appear for trial. The resulting sample was not random, but appeared to be biased in plaintiffs' favor.
c. Intolerably Large Margin of Error Resulted
"Margin of error" is a statistical measurement of the reliability of an estimate produced by sampling. It reflects the amount by which the estimate may be wrong given a certain confidence interval. Plaintiffs' expert Drogin defined margin of error as the "plus or minus" amount associated with the estimate at a given level of confidence. Statisticians typically calculate margin of error using a 95 percent confidence interval, which is the interval of values above and below the estimate within which one can be 95 percent certain of capturing the "true" result.
Here, testimony from the skewed sample group produced an estimate of 11.86 hours of average weekly overtime. Drogin calculated a margin of error of 5.14 hours, or 43.3 percent,
In Bell, supra, 115 Cal.App.4th at pages 756 to 757, the same Court of Appeal that decided this case concluded a 32 percent margin of error was so large that the resulting damages award violated due process. The court went on to observe, in dicta, that "[t]he reliability of an estimate subject to a large margin of error might conceivably be bolstered by evidence of a high response rate, probable distribution within the margin of error, absence of measurement error, or other matters." (Id. at p. 756.) The trial court here cited Bell's "bolstering" factors to justify reliance on Drogin's overtime estimate despite the 43.3 percent margin of error. Specifically, the court asserted that reliability of the estimate was enhanced by (1) the random selection of the
We question whether such ancillary indicia of reliability could ever be sufficient to justify reliance on an estimate with a margin of error approaching 50 percent. In any case, the trial court's assessment was at odds with the facts. (1) Contrary to the court's findings, the randomness of the sample group was repeatedly compromised, and the results obtained for the RWG were marred by selection bias. (2) The response rate for the sample group cannot reasonably be considered high given that one RWG member did not appear for trial, four opted out when given the opportunity, and one was removed by the court. (3) The sample's results almost certainly included a degree of measurement error. Witnesses' recollections of their past overtime were bound to be imprecise. Moreover, several RWG members testified to a range of overtime hours without specifying where in the range they typically worked. In such cases, Drogin chose to rely on the midpoint of the range, but this measure would have been inaccurate if the witness typically worked at the high or low end. (4) The court's assertion that the sample results were corroborated by survey data amounts to little more than bootstrapping. When plaintiffs' expert, Jon Krosnick, surveyed class members after phase one of the trial, the court ruled the survey data inadmissible as a violation of its trial plan and refused to allow USB to conduct any discovery into the design or execution of the survey. Having excluded the survey data and denied USB an opportunity to impeach it, the court could not fairly rely on those data to bolster the reliability of the sample results. (5) As explained ante at page 44, the exclusion of one BBO whom the court considered an "outlier" could well have undermined, rather than enhanced, reliability. As to factors (6) and (7), it is unclear how the court's trial plan or consideration of other procedures could be said, as a matter of statistical rigor, to have made the estimate more reliable.
Nor can the damages estimate here be salvaged by favorable statements in Bell, supra, 115 Cal.App.4th 715 about the utility of sampling to prove classwide damages. The sampling plan in Bell was developed by experts with a significant degree of cooperation among the parties, and the court specifically held that it offered an appropriate means of proving damages under the Mt. Clemens "`just and reasonable inference'" standard. (Bell, at p. 758; see Mt. Clemens, supra, 328 U.S. at p. 687.) Moreover, Bell involved a random sample of nearly 300 and a margin of error under 10 percent. (Bell, at pp. 753-755.)
USB did not waive its right to seek relief on appeal. Forfeiture of issues on appeal typically occurs when a party fails to object. (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 396, p. 453.) The related doctrines of waiver and invited error prevent a party from taking advantage of an error that could have been corrected earlier if brought to the trial court's attention. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134 [275 Cal.Rptr. 797, 800 P.2d 1227].) USB consistently and vigorously objected to the sampling plan, and acted within its rights in doing so. Litigants must of course obey court orders, but they are not obligated to agree to unfair procedures simply because they are convenient for the court. To conclude there was a waiver here would stretch the concept beyond recognition.
Second, although they now concede the 43.3 percent margin of error is too high to support the judgment, plaintiffs stress that this margin of error did not infect the court's phase one finding of classwide liability. Drogin's estimate that 100 percent of the class was misclassified was subject to a margin of error of only 13 percent. However, even if plaintiffs' expert calculated a lower margin of error for the liability estimate, the sampling plan that produced this estimate was tainted by selection bias and the other problems noted. In light of these sampling errors, the true margin of error may have been considerably higher. In any event, the trial court ignored the margin of error entirely when it ruled that USB was liable to all class members, even
d. Sampling Errors Require Reversal
Plaintiffs urge us to ignore the serious flaws in the sampling plan because USB's expert Hildreth raised these criticisms in his testimony and the trial court rejected them, finding the testimony of plaintiffs' experts more credible and persuasive. Although we generally defer to such credibility determinations, the trial court's decision to jettison all statistically grounded criticism of the sampling plan the court itself created was not supported by substantial evidence. Here, the trial court invented its own sampling methodology, without input from the parties' experts. It then adamantly adhered to this methodology, rejecting substantial expert criticism.
We need not resolve here whether statistical sampling can ever be used in a misclassification action to prove an employer's liability to absent class members. Assuming that sampling may be an appropriate means of proving liability or damages in a wage and hour class action, the sample relied upon must be representative and the results obtained must be sufficiently reliable to satisfy concerns of fundamental fairness. These conditions were not satisfied here.
The Court of Appeal's judgment is affirmed in its entirety. On remand, a new trial will be required for both liability and restitution, and the trial court may entertain a new class certification motion.
Cantil-Sakauye, C. J., Baxter, J., Werdegar, J., Chin, J., Liu, J., and Kennard, J.,
It is not difficult to understand why the trial court's sampling plan in this case was "profoundly flawed." (Maj. opn., ante, at p. 13.) The representative witness group was not selected at random but in a manner biased in plaintiffs' favor. The trial court used no known statistical rationale in picking a sample size of 20, and there is no reason to think the sample was sufficiently large. The trial court also tolerated a margin of error at the damages phase that was undoubtedly too large. These errors require reversal of both the liability phase and restitution phase judgments.
At the same time, today's opinion takes an appropriately cautious approach to guiding the conduct of class action trials in employee misclassification cases and, in particular, the use of statistical methods in such trials. The court disavows any "sweeping conclusion as to whether or when sampling should be available as a tool for proving liability in a class action," while emphasizing that any trial plan involving statistical methods "must allow the defendant to litigate its affirmative defenses." (Maj. opn., ante, at p. 40; see id. at p. 35 ["While representative testimony and sampling may sometimes be appropriate tools for managing individual issues in a class action, these statistical
Consistent with our settled precedent, today's opinion continues to encourage trial courts to be "`procedurally innovative'" in managing class actions and leaves open "the appropriate use of representative testimony, sampling, or other procedures employing statistical methodology." (Maj. opn., ante, at p. 33; see Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 339-340 [17 Cal.Rptr.3d 906, 96 P.3d 194] (Sav-On); City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 453 [115 Cal.Rptr. 797, 525 P.2d 701].) Here I offer a few comments to further elucidate the proper inquiry at the class certification stage of an employee misclassification case and the duty of trial courts to manage individual issues in a class action trial.
The threshold task for determining whether a class action is appropriate in a particular case is to inquire whether the substantive law governing the plaintiffs' claims renders those claims amenable to class treatment. Because disputes over the facts or methods of proof that bear on class certification are often, in reality, disputes over "the substantive law that governs the litigation," it is important that courts employ a proper understanding of the substantive governing law to inform the class certification decision, and not the other way around. (Nagareda, Class Certification in the Age of Aggregate Proof (2009) 84 N.Y.U. L.Rev. 97, 104; see id. at pp. 105-106 ["This is not to suggest that class actions-any more or less than conventional, individual lawsuits-cannot serve as vehicles for change in legal doctrine. It is simply to say that the proposed class-wide nature of the litigation should exert no independent weight in arguments for such change." (fn. omitted)].) The exposition of substantive law should be independent of the fact that "the case at hand happens to take a proposed aggregate form." (Id. at p. 108.)
The question in this case is whether the employees in the proposed class are "outside salespersons" exempt from the state's overtime laws. An " `[o]utside salesperson'" is one "who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services or use of facilities." (Industrial Welfare Com., wage order No. 4-2001, subd. 2(M) (Wage Order No. 4-2001, subd. 2(M)); Cal. Code Regs., tit. 8, § 11040, subd. 1(C).) We set forth an authoritative construction
In elaborating "... California's distinctive quantitative approach to determining which employees are outside salespersons," Ramirez resolved a question that had confused litigants and lower courts: "Is the number of hours worked in sales-related activities to be determined by the number of hours that the employer, according to its job description or its estimate, claims the employee should be working in sales, or should it be determined by the actual average hours the employee spent on sales activity? The logic inherent in the [Industrial Welfare Commission's] quantitative definition of outside salesperson dictates that neither alternative would be wholly satisfactory. On the one hand, if hours worked on sales were determined through an employer's job description, then the employer could make an employee exempt from overtime laws solely by fashioning an idealized job description that had little basis in reality. On the other hand, an employee who is supposed to be engaged in sales activities during most of his working hours and falls below the 50 percent mark due to his own substandard performance should not thereby be able to evade a valid exemption. A trial court, in determining whether the employee is an outside salesperson, must steer clear of these two pitfalls by inquiring into the realistic requirements of the job. In so doing, the court should consider, first and foremost, how the employee actually spends his or her time. But the trial court should also consider whether the employee's practice diverges from the employer's realistic expectations, whether there was any concrete expression of employer displeasure over an employee's substandard performance, and whether these expressions were themselves realistic given the actual overall requirements of the job." (Ramirez, supra, 20 Cal.4th at pp. 801-802.)
Thus, in recognizing that California's definition of an outside salesperson is quantitative in nature, Ramirez did not say that the test boils down to whether a particular employee actually spends more than 50 percent of his or her working hours on outside sales. Instead, the ultimate question is: what are "the realistic requirements of the job"? (Ramirez, supra, 20 Cal.4th at p. 802.) The primary consideration that informs this inquiry is "how the employee actually spends his or her time." (Ibid.) But, as Ramirez made clear, this factor is not dispositive because an employee who falls below the 50
Once we have brought into focus the ultimate issue of "the employer's realistic expectations" or "the realistic requirements of the job" (Ramirez, supra, 20 Cal.4th at p. 802), it is not difficult to contemplate that employees in a given job classification will often be either wholly exempt or wholly nonexempt, since a job classification often entails a common set of employer expectations or requirements for performance of the job. That is not to say that trial courts should simply rely on "an employer's job description" in deciding whether employees are outside salespersons; as Ramirez warned, "the employer could make an employee exempt from overtime laws solely by fashioning an idealized job description that had little basis in reality." (Ibid.) How employees actually spend their time obviously matters. But Ramirez also warned that it "would [not] be wholly satisfactory" to rely solely on "the actual average hours the employee spent on sales activity." (Ibid.) Variability in such hours does not necessarily prove that the employer's realistic expectations or the realistic requirements of the job were not the same for all employees in a given job classification.
We addressed the implications of Ramirez for class actions in Sav-On, supra, 34 Cal.4th 319, which upheld certification of a class of drug store employees who alleged they had been misclassified as managers exempt from overtime laws. The defendant in Sav-On argued that the managerial exemption, like the outside salesperson exemption in Ramirez, turns on "`the actual tasks performed by each class member, the amount of time each class member spent on those tasks, and how the class member's practices compare to the employer's reasonable expectations,'" and that such individualized factors necessarily bar class certification. (Id. at p. 335.) We rejected this argument: "Presence in a particular overtime class action of the considerations reviewed in Ramirez does not necessarily preclude class certification.
Sav-On went on to say that "our observation in Ramirez that whether the employee is an outside salesperson depends `first and foremost, [on] how the employee actually spends his or her time' (Ramirez, supra, [20 Cal.4th] at p. 802) did not create or imply a requirement that courts assess an employer's affirmative exemption defense against every class member's claim before certifying an overtime class action." (Sav-On, supra, 34 Cal.4th at p. 337.) Such an approach, we said, would "require as a prerequisite to certification that plaintiffs demonstrate defendant's classification policy was ... either `right as to all members of the class or wrong as to all members of the class,'" thereby reversing the employer's burden to prove the employee's exemption. (Id. at p. 338.) "Ramirez is no authority for such a requirement, nor does the logic of predominance require it." (Ibid.)
Since Sav-On, a number of Courts of Appeal have upheld denials of class certification in employee misclassification cases based on the conclusion they were not amenable to common proof. In some cases, preliminary evidence revealed that a common job classification and description did not actually reflect common employer expectations or requirements. (See, e.g., Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 734 [108 Cal.Rptr.3d 15] [affirming denial of class certification where trial court credited defense evidence that duties of a restaurant manager varied significantly from restaurant to restaurant].) But Sav-On made clear that variation in how employees spend their time does not, by itself, preclude a finding that an employer's realistic expectations are susceptible to common proof. Here, under the relevant wage order, the ultimate question is whether BBOs "customarily and regularly" spend more than half their working time on exempt tasks. (Wage Order No. 4-2001, subd. 2(M), italics added.)
As today's opinion explains, the predominance of common issues "is not the only consideration. In certifying a class action, the court must also
A principal error in this case was the trial court's refusal to consider declarations from class members outside of the representative witness group during the trial. I agree that "[i]n rigidly adhering to its flawed trial plan and excluding relevant evidence central to the defense, the court here did not manage individual issues. It ignored them." (Maj. opn., ante, at p. 34.) What would it mean to "manage individual issues" in the context of an employee misclassification case? To aid the trial court on remand, as well as future courts in similar cases, I briefly address this question.
At the outset, it must be remembered that a declaration indicating that an employee typically spent more than 50 percent of the workday engaged in outside sales activity does not dispositively show that the employee was properly classified as exempt. Rather, such a declaration is evidence bearing on the ultimate issue of "the employer's realistic expectations" or "the realistic requirements of the job." (Ramirez, supra, 20 Cal.4th at p. 802.) In a trial, such evidence must be assessed for its weight and credibility, and it must be considered together with all other evidence bearing on the ultimate issue.
Further, although a representative sampling approach to proving class liability is not appropriate for all statutory rights (see Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. ___ 180 L.Ed.2d 374, 131 S.Ct. 2541]), the need to manage individual issues does not foreclose the use of sampling, representative testimony, or other statistical methods to obtain relevant evidence in a class action trial on employee misclassification. However, because such methods are inherently designed to reveal generalized characteristics of a population, they pose the risk that a defendant's affirmative defenses as to individual employees will not be properly adjudicated. There are two ways that a trial court should consider individual issues in this context.
First, consideration of individual issues should inform the design of any sampling or similar statistical approach. As today's opinion notes, "[i]t is impossible to determine an appropriate sample size without first learning about the variability in the population." (Maj. opn., ante, at p. 42.) In other words, a valid sampling plan must take into account individual variation within the population, and in that sense, consideration of individual issues is
Second, even when a trial court has settled on a valid sampling plan, the defendant is entitled to raise individual issues that challenge the results of the plan as implemented. The defendant may introduce evidence, such as individual declarations, suggesting that the sample was not truly representative or that the margin of error admits substantial variation around an average or generalized finding. Faced with evidence from individual and aggregate methods of proof, the trial court must reasonably resolve any conflicts. In so doing, the court may arrive at many possible conclusions, depending on the evidence.
As noted, the court must assess the credibility of the individualized evidence. Here, for example, the credibility of declarations as to how much time an employee spent on outside sales activity may depend on whether the employer or employee kept contemporaneous records of his or her time. Or the trial court could call some of the declarants to testify and assess whether their testimony confirmed or contradicted their declarations. The court might find that the individualized evidence lacks credibility and that the sampling evidence is reliably probative of the employer's realistic expectations. Or the court might find that the individualized evidence is credible and casts doubt on the validity of the sampling plan as executed. In the latter case, the court might conclude that variability cannot be managed in a class proceeding and that the class should be decertified. Or the court might notice patterns that suggest unmanageable variation in particular subgroups, resulting in partial decertification. Or the court might conclude that the individualized evidence shows only a few outliers that can be handled through minitrials without disrupting the class proceeding.
Alternatively, the court might find that the individualized evidence, while credible, does not show variability in the class but rather provides strong, consistent evidence of the employer's realistic expectations for the job at issue. Such evidence, depending on what it showed, could support a finding of exemption or nonexemption for the entire class, thereby corroborating or undercutting the sampling evidence. Or such evidence could support a finding of liability for a subset of the class, while tending to disprove liability for the remainder.
The important point is that neither an aggregate method of proof (like sampling or representative witness testimony) nor individualized evidence
A class action trial plan, however well conceived, cannot anticipate every possible development. The trial court must address individual issues when they arise. In so doing, the court has a great deal of discretion — from determining the weight to be given to individualized and aggregate evidence, to determining how much variability such evidence suggests there is in the class, to determining what implications such evidence has for continued certification of the class and for the ultimate merits of the case. As we said in Sav-On: "Courts seeking to preserve efficiency and other benefits of class actions routinely fashion methods to manage individual questions. For decades `[t]his court has urged trial courts to be procedurally innovative' [citation] in managing class actions, and `the trial court has an obligation to consider the use of ... innovate procedural tools proposed by a party to certify a manageable class' [citations]. Such devices permit defendants to `present their opposition, and to raise certain affirmative defenses.' [Citation.]" (Sav-On, supra, 34 Cal.4th at pp. 339-340, fns. omitted; see id. at p. 339, fns. 11-12 [providing numerous examples of methods to manage individual issues, including bifurcation, subclasses, questionnaires, and individualized hearings].)
Today's opinion properly identifies the shortcomings of the representative witness group in this case and the trial court's failure to give due consideration to the individualized evidence that U.S. Bank National Association (USB) sought to introduce in its defense. But it is important to note that the trial court focused on the right question on the merits: What were the realistic requirements of the BBO position?
At trial, no party argued that USB lacked common expectations and requirements for BBOs. According to USB's answer brief, USB presented
Such findings, if based on substantial evidence, ordinarily would be sufficient to show the nonexempt status of employees under the relevant wage order. In this case, however, we cannot have confidence in such findings because the trial court did not use a valid representative witness group or consider individualized evidence that might have presented a more complete picture of the class. On remand, the trial court must start anew by assessing whether there is a trial plan that can properly address both common and individual issues if the case were to proceed as a class action.