Class Action Lawsuits

What Is a Class Action Lawsuit?

A class action lawsuit is a legal proceeding in which one or more employees (the "named plaintiffs" or "class representatives") sue an employer on behalf of a larger group of employees (the "class") who allegedly suffered similar harm from the same unlawful practices. In California employment law, class actions most commonly involve wage and hour violations such as unpaid overtime, missed meal and rest breaks, and minimum wage violations.

For California employers, class action litigation represents a significant financial and operational risk. A practice that might generate a modest individual claim can create millions of dollars in exposure when aggregated across hundreds or thousands of employees over multiple years.

How Class Actions Work

Class Action Requirements

For a case to proceed as a class action, the court must "certify" the class. California courts evaluate class certification based on several factors:

Requirement	Definition	What Plaintiffs Must Show
Numerosity	Class is large enough that individual suits impractical	Typically 40+ potential class members
Commonality	Common questions of law or fact	Same policy or practice affects all members
Typicality	Representatives' claims typical of class	Named plaintiffs have same claims as class
Adequacy	Representatives will fairly protect class interests	No conflicts, competent counsel
Predominance	Common issues predominate over individual ones	Class-wide proof can establish liability
Superiority	Class action is superior method for resolution	More efficient than individual lawsuits

Types of Employment Class Actions

Class Action Type	Description	Common Claims
Wage and hour	Violations of pay requirements	Overtime, minimum wage, breaks
Misclassification	Improper exempt status	Overtime owed to misclassified workers
Off-the-clock	Unpaid work time	Pre/post-shift work, working through breaks
Expense reimbursement	Unreimbursed business expenses	Mileage, cell phones, uniforms
Discrimination	Pattern or practice discrimination	Hiring, pay, promotion disparities
ERISA	Employee benefit violations	Pension, health plan issues

The Class Action Lifecycle

Phase 1: Pre-Filing Investigation

Before filing, plaintiffs' attorneys typically:

• Interview potential class members
• Review policies and practices
• Analyze pay data and records
• Assess class certification viability
• Calculate potential damages
• Evaluate employer's financial condition

Employer Warning Signs:

• Complaints to HR about pay practices
• DLSE wage claims filed
• PAGA notices received
• Requests for pay records from former employees

Phase 2: Complaint Filing

The lawsuit begins with filing a complaint that:

• Names the plaintiff(s) and defendant(s)
• Describes the alleged violations
• Defines the proposed class
• States claims under applicable laws
• Demands relief (damages, injunctions, fees)

Common California Claims:

• Labor Code violations (overtime, breaks, wage statements)
• Unfair Competition Law (Bus. & Prof. Code § 17200)
• PAGA claims (often joined with class claims)

Phase 3: Early Litigation

After filing, several events typically occur:

Event	Timing	Purpose
Answer	30 days after service	Employer responds to allegations
Initial disclosures	Per court rules	Basic information exchanged
Case management conference	90-120 days	Court sets schedule and deadlines
Early mediation	Varies	Attempt early resolution
Protective order	Early	Governs confidentiality of discovery

Phase 4: Discovery

Discovery in class actions is extensive:

Plaintiffs Seek:

• Payroll data for all potential class members
• Time and attendance records
• Policies and procedures
• Training materials
• Communications about pay practices
• Manager depositions

Employers Seek:

• Individual plaintiffs' work history
• Evidence of individual variations
• Knowledge of policies
• Prior complaints or lawsuits
• Damages calculations

Phase 5: Class Certification Motion

The pivotal moment in most class actions:

Plaintiffs' Motion:

• Demonstrates all certification requirements met
• Shows common policies affected all class members
• Argues class treatment is superior
• Proposes class definition

Employer's Opposition:

• Challenges certification requirements
• Shows individual issues predominate
• Argues class members are not similarly situated
• Identifies manageability problems

Court's Decision:

• Grants or denies certification
• May modify class definition
• May certify some claims but not others
• Denial often ends case (or limits it to individual claims)

Phase 6: Post-Certification Proceedings

If the class is certified:

Proceeding	Description
Class notice	All class members notified of lawsuit and rights
Opt-out period	Class members may exclude themselves
Merits discovery	Continued discovery on liability and damages
Summary judgment	Motions to resolve case without trial
Trial	Jury or bench trial on common issues
Damages phase	Individual damage calculations if needed

Phase 7: Resolution

Class actions typically resolve through:

Settlement:

• Most class actions settle (90%+)
• Court must approve as fair and reasonable
• Notice to class members required
• Objection and opt-out rights

Trial:

• Relatively rare in employment class actions
• May address liability only (bellwether trial)
• Damages often require separate proceedings

Appeal:

• Either party may appeal adverse rulings
• Certification decisions frequently appealed
• Can significantly delay resolution

Class Action Damages and Exposure

Calculating Class Action Exposure

Class action exposure is calculated by aggregating individual damages across the class:

Component	Calculation	Example
Class size	Number of affected employees	500 employees
Class period	Years of alleged violations	4 years
Violation rate	Frequency of violations	2 per week
Damages per violation	Legal measure of harm	$30 per violation
Subtotal	Class × period × rate × damages	$6.24 million
Interest	Prejudgment interest	+$600,000
Penalties	Statutory penalties	+$2 million
Attorney fees	25-40% of recovery	+$2-3 million
Total exposure		$10+ million

Common Damage Components

Damage Type	Basis	Amount
Unpaid overtime	Time-and-a-half premium	0.5× regular rate × OT hours
Meal break premium	One hour pay per violation	Hourly rate × violations
Rest break premium	One hour pay per violation	Hourly rate × violations
Minimum wage shortfall	Underpayment amount	Difference × hours
Waiting time penalties	Up to 30 days wages	Daily rate × 30 days
Wage statement penalties	$50-$100 per pay period	Up to $4,000 per employee
Interest	10% per year (California)	Calculated from due date

Defending Class Actions

Pre-Certification Defense Strategy

The most effective defense often focuses on defeating class certification:

Attack Commonality:

• Show policies varied by location, manager, or time period
• Demonstrate individualized circumstances
• Identify variations in job duties and conditions

Challenge Predominance:

• Argue individual issues outweigh common ones
• Show liability requires individual determinations
• Identify affirmative defenses requiring individual proof

Question Typicality and Adequacy:

• Identify unique circumstances of named plaintiffs
• Show conflicts between representatives and class
• Challenge adequacy of class counsel

Common Defenses to Class Claims

Defense	Application	Evidence Needed
Compliance	Policies and practices were lawful	Policies, training, records
Individual variations	Circumstances varied by employee	Manager testimony, location differences
Exemption	Employees were properly exempt	Job duties, salary evidence
Arbitration agreement	Individual arbitration required	Signed agreements
Statute of limitations	Claims too old	Employment dates, filing date
Good faith	Reasonable belief practices lawful	Legal advice, industry practice

Arbitration and Class Waivers

Many employers now include class action waivers in arbitration agreements:

What They Do:

• Require individual arbitration of disputes
• Prohibit class or collective proceedings
• Covered by Federal Arbitration Act

Legal Status:

• Generally enforceable (Epic Systems v. Lewis, 2018)
• Must be properly drafted and presented
• Cannot waive PAGA representative claims entirely
• State law limitations may apply

Limitations:

• Must be voluntary and knowing
• Cannot be condition of employment in some contexts
• PAGA claims cannot be fully waived
• May face unconscionability challenges

Class Action Settlements

Settlement Structure

Class action settlements typically include:

Component	Description	Typical Amount
Gross settlement fund	Total amount available	Full negotiated amount
Attorney fees	Plaintiffs' counsel compensation	25-40% of gross
Administration costs	Notice, distribution, reporting	3-8% of gross
Service awards	Payment to named plaintiffs	$5,000-$25,000 each
Net settlement fund	Available for class members	Remainder

Settlement Approval Process

Courts must approve class action settlements as fair, reasonable, and adequate:

Preliminary Approval:

1. Parties file settlement agreement
2. Court reviews for facial fairness
3. Court approves notice plan
4. Notice sent to class members

Notice and Response Period:

1. Class members receive notice
2. Opt-out deadline (typically 45-60 days)
3. Objection deadline (same period)
4. Claim form deadline (if required)

Final Approval:

1. Hearing on fairness of settlement
2. Consideration of objections
3. Final approval order
4. Distribution of funds

Factors Affecting Settlement Value

Factor	Impact on Value
Strength of claims	Stronger claims = higher value
Class size	Larger class = higher total
Documentation	Better records = stronger case
Employer resources	Ability to pay affects negotiations
Litigation risk	Uncertainty increases settlement interest
Attorney experience	Sophisticated counsel extracts more

Preventing Class Actions

Compliance Program Elements

Policy Development:

• Written policies on all wage and hour issues
• Regular legal review of policies
• Clear communication to employees
• Consistent enforcement

Training:

• Manager training on wage and hour compliance
• Supervisor training on break requirements
• Employee training on timekeeping
• Documentation of all training

Monitoring:

• Regular audits of pay practices
• Review of time records for anomalies
• Assessment of break compliance
• Investigation of complaints

Warning Signs to Address

Warning Sign	Concern	Response
Employee complaints	Potential violations	Investigate and correct
Individual wage claims	Systemic issues	Audit related practices
High turnover	Disgruntled former employees	Exit interview review
Manager shortcuts	Policy violations	Retraining and accountability
Industry lawsuits	Similar exposure	Compare your practices

Record-Keeping Best Practices

Strong records are essential for class action defense:

• Time records: Accurate, complete, employee-verified
• Meal break records: Documentation of break times and waivers
• Rest break records: Attestations or time records showing breaks
• Policy acknowledgments: Signed receipts for all policies
• Training records: Who was trained, when, on what
• Correction records: How issues were identified and fixed

Class Actions vs. PAGA Claims

Understanding how class actions interact with PAGA claims:

Factor	Class Action	PAGA
Certification	Required	Not required
Arbitration	Can be waived	Cannot fully waive
Recovery type	Actual damages	Civil penalties
Statute of limitations	3-4 years typically	1 year
Notice	Required to class	Not required
Settlement approval	Court approval	LWDA and court approval

Common Strategy: Plaintiffs often file both class claims and PAGA claims in the same lawsuit, providing multiple avenues for recovery and making complete dismissal more difficult.

Class Action Trends

Increasing Sophistication

Class action litigation has evolved:

• Data analytics: Plaintiffs use payroll data to prove violations
• Specialized counsel: Plaintiffs' bar highly experienced
• Larger classes: Technology enables bigger cases
• Multi-state actions: National employers face coordinated suits

Common Target Industries

Industry	Common Claims	Risk Factors
Retail	Off-the-clock, breaks, misclassification	High turnover, variable schedules
Healthcare	Overtime, meal breaks	Long shifts, understaffing
Transportation	Overtime, breaks, piece-rate	Continuous work, exempt misclassification
Technology	Exempt misclassification, overtime	Salary assumptions, long hours
Hospitality	Tips, overtime, breaks	Complex pay, 24/7 operations

Financial Impact

Class actions can have significant financial consequences:

• Defense costs: $500,000-$2 million+ through trial
• Settlements: Often $1-50 million for large classes
• Verdicts: Can exceed $100 million in extreme cases
• Insurance: May or may not cover (EPLI policies vary)
• Reputation: Public settlements affect employer brand

Class action litigation remains one of the most significant legal risks for California employers. Understanding how these cases work helps employers develop compliance programs that prevent class-wide violations and defense strategies that protect against unjustified claims.