Class-action litigation – new tool for unions?

Denny’s case in B.C. may signal beginning of different organizing strategy
By Tom Roper
|Canadian HR Reporter|Last Updated: 02/26/2013

On March 5, 2012, the Supreme Court of British Columbia certified a class action brought on behalf of temporary foreign workers recruited to work at a Denny’s Restaurant franchise in Vancouver — Dominguez v. Northland Properties Corp (COB Denny’s Restaurants).

The lawsuit alleged recruiting companies engaged by the Denny’s franchisee charged agency fees contrary to the Employment Standards Act. It also claimed damages, aggravated damages and punitive damages against the franchisee for breach of contract in failing to pay overtime and provide 40 hours of work per week as promised, as well as breach of fiduciary duty, a duty of good faith and fair dealing, and unjust enrichment.

The decision is significant because it is one of very few class actions certified in B.C. arising in an employment context. Moreover, it may signal the beginning of a new organizing strategy by unions in difficult-to-organize sectors.

This case involved about 75 temporary foreign workers who were recruited from the Philippines to work at the franchisee’s restaurant. A Labour Market Opinion had been obtained from Human Resources and Skills Development Canada (HRSDC) for each of the workers in essentially the same terms.

Although the employment contracts differed somewhat, they were in a form similar to the HRSDC sample contract which provided for 40 hours of work per week, with overtime at time-and-one-half. Prior to the litigation, complaints had been made to the director of employment standards who had determined there was an overtime violation in the case of one worker and a violation of section 10 of the Employment Standards Act when the recruiting firms used by the franchisee charged a recruitment fee.

The court certified the action as a class action under the Class Proceedings Act because the causes of action alleged in the claim were common to the group. Even though there were some differences in the employment contracts, the court found there was sufficient commonality, in both the facts and causes of action, to make certification as a class action appropriate.

The court further held that common issues of alleged systemic effects (failure to record hours worked) and a claim for an aggregate assessment of damages and punitive damages were appropriate for certification.

The United Food and Commercial Workers union (UFCW) and National Union of Public and General Employees (NUPGE) have thrown their support behind this action, as seen on NUPGE’s website: “(NUPGE) has signed a protocol with UFCW Canada to assist in organizing exploited groups of workers, such as migrates and employees of Walmart.”

The Denny’s case may be the first instance of unions using class-action litigation as an organizing strategy. In doing so, they have taken a page out of the playbook of unions in the United States that have, for years, used wage and hour claims, both in collective actions and class actions, to gain the support of non-union workers.

In the U.S., unions in the service industry, building maintenance and, more recently, private health-care sector have brought collective actions under the Fair Labour Standards Act or class actions under rule 23 of the Federal Rules of Civil Procedure for “off the clock” claims (overtime), employee misclassification or overtime calculation claims (to determine “regular rate of pay”).

Working with class-action plaintiffs’ attorneys, unions in the U.S. have obtained multimillion-dollar settlements from employers anxious to avoid the significant cost of litigation and adverse publicity. By supporting the class-action suit, unions are able to generate support within groups of employees that would have difficulty advancing their claims individually.

Ironically, while class-action employment litigation has been more prevalent south of the border, the test for class-action certification is in fact broader in B.C. In the U.S., questions of law or fact common to class members must predominate over any questions affecting only individual members. In B.C., common issues of fact or law may not necessarily be identical and need not predominate over issues affecting only individual members.

While the Denny’s case may mark the beginning of class-action employment litigation in B.C., the Supreme Court of the United States has recently pulled in the reins somewhat on employment class-action litigation. In the June, 20, 2011, decision Walmart v. Dukes, the court set aside a certification of a class action alleging gender discrimination against current and former female Walmart employees, who were denied promotion opportunities.

In a split five-to-four decision, the Supreme Court reversed a lower court certification of the class consisting of 1.6 million employees working at 3,400 stores across the U.S., on the basis the claim did not show sufficient “commonality.”

The most significant aspect of this ruling was the importance it placed on the rule 23 requirement that all of those in the class must have a common legal claim such that, in a workplace bias case, claimants must show the alleged bias was targeted at each of them. Justice Antonin Scalia, writing for the majority, held that the plaintiffs were suing “about literally millions of employment decisions at once.”

The court held plaintiffs were obliged to offer “significant proof that Walmart operated under a general policy of discrimination” and the exercise of discretion by store management was influenced by a general discriminatory policy that pervaded the entire company.

The majority held that statistical evidence put forward by the plaintiffs to demonstrate gender played a role in promotion decisions was not enough to show a common reason for adverse treatment.

“In a company of Walmart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way, without some common direction. Respondents attempt to make that showing by means of statistical and anecdotal evidence, but their evidence falls well short,” said the court.

This decision has been seen as an attempt to constrain class-action employment litigation targeting large companies based largely on statistical analysis. The court has indicated that, in the future, it will be much more stringent in requiring plaintiffs to prove commonality: “Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question, ‘Why was I disfavoured?’”

The U.S. has had a long history with class-action employment litigation, with the courts now taking steps to tighten the requirements for certification. By contrast, the phenomenon of such litigation is relatively new in Canada and Denny’s demonstrates our courts will take a liberal approach to certification.

Plaintiffs’ class-action attorneys in the U.S. stepped into the void left by unions unable to organize in the retail and service industries. Unions then saw the opportunity to use class-action litigation to garner worker support from those who would benefit by being a member of the class. The Denny’s case indicates this strategy may be just beginning in B.C.

Tom Roper is a partner and labour and employment law expert at law firm Roper Greyell in Vancouver. He can be reached at (604) 806-3850, troper@ropergreyell.com or visit www.ropergreyell.com/thomas-a-roper-q-c.html for more information.

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