Last week, in McCaster et al. v. Darden Restaurants, Inc. et al., No. 15-3258 (7th Cir. Jan. 5, 2017), the Seventh Circuit relied on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) and affirmed the district court’s denial of class certification of Plaintiffs’ claims for vacation pay under state law.  The Seventh Circuit’s reliance on Dukes demonstrates that the Supreme Court’s holding extends beyond the discrimination context and applies with equal force in wage and hour class actions (at least within the Seventh Circuit).  The Court concluded that Plaintiffs’ proposed class definition constituted an impermissible “fail safe” class because an individual’s membership in the class turned on the merits of his or her claim, and that Plaintiffs’ alternative class definition did not satisfy the commonality requirement of Rule 23 under Dukes. This decision exemplifies the critical balance plaintiffs must strike in defining their proposed classes; while a “fail safe” class will not be permitted, a class definition that is too broad will not satisfy the requirements of Rule 23.

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Plaintiffs Demiko McCaster and Jennifer Clark, who worked at two different restaurants owned by Darden Restaurants, Inc., alleged that Darden failed to pay them the accrued vacation pay allegedly owed to them upon their separation from employment in violation of the Illinois Wage Payment and Collection Act (“IWPCA”). Here, the “vacation pay” at issue was actually “anniversary payments” paid to eligible employees when they reached the annual anniversary of their hiring date.  The anniversary payments are referred to as “vacation pay” because Darden treated the anniversary payments as vacation pay for purposes of the IWPCA, and when an employee stopped working for the company, Darden would include the pro rata amount of anniversary pay in the employee’s final paycheck.

Plaintiffs sought to bring claims on behalf of themselves and “[a]ll persons separated from employment with [Darden] in Illinois between December 11, 2003, and the conclusion of this action[] who were subject to Darden’s Vacation Policy . . . and who did not receive all earned vacation pay benefits.” The Seventh Circuit agreed with the district court that this definition described an improper “fail safe” class because membership in the class was dependent on whether an individual had a valid claim.

In an attempt to address the district court’s concerns with the “fail safe” class, Plaintiffs proposed an alternative definition, which omitted the phrase “who did not receive all earned vacation pay benefits.” By way of their alternate class definition, Plaintiffs sought to bring claims on behalf of “[a]ll persons separated from employment with [Darden] in Illinois between December 11, 2003, and the conclusion of this action[].”  The Seventh Circuit concluded that Plaintiffs did not satisfy the fundamental commonality requirement of Rule 23(a) because the alternate class consisted of all employees who separated from employment with Darden during a specific time period but Plaintiffs did not identify any unlawful conduct by Darden that covered the entire putative class and that caused putative class members to suffer the same injury.

The Court explained that Plaintiffs had not “pointed to any unlawful practice or act common to the class” and did not, for example, argue that Darden’s vacation-pay policy violated the IWPCA on its face. Rather, Plaintiffs simply claimed that some former employees did not receive all of the vacation pay they were allegedly due under the vacation policy without proffering any common proof that could establish liability on a class-wide basis.  Accordingly, the Seventh Circuit concluded that the case “raise[d] only an amalgam of individual IWPCA pay claims by McCaster, Clark, and other separated employees . . . that may (or may not) be valid based on the employee’s particular circumstances” and assessing the merits of the claims would depend “entirely on each employee’s individual work history [with Darden] and the specific payroll practices of the managers of the restaurants where they worked.”

The Court acknowledged that Plaintiffs had offered one question that was technically “common” to the putative class – whether Darden’s vacation pay policy is a length of service policy subject to the pro rata requirement of the IWPCA. The Court found that this question did not advance Plaintiffs’ argument in support of class certification. It was undisputed that Darden treated the vacation pay as subject to the IWPCA’s pro rata requirement and therefore the answer to that “common” question did not satisfy the commonality requirement of Rule 23 under Dukes because it did not resolve “an issue that is central to the validity of each one of the claims in one stroke.”