Court Denies Defendant’s Appeal, Affirms Class Certification for About 800 Allstate Claims Adjusters Trying to Recover Unpaid Overtime

One Sept. 3, 2014, the 9th Circuit Court of Appeals considered and rejected Defendant Allstate Insurance Company’s appeal of a California district court’s grant of class certification to hundreds of Claims Adjustors, who allege that the company had a practice of requiring them to work unpaid overtime.

Before 2005, Allstate’s claims adjustors in California had been paid annual salaries and treated as exempt from the Fair Labor Standards Act’s overtime requirements. Then all were converted to hourly employees. They continued to work about the same number of hours as before, but more than 40 per week, but each time they worked overtime their local office manager had to file a timekeeping “exception” or “deviation” to the default 40-hour week. No one kept records of the hours worked by these employees; each adjustor had to request an exception each time. But each local office manager has a non-negotiable compensation budget, which “creates a functional limit on the amount of overtime a manager may approve.” In effect, then, adjustors worked overtime, then had to file requests which often would not get approved by their managers, and ended up not getting paid for many hours of overtime they had already worked.

Plaintiffs alleged in their complaint that after reclassifying them as hourly employees, Allstate had an unofficial policy of continuing to require adjustors to work overtime but discouraging them from reporting it so it could be compensated. In effect, the company continued to treat them as salaried employees for whom paid overtime was an “exception” that required special approval case by case. They further allege that company knew or should have known that class members were doing this, and “stood idly by without compensating (them) for such overtime.”

In its appeal of class certification, Allstate argued that the district court had abused its discretion in certifying the class, because the purported class fails to satisfy the commonality requirement under Rule 23 since not all of the legal questions raised in the lawsuit apply to every class member. The Appeals Court disagreed, concluding that the relevant issue was whether the questions at the core of the case, questions the answers to which were “apt to drive the resolution of the resolution of the litigation,” and that in this case the central question in the case did in fact apply to the class generally. That question is whether the company required its claims adjustors to work more than forty hours per week while discouraging them from reporting those hours or collecting overtime pay. The Court concluded that “the district court did not abuse its discretion in determining that these three common questions contained the ‘glue’ necessary to say that ‘examination of all the class members’ claims for relief will produce a common answer to the crucial question[s]’ raised by the plaintiffs’ complaint.”

So about 800 plaintiffs are now posed to recover many hours’ worth of overtime pay after Allstate properly reclassified them, but without adjusting its payroll policies accordingly.

If you are an employee and you believe your rights under Fair Labor Standards Act or corresponding state laws have been violated, please contact The Harman Firm, LLP.