Scales of JusticeAll California employers will want to closely monitor a matter currently pending in California’s First Appellate District entitled Duran v. U.S. Bank, Case No. 2001035537.  This case could dictate how future class action lawsuits are litigated–in ways which will be very unfavorable to California employers.

Duran involved a class of 260 business banking officer (“BBO”) employees who sued U.S. Bank to recover unpaid overtime wages.  U.S. Bank contended that each BBO was subject to an “outside salesperson exemption” which is met when an employee spends more than half his time away from the employer’s business.  The prime issue in Duran, therefore, was whether the BBO’s were properly classified as exempt, and therefore not entitled to overtime.

In order to answer that question the trial court conducted a mini-trial of 20 randomly selected employees.  During the course of the mini-trial, the trial court determined that U.S. Bank had misclassified 19 of the 20 randomly selected employees.  The trial court then decided it could extrapolate from the mini-trial results that all 260 employees had been misclassified because the Plaintiffs’ expert statistician testified that he had calculated “with 95% confidence that all 260 employees” had been misclassified.  The trial court refused to allow U.S. Bank to put forth evidence that at least 70 of the 260 employees were not misclassified.

Although at least one appellate court has held that statistical sampling can be used to prove damages, no appellate court has ever held that statistical sampling can be used to prove liability.  And there is good reason for that.  It’s a pesky little thing called “due process.”  For 220 years the U.S. Constitution has barred prosecutors and plaintiffs alike from denying someone life, liberty, or property without proving that the individual did something wrong.

The Duran trial court essentially held that it could not be bothered with due process concerns for the sake of judicial economy.   It remains to be seen whether the First Appellate District (and likely the California Supreme Court) will agree with the trial court and dismiss fundamental notions of due process as “antiquated.”  If so, California employers will have yet another reason to bolt for greener pastures.