The California Supreme Court issued its opinion on May 29, 2014, in one of the most anticipated labor and employment cases on its docket in years. The court affirmed the court of appeal's reversal of a $15 million trial court judgment in an overtime exemption misclassification case. Barring legislative action, the Duran v. US Bank decision will shape the course of class wage and hour litigation in California for years to come, most likely favorably for employers.

While many observers anticipated a narrowly written decision limited to the particular facts of the Duran case, the California Supreme Court endorsed a significantly increased level of academic rigor on statistical evidence and survey and sampling methodologies relied upon by courts and plaintiffs' lawyers to support class certification in wage and hour litigation. The court's discussion focused largely on the question of whether the Duran trial court had adequately evaluated the manageability of the case as a class action, and found that the statistical and sampling evidence employed at trial was academically deficient and deprived the employer of its right to fully defend itself against claims that it had misclassified as exempt from overtime a group of approximately 260 bank employees. The supreme court found that a "sample" of 20 employees was improperly selected and not representative of the class and that extrapolation of conclusions regarding liability and damages to the entire class based on the flawed sample was unreliable and carried too high a margin of error. The supreme court found that the trial court's $15 million judgment was not justified and that the class should not have been certified.

For many years, California has been extraordinarily fertile ground for plaintiffs' lawyers bringing wage and hour class action litigation against employers. Class certification has often been almost routinely granted in the California courts, resulting in billions of dollars paid by employers in what have been viewed by many as coercive settlements. Commentators and defense lawyers have argued that the courts have often applied little or no scrutiny or academic rigor into the questions of how class-wide evidence would be presented in a trial, how to manage complex individual issues, or how to assess plaintiffs' lawyers' proffers of statistical, survey-based or sampling evidence. The Duranopinion presents a potent new basis for employers to oppose certification of classes and significantly increases the burden on plaintiffs' lawyers.

This client alert was issued because the Duran decision will have immediate impact on many pending California state court wage and hour class cases, and it should be taken into consideration in connection with decisions regarding policies and practices relating to wage and hour matters that employers may have under review currently.