On June 12, 2023, The Third Circuit Court of Appeals upheld the 2022 decision of the United States District Court for the District of New Jersey to certify a class of drivers in a wage and hour suit against Sleepy’s LLC (“Defendant” or “Sleepy’s” or the “Company”), rejecting Sleepy’s argument that drivers’ misclassification claims require individualized inquiry to determine whether each class member was an employee or an independent contractor.
The Third Circuit explained that “the drivers present identical legal claims based on virtually identical facts,” and that because these claims can be proven with common evidence, “resolving them in a single trial would be fair and efficient.”
Despite Defendant’s position that a class was not “ascertainable based on objective criteria” due to Sleepy’s lack of records documenting which drivers worked full time, the Court held that class membership could be determined from pay statements and other documents, as Plaintiffs proposed. The Court further noted that de-certifying the class in this case would make the failure of an employer to keep adequate records an exploitable loophole, which would have repercussions far beyond this particular case.
In evaluating misclassification claims, courts in the Third Circuit apply the ABC test to determine if workers are free from company control, perform services outside of the usual course of business for the company, and are engaged in an independently established trade, occupation, profession, or business. If any of these criteria are not met, the worker is considered an employee and must be compensated as such. Since evidence to support or refute these criteria is often found in widely applicable employer policies and practices, misclassification is often deemed to present a common issue.
In this case, the District Court previously found, and the Third Circuit affirmed, that common evidence demonstrated Sleepy’s exercised control over the drivers, thereby failing Part A of the test. Accordingly, employment status and related wage issues are common issues to the class.
Plaintiffs’ wage claims allege that Sleepy’s (1) made illegal deductions from their wages and (2) failed to pay them overtime. Regarding Plaintiffs’ wage deductions claim, Sleepy’s asserted that any deductions made were lawful because drivers were paid through LLCs, not in the form of wages. However, because this defense relies on an issue common to all the drivers, it does not counsel against class certification.
Regarding Plaintiffs’ overtime claims, Sleepy’s argued that overtime claims cannot be settled on a class basis, as drivers worked different hours and the Company did not document overtime hours. In answer, the Third Circuit again condemned the excuse of employer failure to keep proper records, holding instead that Plaintiffs can prove their claims through common evidence showing the “amount and extent of [their] work as a matter of just and reasonable inference.”
The Third Circuit remanded the case to the District Court for further proceedings, allowing Plaintiffs to continue pushing their misclassification claims forward on a class-wide basis. With 111 individual drivers in the class, the class action mechanism will allow for the most efficient resolution of the claims.
The case is Sam Hargrove, et al. v. Sleepy’s LLC, number 22-2040, filed in the United States Court of Appeals for the Third Circuit. The District Court proceeding is Sam Hargrove, et al. v. Sleepy’s LLC, number 3:10-cv-01138-PGS-LHG, filed in the United States District Court for the District of New Jersey.
The legal team at Miller Shah LLP has extensive experience with class action and misclassification matters. If you have any questions regarding this subject or this post, please contact Chiharu G. Sekino (cgsekino@millershah.com) or Anna K. D’Agostino (akdagostino@millershah.com). The Firm can also be reached toll-free at (866) 540-5505.
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