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Staff Report No. 13-182

MEMORANDUM

PUBLIC DOCUMENT

To: President Harper and Members of the Board of Directors

From: David A. Wolf, General Counsel

Date: June 20, 2013

Subject: Gilmer, eta/. v. AC Transit (Travel Time): History of Settlement

For your review, we have prepared a two part memorandum regarding the above matter. The first part will provide a brief chronology of the Gilmer, et a/ v. Alameda-Contra Costa Transit District, et a/. Fair Labor Standards Act (FLSA) "travel time" collective action lawsuit, which settled last year for a total amount of $7 million. The second part will provide a brief discussion of similar cases.

Previously, through attorney-client privileged memoranda, we provided the Board more detailed summaries of the Gilmer Settlement and of issues surrounding that Settlement.

PART ONE

1. Brief Historical Timeline of the "Travel Time" Legal Framework That Gilmer Raised

In 1985, the FLSA became applicable to state and local municipalities, thereby requiring the District to pay overtime for any "hours worked" over forty hours in a work week.

In January 2001, California Wage Order No. 9 became applicable to the District's bus drivers, thus requiring provisions for driver meal and rest breaks.

In January 2002, a California Department of Labor Standards and Enforcement Opinion Letter to the ATU and Sacramento RTD determined that the California Wage Order No. 9 definition of "hours worked" included travel time. It stated: "the time that an employee must spend traveling back to the location where the shift started, in order to pick up her automobile so that she can start her nonnal commute time back home, constitutes hours worked."

2. Summary of Litigation Over "Travel Time"

This Gilmer FLSA collective action was a continuation of "travel time" related pay issues that began as early as 1978. In what appears to be the first known arbitration regarding driver "travel time," Arbitrator William Easton held in a 1978 Decision and Award that, under Section 51 of the parties' Collective Bargaining Agreement, the District must pay "travel time" when a bus operator reports to Division 4, but whose bid work is out of Division 6. He stated: "Operators reporting to work at a place other than that for which they had signed up shall receive travel time."

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More litigation followed:

08/17/04

12/27/05

08/07/06

09/17/08

11/17/08

06/09/09

10/23/09

12/23/09

05/18/11

Gilmer I class/collective action filed in Alameda Superior Court for "travel time."

The Parties enter into a settlement agreement of the above action, wherein as part of that agreement, Arbitrator Doug Collins will hear the travel claims.

Pursuant to a settlement agreement in Gilmer I, Arbitrator Collins rules that, under the Collective Bargaining Agreement Article 54, the District must pay "travel time" for operators from October 24, 2003, forward.

Union Grievance over vacation pay and travel time. Grievance claims that travel time must be included in run time for purposes of calculating employee's vacation pay.

Gilmer II FLSA collective action complaint for overtime filed in the federal court for the Northern District of California. The complaint contains claims regarding: (1) start-end travel; (2) split-shift travel; (3) foreign division travel; (4) lack of time records; and (5) willful misconduct.

Arbitration on the remedy portion of the Collins' 2006 Award, wherein Arbitrator Collins rules that travel time pay must be calculated by District bus-scheduled time, not BART time.

Union files split-shift travel time Grievance under contract Sections 54.01, .02 and .04, claiming the District is not paying the 15% premium when split-shift travel causes a driver to work in excess of eight (8) hours in a day or forty (40) hours in a week.

Union files another split-shift travel time Grievance under contract Sections 54.01 and .02, claiming that the District is violating June 2009 Collins' Award in that it is still paying BART time or bus time, not just District running time as ordered.

Petition to Compel Arbitration over the three travel time Grievances filed. District refused to arbitrate Grievances, claiming they were time barred.

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3. Milestones in the Gilmer Case That Impacted Its Resolution

The Gilmer litigation spanned four years. Early in the case, the Parties stipulated to conditional collective action certification of the collective class that included: "individuals employed by the District who drove fixed routes." The stipulation further provided that the claims period began three years preceding the filing of the Complaint.

In the course of the 2008 Gilmer litigation, Judge Wilken issued two key decisions- one relating to the merits and one relating to damages- both unfavorable to the District.

a. Judge Wilken's January 15, 2010 Parlial Summary Judgment Order:

i. Judge Wilken ruled that start/end travel time is compensable time and that the District was required to include start/end travel time as time worked for purposes of overtime calculations. The calculation is based upon the contractual scheduled running time. (The District was paying starVend travel time. However, it was not paying at the "time and one-half' rate when that time results in overtime.)

ii. Judge Wilken ruled that the District must pay drivers the "actual time" for split shift travel. (The District was not paying actual time, which would include walk and wait time. The District was paying bus scheduled running time.)

iii. Judge Wilkin denied the District's motion for summary judgment, based on the de minimis doctrine, on Plaintiffs' split-shift travel claims. The District argued that Plaintiffs' claims for split-shift travel were de minimis because, averaged across a ninety-six week period, they amounted to less than a minute per day per driver. The Court found it "misleading to focus on such daily averages when they masked uncompensated overtime amounts that were not insubstantial."

b. Judge Wilken's November 2, 2011 Order Regarding Decerlification; Willfulness and Credits for Cerlain Payments

i. On November 2, 2011, the Plaintiffs moved for a ruling that the District acted willfully, and thus, they were entitled to three years' worth of damages, instead of two years. They also sought rulings on other related damage issues. The District sought to decertify the class. The Court (1) denied the District's motion to decertify the class. However, it also (2) found that, although the District gave up its "advice of counsel" defense to the willfulness claim, based upon General Manager's Rick Fernandez' deposition testimony regarding his reliance on the Albuquerque case, it would not grant Plaintiffs' summary judgment on the "willfulness" issue, but leave the question to the jury. However, the Court (3) disagreed with the District and found that elapsed time premiums were not creditable against overtime compensation owed, and were properly included in the calculation of Plaintiffs' regular rate. Further, the Court (4)

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granted Partial summary judgment in favor of Plaintiffs' holding that Plaintiffs may include in their damages calculation unpaid travel time at the straight time rate of pay, incurred before they have worked forty hours, in those weeks when they are owed overtime damages for travel time incurred resulting in a work week in excess of forty hours (called gap time) and that (5) premium pay offsets must be calculated on a weekly basis and may not be aggregated over the entire period of the suit. Finally, the Court (6) denied again the District's de minimis defense based upon a different de minimis argument. The District argued that Plaintiffs' expert failed to exclude from the damages calculations minimal amounts of overtime due to start-end and split-shift travel time. The District's position had been that it is not required under the FLSA to compensate such time. Plaintiffs' expert had provided a method of calculating travel times. The Court ruled "In this respect, AC Transit's de minimis defense is a request that the Court disregard small amounts of uncompensated overtime because they are small amounts when disaggregated. AC Transit's motion for summary adjudication that it is entitled to a de minimis defense is denied."

c. Experl Reporls

According to his May 2011 report, Plaintiffs' expert projected that the total payments due the class were $1,463,309 for regular pay for split-shift travel time and $2,760,978 for overtime premiums for split-shift and start-end travel for a total of $4,224,287 based on a three-year statute of limitations. Based on a two­year statute of limitations, he calculated the payments due as $1,250,753 for regular pay for split-shift travel time and $2,253,857 for overtime premium payments for a total of $3,504,609. These figures are after selected credits have been applied. These figures do not include attorneys' fees, interest and liquidated (or double damages) damages.

The District withdrew its expert's report and determined that it would use its expert in rebuttal.

4. Brief Summary of Settlement Efforts

Before the 2012 mediation, the Parties engaged in three unsuccessful attempts to resolve this matter through mediation both before and after the Court ruled on the summary judgment motions. Before the Court issued its January 2010 summary judgment Order, Neutral Mediator/Arbitrator Luella Nelson mediated the case on June 17, 2009. Then, after the summary judgment decision, on April 6, 2010, the Parties participated in another unsuccessful mediation session with Chief Magistrate Judge Maria Elena James. The Parties participated in another mediation session with retired Judge Ronald Sabraw on August 24, 2010.

On November 22, 2011, Judge Wilken ordered the Parties to a Settlement Conference before Magistrate Donna Ryu.

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Magistrate Judge Donna M. Ryu conducted a brief aborted January 20, 2012 Settlement Conference.

On February 21, 2012, the Court signed an order allowing the District to substitute the law firm of Hanson Bridgett LLP for the Foster Employment firm.

Magistrate Ryu conducted a further, successful Settlement Conference on March 5, 2012. As part of the Conference, Magistrate Ryu addressed negotiations regarding two separate matters: the federal court Gilmer collective action and the state court Petition to Compel Arbitration concerning the three related contract grievances from 2008 and 2009.

5. Summary of Settlement

a. Gilmer Case

The $7 million total settlement amount for 1382 drivers covers a seven-year time period and consists of the following:

$5,300,000:

$75,000:

$1,625,000:

wages (one-half in actual wages and one-half in liquidated damages)

estimated fees to a claims administrator to distribute the settlement

fees and costs

Any funds not distributed to the driver claimants would be distributed to the cy pres fund: the ATU Local 192 Retiree Medical Trust. As of June 11, 2013, the amount that is available for distribution to cy pres is $18,930.79. In addition there will be up to $8,198 in tax refunds from the first distribution that will go to cy pres when received. Also, the value of any uncashed checks from the second distribution will go to cy pres after those checks are stopped.

b. Petition to Compel Arbitration Regarding Three Contract-Related Grievances

PART TWO

To assure that the Parties laid to rest all travel time-related issues, the District agreed to provide the substantive relief requested in each grievance. In return, the Union agreed to withdraw the Petition to Compel Arbitration and the grievances and not to seek any back pay related to the matters.

At the time that the Gilmer Plaintiffs filed their lawsuit, there appeared to be only one case involving travel time- United Transportation Union Local1745 v. City of Albuquerque (1oth Cir. 1999) 178 F.3d 1109. During the summary judgment stage in the Gilmer case, both Parties

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relied upon the Albuquerque Tenth Circuit case. In ruling on the cross-motions for summary judgment, Judge Wilken split her opinion regarding her reliance on the Albuquerque case. She disagreed with the Albuquerque court and held that start-end travel time was compensable time and agreed with the Albuquerque court and held that split-shift travel time was also compensable. Since the Gilmer case, three lawsuits have been filed in the Bay Area involving driver travel time.

Fontenberry, eta/ vs. MV Transportation (E.D. Cal 2012). In July 2012, plaintiff drivers filed a lawsuit in the federal court for the Eastern District of California seeking, among other forms of relief, overtime payment for start-end and spilt-shift travel time. This case is still pending. Recently, plaintiffs filed a second amended complaint and Defendant MV Transportation moved to dismiss the ninth cause of action on the ground that plaintiffs' ninth cause of action for violation of California's unfair competition law fails to state a claim as to out-of-state MV drivers. The court has not yet rendered a decision on that motion. A copy of the second amended complaint is attached.

Baljinder Rai v. Santa Clara Valley Transportation Authority (N.D. Cal 2012). In July 2012, plaintiff drivers filed a lawsuit in the federal court for the Northern District of California seeking, among other forms of relief, overtime payment for start-end and spilt-shift travel time. This case is still pending. Recently, plaintiffs filed a fourth amended complaint. The Board is aware of, and has been presented with a copy of, that complaint.

Margulies v. Tri-Met (N.D. Cal 2013). On January 13, 2013, plaintiff bus drivers and rail operators filed a lawsuit in the Oregon state court seeking, among other forms of relief, overtime payment for start-end and spilt-shift travel time. This case is still pending. Tri-Met removed the case to federal court, and recently, plaintiffs filed a fourth amended complaint. The Board is aware of, and has been presented with a copy of, that complaint.

6. Other Driver Wage and Hour Cases

To our knowledge, there are no other collective action settlements directly on point. There are wage and hour settlements for public and private sector transportation-related entities, some of which are noted below. Any case settlement amount, of course, involves numerous factors, including length of litigation, number of class members, number and types of claims. One in particular, and unfortunate, distinction for the Gilmer case is that the District had an unfavorable summary judgment decision with which it had to contend.

Smith v. MV Transportation (2004) (Alameda County). This case involves overtime, meal and rest break claims and settled for $4, 196,000.00, in addition to the payment of all employer taxes and $75,000 to the claims administrator.

WatTen v. MV Transportation (2006) (Alameda County). This case settled for $1,392,425.00 and involved 1103 para transit drivers' meal period claims over a 60 week time period.

Brooks v. Williams Tank Lines (2011) (Northern District of California). This case involved 590 drivers alleging claims of rest breaks, meal breaks, off the clock work and

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overtime for a five-year time period (2006-2011 ). The case settled for $1.5 million -evidence was presented that a larger amount would cause "partial or complete dismemberment of the company." Employer portion of payroll taxes was to be paid in addition to this amount.

Garcia v. Yanez (2012) (Eastern District of California). This case involved 1,868 commercial truck drivers making state wage claims for minimum wages, meal and rest breaks, penalties and fines. This case settled, by way of a mediator's proposal, for $3.7 million two years after filing.

Reyes v. Chicago Transit Authority (N.D. Ill. June 6, 2011). Filed in February 2010, the case settled less than one year later for $650,000 and involved 1,100 drivers for overtime in learning new routes.

Hoffman v. First Student (District of Maryland) (201 0). Filed in April 2006, 750 drivers claimed that they were denied overtime for hours worked over forty. The case settled in 2010 for a seven-year claim period for $1.55 million.

ATU v. First Transit (Laidlaw) (Southern District of California (2009). This case, filed in 2005, involved claims for missed meal and rest periods, and included a class of 468 class members representing: "All bus operator employees of Defendants Laidlaw or First Transit, driving bus routes associated with San Diego Metropolitan Transit System in or around the City of El Cajon, California, at any time between April 12, 2001 and January 27, 2007." The case settled in four years for $1,724,000.00.

Bassett v. Tennessee Valley Authority (Western District of Kentucky) (2009). This case involves, among other claims, a type of travel time. The court holds that plaintiffs will be able to recover for travel time "away from the home community" performed during normal business hours on working days or during corresponding hours on nonworking days, but not outside working hours. This case is set for a bench trial on August 8, 2013.

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