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Speer v. Cerner Corp.

United States District Court, W.D. Missouri, Western Division

September 27, 2016

FRED SPEER and MIKE MCGUIRK, individually and on behalf of a class of all others similarly situated, Plaintiffs,
v.
CERNER CORPORATION, Defendant.

          ORDER

          FERNANDO J. GAITAN, JR. United States District Judge.

         Pending before the Court is Plaintiffs' Motion for Class Certification (Doc. No. 153); and (2) Plaintiffs' Motion to Supplement Rule 23 Reply Brief with Newly Discovered Evidence (Doc. No. 182). As an initial matter, the Court finds that plaintiff's motion to supplement its reply brief is well-taken, despite defendant's arguments that plaintiffs could have discovered this evidence earlier had they asked the correct follow-up questions at the deposition of Cerner's 30(b)(6) deponent Jessie Richardson. See Doc. No. 187, pp. 2-3. Therefore, plaintiffs' motion to supplement is GRANTED, and the Court considers the information presented by plaintiffs' supplemental reply brief below.

         I. Background

         Plaintiffs, Frederic Speer and Michael McGuirk, individually and on behalf of themselves and others similarly situated, bring a two-count complaint against Defendant, Cerner Corporation (“Cerner”), alleging that Defendant violated the Fair Labor Standards Act (“FLSA” or “Act”) and the Missouri Minimum Wage Law (“MMWL”). Cerner employed both Plaintiffs, Speer and McGuirk, as Service Center Analysists/System Support Analysts (“Desktop Support Staff”) at its operation, Tiger Institute for Health Innovation in Columbia, Missouri. In their Complaint, Plaintiffs allege that Cerner improperly calculated their overtime compensation by using a fluctuating workweek (“FWW”) method, which contemplates dividing employees' fixed earnings by the number of hours they worked in a given week to arrive at a regular rate and then adding one-half time (50%) of the regular rate as overtime for all hours over forty. According to Plaintiffs, because they and other proposed class members received payments in addition to their fixed salary, these payments invalidated the FWW method, thus entitling Plaintiffs to the statutorily prescribed default overtime rate of one-and-one-half times (150%) their regular hourly rate. Plaintiffs also complain that Cerner failed to include all remuneration when calculating the regular rate of pay for its employees, and such failure resulted in overtime compensation of less than even the reduced FWW one-half (50%) overtime compensation rate. Furthermore, according to Plaintiffs, even this inadequate overtime compensation was systematically paid late. Plaintiffs claim that as a result of these violations Cerner denied them, as FLSA non-exempt employees, proper and timely overtime pay in violation of FLSA. Doc. No. 39, ¶ 23.

         On March 30, 2016, the Court granted plaintiffs' motion for conditional certification of a collective action in part. See Doc. No. 165. Specifically, the Court found that plaintiffs met the burden for conditional certification as to “Late Payment of Overtime” and “Miscalculated Overtime” classes. The “Late Payment of Overtime” class includes “all nonexempt persons employed by Defendant in the U.S.” from September 7, 2012 to the present, “whose overtime compensation was not paid on the next regular payday for the period in which the overtime work was performed.” The “Miscalculated Overtime” class includes all those from September 7, 2012 to the present whose overtime compensation was calculated based on a regular rate of pay that excluded additional remuneration. See Doc. No. 165, Doc. No. 180-1.

         On September 26, 2016, the Court entered an Order denying in large part Cerner's motions for summary judgment and for partial judgment on the pleadings. Order, Doc. No. 214. Specifically, the Court denied Cerner's motion regarding the FWW method of pay (Doc. No. 103), granted in part the motion regarding the wellness incentive claims due to the statute of limitations as to the individual claims of Mike McGuirk for violations of the FLSA and MMWL as well as the individual claims of Fred Speer for violations of the FLSA, and denied the motion in all other relevant aspects (Doc. No. 105), and denied Cerner's motion for summary judgment based on standing (Doc. No. 141).

(1) All non-exempt persons employed by Cerner in Missouri, at any time since March 5, 2012 through the final judgment in this matter, whose overtime compensation was not paid on the next regular payday for the period in which the overtime work was performed (“Late Payment of Overtime Class”);
(2) All non-exempt persons employed by Cerner in Missouri, at any time since March 5, 2012 through the final judgment in this matter, who received overtime compensation that was calculated based upon a “regular rate” of pay that excluded On-Call Pay, Wellness Incentive Bonuses, Night Differentials, Security Differentials - ARM, Retro Wellness Incentives, and/or Holiday Differential Pay (“Miscalculated Overtime Class”);
(3) All non-exempt persons employed by Cerner in Missouri, at any time since March 5, 2012 through the final judgment in this matter, who were purportedly compensated based on the fluctuating workweek method of pay and: (i) whose overtime compensation was not paid on the next regular payday for the period in which the overtime work was performed; and/or (ii) who were paid additional compensation beyond their “fixed” salary (“Fluctuating Work Week Class”).

(Collectively, the “Rule 23 Classes”).

         II. Statement of Facts

         Defendant Cerner Corporation (“Cerner”) is a healthcare information technology corporation, with its world headquarters located in North Kansas City, Missouri. During the relevant time period, Cerner employed Plaintiffs and thousands of other non-exempt employees within the United States to facilitate its global business services as a “leading-edge” technology development company. All Cerner employees are classified into one of three distinct groups: (1) salaried exempt; (2) hourly nonexempt (“hourly”); or (3) salaried nonexempt (“SNE”). Regardless of each employee's location, defendant's U.S. Payroll group processes payroll for all non-exempt employees centrally, at its world headquarters in Missouri. During the relevant time period, Cerner employed four individuals in its payroll department to complete the payroll process each pay period for its approximately 16, 500 U.S.-based employees.

         Plaintiffs Fred Speer and Mike McGuirk were employed by Cerner as salary non-exempt Service Center Analysts and/or System Support Analysts in the ITWorks division in Columbia, Missouri. Plaintiffs, like all of Cerner's non-exempt employees, were entitled to overtime premium pay for work in excess of 40 hours each week. Speer worked for Cerner from September 2011 to December 2012 as a Service Center Analyst. McGuirk worked for Cerner from April 2010 to March 2013 as a Service Center Analyst. Plaintiffs Fred Speer and Mike McGuirk claim that they received ITWorks® on-call pay and a Wellness Incentive that were not included in the regular rate when calculating their regular rate of pay.

         Like all of Cerner's Missouri non-exempt employees, Plaintiffs recorded their work hours using Cerner's centralized time-keeping system-through PeopleSoft Finance- and then those hours were integrated into PeopleSoft HR. All of Cerner's hourly and salary non-exempt employees are required to enter their work hours each week by 11:59 p.m. on Saturday. From there, Cerner's corporate U.S. Payroll group processes payroll and issues pay checks, utilizing centralized and system-wide calculations and processes. Of its Missouri-based, non-exempt associates, during any given year of the class period, Cerner paid approximately 850-1, 200 employees-including Plaintiffs-on a fluctuating workweek basis (“Salary Non-Exempt Employees”). Plaintiffs, like all of Cerner's Salary Non-Exempt Employees, were promised a fixed salary plus one-half (instead of one-and-one-half) times their regular rate of pay for each hour worked over 40 in a workweek. Cerner calculated and paid all its Salary Non-Exempt Employees across the U.S. pursuant to the same payroll policies and overtime calculations.

         Timing of Payment of Overtime

         Cerner operates on a bi-weekly payroll schedule and has established its payday as the Friday following the close of the two-week pay period. Cerner imposes a deadline of 11:59 p.m. on Saturday for the submission of time, and the pay period closes immediately after that deadline. Cerner paid all its Salary Non-Exempt Employees' overtime wages a full pay period behind (e.g. nearly three full weeks after the close of the pay period in which the overtime was earned), from at least March 2012 until the summer of 2014, after Plaintiffs filed this lawsuit. This pay process was confirmed in Cerner's HR documents, which notified U.S. associates that “Overtime is always one pay period behind.” Cerner's detailed instructions to its U.S. Payroll group for processing payroll also expressly reminded them that “***Overtime is always a pay period behind***” and direct them to “pull prior pay period weeks” when gathering associates' reported overtime hours. Doc. No. 153, Exh. 11, at SPEERD00001163. Cerner testified that it takes approximately 21-23 hours to calculate and process Salary Non-Exempt Employee's payroll each pay period. (Doc. No. 153, Richardson Depo., Exh. 4, at 176:1- 22; 179:17-21). Only one person in defendant's payroll department performs the overtime calculations for all Salary Non-Exempt Employees. (Richardson Depo., Exh. 4, at 176:1-9). From March 2012 until the summer of 2014 (after this lawsuit was filed), Cerner did not begin the process of calculating Salary Non-Exempt Employees' overtime each pay period until Thursday following the close of the two-week pay period (e.g., a full five days after the pay period ended). (Richardson Depo., Exh. 4, at 169:25-171:21). Cerner admitted that all hourly and salary non-exempt employees have the same deadline (Saturday at 11:59 p.m.) for entering their work hours, but only hourly employees received their overtime pay on the next pay day after the close of the pay period. (Richardson Depo., Exh. 4, at 157:20-158:2; 160:8-161:11). Defendant argues that during the final 37 weeks Speer worked at Cerner (pay end dates on or after April 14, 2012), Speer did not comply with Cerner's time submission policy and submitted his time anywhere from 1 to 3 days late 18 out of those 37 weeks. McGuirk contends that an individual told him as part of his orientation that employees “could still submit [their time] by Monday or Tuesday. Usually Monday because by Tuesday they may be screaming at you to fill it out so they can do the payroll on time.” (Doc. No. 166, Ex. D, McGuirk Dep. at 100:3-14).[1]

         After Plaintiffs filed this lawsuit in March 2014, Cerner wrote a computer program called Time Tool, which it implemented in the summer 2014, and began paying Salary Non-Exempt Employees' overtime wages on the next pay day following the close of the pay period. (Richardson Depo., Exh. 4, at 150:9-151:7). Prior to the summer of 2014, Cerner claims it “lacked the resources” to pay overtime to its Salary Non-Exempt employees the next pay day after close of the pay period. Plaintiff, however, notes that defendant reported $2.911 billion in annual revenue in 2013. Plaintiffs assert that all of Cerner's Missouri-based, non-exempt employees who were paid overtime a pay period behind at any time since March 2012, were similarly injured by Cerner's systemic, unlawful pay practice.

         Inclusion of Additional Compensation into Regular Rate of Pay

         Plaintiffs argue that, until they filed this lawsuit, Cerner failed to include all additional compensation into non-exempt employees' regular rate of pay when calculating and paying overtime premiums. With respect to named plaintiffs, Plaintiff Fred Speer received Wellness Incentive compensation and On-Call pay, both of which were excluded from his overtime calculations between March 2012- present. Plaintiff Mike McGuirk received On-Call pay, which Cerner excluded from his overtime calculations between March 2012-present. Plaintiff further argues that Cerner admits that it did not include On-Call Pay, Wellness Incentive, Night Differential, Security Differential - ARM, Retro Wellness Incentive, and Holiday Differential compensation into Missouri-based, non-exempt employees' overtime calculations between March 5, 2012-December 31, 2015.[2]

         Fluctuating Work Week

         Plaintiff argues that Cerner's failure to include additional remuneration Cerner paid for on-call work and other incentive pay into Plaintiffs' and other Salary Non-Exempt Employees' regular rate of pay when calculating overtime premiums resulted in an underpayment of overtime, thus invalidated the flexible work week (FWW) method of calculating overtime payments.

         III. Standard

         Under Federal Rule of Civil Procedure Rule 23(a), the Court considers the following prerequisites and certifies a class only if:

(1) the class is so numerous that joinder of all members is impracticable;(2) there are questions of law or fact common to the class;(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

         Additionally, the Court considers whether one of the three Rule 23(b) requirements justify certification. Here, plaintiffs move for certification under Rule 23(b)(3), which provides that a class may be maintained if: “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.”

         “The decision whether or not to certify a class is not a reflection of the merits of the case.” Casey v. Coventry HealthCare of Kansas, Inc., No. 08-0201-CV-W-DGK, 2010 WL 3636140, at *2 (W.D. Mo. Sept. 10, 2010). However, the Supreme Court has explained that a class should not be certified until the district court concludes, “after a rigorous analysis, ” that the four prerequisites of Rule 23(a)-numerosity, commonality, typicality, and adequacy of representation-are met. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338. 350-51 (2011). Furthermore, the predominance inquiry of Rule 23(b)(3) must begin “with the elements of the underlying cause of action, ” Erica P. John Fund, Inc. v. Halliburton Co., 563 U.S. 804, 809 (2011), and focus on whether the requirements to prove the ...


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