The parent company of Olive Garden and Red Lobster and other chain restaurant brands has won a legal victory after a federal appeals panel refused to certify a class action over unpaid vacation time, saying the restaurant group’s change to its “anniversary pay” policies shouldn't subject it to a class action lawsuit.
Illinois residents Demiko McCaster and Jennifer Clark worked for Darden Restaurants intermittently from 2004 to 2012. After quitting, they filed a class action complaint in federal court in Chicago.
The lawsuit centered on Darden’s practice of awarding “anniversary payments” to employees on the anniversary of their initial hire date. According to court documents, Darden made the payments to all employees until 2008, when it shifted its policy to include only full-time employees working at least 30 hours a week.
Eligibility decisions rested with individual restaurant managers. McCaster alleged Darden owed him 12 hours of vacation pay when he left his job at Red Lobster. Clark said she got everything she was owed under the pre-2008 terms, but got no vacation pay when she left the company under the revised policy.
While the company didn’t officially classify the anniversary pay as vacation pay, court documents indicated the company used the anniversary payments to satisfy obligations imposed by Illinois state law, and would pay out prorated “anniversary pay” on the final paycheck of employee’s who left the company, similar to paid vacation time.
Chicago federal Judge Samuel Der-Yeghiayan declined to certify the class action, and then granted summary judgment in favor of Darden on Clark’s individual complaint, prompting the plaintiffs to appeal to the U.S. Seventh Circuit Court of Appeals. McCaster has settled his claim with Darden, but in his deal reserved the right to appeal denial of class certification.
Seventh Circuit Judge Diane Wood and Circuit Judges Michael Kanne and Diane Sykes heard arguments in the case Feb. 18 and issued a decision Jan. 5.
The Seventh Circuit judges said Der-Yeghiayan was right to reject Clark’s argument that an employer must offer prorated vacation benefits to part-time employees if it does so for full-time workers. They said the law prevents only mandatory forfeiture of accrued vacation pay; it does not guarantee such benefits to part-time workers.
Clark cited a 1986 Illinois Appellate Court opinion in Golden Bear Family Restaurants v. Murray, but the Seventh Circuit judges said that case differed from this one, as the Golden Bear case dealt with a restaurant chain which had instituted a policy linking the payment of prorated earned vacation time to being employed on an “arbitrary date.” In this case, the judges said, Darden has not failed to pay anyone benefits owed under its employee contract.
The judges said Der-Yeghiayan was right to refuse to certify the classes, agreeing with the lower court judge that the proposed class of employees – including anyone who worked at Darden restaurants since 2003 and “who did not receive all earned vacation pay benefits” – fit the definition of a so-called “failsafe class.” In such a legal maneuver, plaintiffs can be included in classes only if they have a valid claim. This essentially would leave defendants unable to win, as plaintiffs removed from the class cannot be precluded.
In response, the plaintiffs had argued the court could have adjusted the putative class description to exclude the problematic clause and allowed certification.
But the judges noted Der-Yeghiayan also deemed the claim failed to actually identify “any unlawful conduct on Darden’s part that spans the entire class and caused all class members to suffer the same injury.”
Ultimately, the judges noted, there is no allegation Darden has corporate policies that violate state law. If some employees’ pay was not handled properly, that conduct would constitute a violation, but it would not jeopardize the entire company policy.
McCaster and Clark were represented in the action by attorneys with the firms of Werman Salas P.C. and the Law Office of Jamie Golden Sypulski, of Chicago.
Darden Restaurants was represented by the firm of Seyfarth Shaw, of Chicago.