Costa v. Apple, Inc.

Background

Francis Costa, Amanda Hoffman, and Olivia McIlravy-Ackert brought claims against Apple under the Fair Labor Standards Act (FLSA), California overtime law, and New York overtime law. They alleged that Apple failed to include the value of vested restricted stock units (RSUs) in the regular rate used to calculate overtime pay. Apple admitted that it used this common pay practice for employees classified as non-exempt or overtime eligible.

The court had previously authorized notice to an FLSA collective. More than 8,000 employees had opted into that collective. Plaintiffs also sought certification under Federal Rule of Civil Procedure 23 of California and New York classes consisting of eligible current and former Apple employees who received RSUs and worked qualifying overtime before the RSUs vested. The proposed classes excluded employees who had signed arbitration agreements.

Class Certification

The court granted plaintiffs’ motion for class certification. It found that the requirements of Rule 23 were met, including numerosity, commonality, typicality, adequacy, predominance, and superiority.

The central common question was whether Apple’s policy of excluding vested RSU value from the regular rate complied with California and New York overtime law. The court held that this issue could be evaluated using common evidence, particularly Apple’s Employee Stock Plan and RSU Award Agreements. The court also concluded that Apple’s arguments about possible overtime exemptions, statutory exclusions from the regular rate, arbitration agreements, and releases did not prevent certification at this stage. The court noted that subclasses or other procedural protections could be considered later if individualized issues became more significant.

The court accepted plaintiffs’ proposed damages methodology for certification purposes. The proposed calculation would use Apple’s payroll, time, and RSU records to compare the overtime employees actually received with the overtime they allegedly should have received if vested RSU value had been included. The court found the methodology sufficiently reliable and capable of calculating damages on a classwide basis.

FLSA Decertification

The court denied Apple’s motion to decertify the FLSA collective. At the second stage of FLSA collective treatment, plaintiffs had to provide substantial evidence that the opt-in plaintiffs were similarly situated. The court found that the plaintiffs met that burden because the employees were subject to the same Apple contracts and terms, and the main legal and factual questions could be resolved through common proof.

The court agreed, however, that employees shown to be bound by valid and enforceable arbitration agreements were not similarly situated to the remaining collective members. It therefore modified the FLSA collective to exclude employees who had signed Apple’s binding arbitration agreements and had not opted out. The opinion also states that 131 opt-in plaintiffs identified as subject to releases would be excluded, and that claims of 3,674 identified arbitration plaintiffs were stayed rather than dismissed.

Other Rulings and Disposition

The court denied Apple’s administrative motion seeking an order to show cause why nonresponsive opt-in plaintiffs should not be dismissed. Although some selected plaintiffs did not respond to discovery requests or deposition notices, the court concluded that dismissal was not warranted because the case would be resolved primarily through Apple’s records and agreements rather than individual testimony.

The final disposition was that plaintiffs’ motion for class certification was granted, Apple’s motion to decertify the FLSA collective was denied, and the FLSA collective was modified to exclude opt-in plaintiffs who had signed binding arbitration agreements.