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November 27, 2014

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Station Casinos wants ‘breathing room’ from employee wage suit

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The Red Rock Casino Resort is shown in the western Las Vegas Valley.

Station Casinos Inc. of Las Vegas wants a lawsuit over employee wages to be put on hold, saying it's entitled to some "breathing room" from such litigation during its bankruptcy proceedings.

With revenue at its locals hotel-casinos declining due to the recession, Station defaulted on debt obligations this year and filed for bankruptcy reorganization July 28. Its hotel-casinos remain open during the bankruptcy process.

At the time of the bankruptcy filing, a lawsuit seeking class-action status was pending in Clark County District Court alleging as many as 20,000 current and former workers were shorted on pay because of a "rounding" system Station uses to track hours worked.

Attorneys for several non-bankrupt Station hotel-casino and casino holding companies moved in August that the state court lawsuit be put on hold because of the bankruptcy. Attorneys for the workers then asked the bankruptcy court Sept. 9 to lift the automatic stay of litigation so they could prosecute the case in the state court.

Attorneys for the workers say employee starting and ending times were rounded both forward and backward.

"This illegal policy and practice has resulted in a systemic failure to compensate hourly employees for all wages and hours earned during their employment with defendants," the workers' attorneys charged in their filing. "Specifically, defendants required their hourly employees to clock in well in advance of their scheduled shift start time and to clock out well after the end of their scheduled shifts. However, by virtue of their rounding policy, defendants failed to compensate their hourly employees for the time they worked before and after their scheduled shift start and end times."

The attorneys say if an hourly employee clocked in up to 14 minutes before the quarter hour, the computer automatically rounded that time forward to the nearest quarter hour. Thus, if an employee clocked in at 8:47 a.m., the computer automatically rounded the shift start time forward to 9 a.m., they said. At the end of the shift, the employee clocking out within seven minutes of the quarter hour had the time rounded back to the nearest quarter hour, they said.

In these examples, the employee would not be paid for one hour of pay per week, the workers' attorneys said.

The case was initially filed in U.S. District Court for Nevada in 2008, but was dismissed for procedural reasons and then was re-filed in state court a few days before Station filed for bankruptcy.

In their motion that the state court lawsuit be allowed to proceed, the workers' attorneys said: "Plaintiffs also allege that the debtor (Station Casinos) is jointly and severally liable with each of the other non-debtor defendants by virtue of the control it exercised over the wages, hours and working conditions of all hourly employees employed by the non-debtor defendants. As a result, plaintiffs and approximately 20,000 similarly situated individuals may have both unsecured and potentially priority wage claims against the debtor."

They cited case law finding that state courts in similar circumstances can assist the bankruptcy process -- rather than interfere with it -- by facilitating thousands of individual claims against the bankruptcy estate.

"Lifting the stay will result in complete resolution of the issues, without any interference with the bankruptcy case," the attorneys argued, adding the rights of other creditors are not implicated.

But attorneys for Station, in their response last week, said the state court case will "inevitably require several years for pre-trial discovery and motion practice to even get to trial."

The "presumption in the (U.S.) Ninth Circuit (federal courts) -- that a Chapter 11 debtor is entitled to the breathing room provided by the automatic stay to allow it to focus on reorganization -- applies, and the plaintiffs have provided no compelling argument to overcome that presumption," Station said in its filing.

"Plaintiffs’ claims are not meritorious," the Station attorneys added.

"Nevertheless, the litigation in the Nevada state court will surely cost the debtor at least several million dollars, even if the debtor obtains a complete judgment of dismissal on the merits. In light of the fact that plaintiffs’ claims are (pre-bankruptcy) unsecured claims, common sense requires that the automatic stay remain in place until it becomes more clear what the likely recovery of unsecured creditors will be in these Chapter 11 cases. Once the parties know what the recovery will be, it will set the stage for practical settlement discussions, and at that point it may make more sense for the debtors to stipulate to a reasonable claim than spend valuable estate resources litigating the claims in state court," Station said.

"Each of the alleged class members holds only a small claim, but the potential class is alleged to include 20,000 present and former employees of the debtor and its subsidiaries. So no employee is harmed economically by the delay to get to a confirmed plan in these cases," the company attorneys argued.

Station added that it pays employees for their meal breaks.

The system now in place, Station said, slightly over-compensates employees in some case and slightly under-compensates them in others, but overall the arrangement "averages out so that employees are fully compensated for all the time they actually work."

The time-tracking system, Station said, "is intended to provide employees with time to enter and exit their work locations in an orderly manner, so they can engage in activities such as walking to and from their work stations, using the restroom, stopping by their lockers, and checking their appearance. This policy also provides parameters within which employees know when they may properly clock in and/or out and arrive at their work stations on time and prepared."

In dismissing the initial federal wage lawsuit July 16, U.S. District Judge Larry Hicks cited a jurisdictional rule for class-action lawsuits.

The rule is called the "home-state controversy exception." It says federal courts must decline jurisdiction in such cases when two-thirds or more of the members of the proposed class-action, and the primary defendants, are citizens of the state in which the lawsuit was filed.

In both the federal and state cases, the lead plaintiffs are former Station employees Josh Lukevich, Cathy Scott and Julie St. Cyr. The case has not advanced to a point where a judge has ruled on its motion to be certified as a class-action.

The state suit seeks to represent all individuals who are or were employed by Station since Feb. 4, 2005. The properties named as defendants are Boulder Station, Fiesta Henderson, Fiesta Rancho, Gold Rush, Magic Star, Palace Station, Red Rock Resort, Santa Fe Station, Sunset Station, Texas Station, Wildfire and Wild Wild West.

The workers claim that because of its labor budgeting procedure, Station strictly allocated the number of hours that could be used to staff the various departments at its properties and that compensation of salaried managers was tied to complying with the labor budgets.

"Defendants’ practices ... are anti-competitive in that these illegal practices make one of defendants’ largest cost items — labor — lower than as compared to other casino owners/operators who are desirous of complying with the labor laws," the new state lawsuit charges.

In the now-dismissed federal suit, Station denied wrongdoing and said wage disputes must be resolved by the Nevada Labor Commissioner, not the courts.

But Station attorneys later filed papers in the federal case showing they had engaged in mediation with the workers’ attorneys and that the parties established a discovery plan with the goal of securing a class-wide settlement to be submitted to the court for review.

Because of the large number of current and former employees affected and the large number of workplaces at issue — 12 casinos or hotel-casinos — the parties had agreed to a plan involving sampling so as to avoid having to deal with millions of documents covering thousands of workers over several years.

The plan involved studies or other analysis at two of the casinos regarding the rounding issue, the amount of time it takes to walk from time clocks to the hourly employees’ respective work stations and a determination of the start and end of the work day for hourly employees.

In its August motion that the state case be stayed, attorneys for the holding companies said the discovery was limited for purposes of a pre-class-action certification mediation.

The filing said only certain categories and types of information and documents were to be produced by the two casinos. "Although the parties attended several mediation sessions, they did not settle the matter," the casinos' filing said.

An Oct. 6 hearing in bankruptcy court is planned on whether the workers' lawsuit can proceed in state court.

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