TSN Tyson Foods

WASHINGTON—The Supreme Court appeared ready Tuesday to uphold a $5.8 million judgment against Tyson Foods Inc. for underpaying workers at an Iowa pork plant, likely frustrating business hopes for another blow against class-action litigation.

"I just don't understand your arguments," Justice Anthony Kennedy told Tyson's lawyer as the hearing began. As the hour unfolded, Justice Kennedy sketched out his view the court's ruling should focus on specific provisions of labor law favoring employees when businesses don't keep track of hours worked, rather than on class-action principles.

The case came from Storm Lake, Iowa, where workers alleged Tyson didn't' pay them for their time when applying protective gear and walking to the slaughterhouse floor. Such "donning and doffing" and "walking time" cases are common labor disputes, and the Supreme Court has decided several on narrow grounds in recent years.

The Tyson case was different, however, because the central issue was the use of statistical estimates to establish liability, potentially affecting a wide range of class actions in different industries.

Because Tyson didn't keep accurate hourly records, lawyers for the workers used statistical experts to estimate the average underpayment. The estimates were based on "744 videotaped observations" of how workers spent their time, the plaintiffs' lawyer, David Frederick, told the court.

Tyson's lawyer, Carter Phillips, said the approach improperly averaged the hours of employees who performed "vastly different activities" and spent varied amounts of time donning and doffing, from 30 seconds to 10 minutes.

Under those estimates, more than 200 employees included in a class of more than 3,000 workers potentially could receive compensation even though they didn't' work overtime, Mr. Phillips said. Several justices suggested such matters could be resolved by the trial court when it divvies up the judgment.

Recent Supreme Court decisions have tightened the reins on class-actions, requiring plaintiffs' attorneys to more clearly show the victims they purport to represent truly share the same circumstances and injuries.

In a 2011 case, Wal-Mart Stores Inc. v. Dukes, the court threw out a suit seeking to represent 1.5 million women who allegedly suffered sex discrimination by the retailer. The court found statistical evidence regarding disparities between male and female employees inadequate to demonstrate the "commonality" of interests among the class. In Dukes and a 2013 antitrust case that likewise rejected a class action, Justice Kennedy joined four conservatives in the majority, while the four liberal justices dissented.

Business interests hoped the Tyson case would make a triad of rulings requiring plaintiffs' attorneys to demonstrate each member of a class actually suffered damages, rather than relying on projections.

Justice Antonin Scalia, who wrote both of the prior pro-business precedents, appeared most open to Tyson's arguments.

When Mr. Frederick said the workers all wore similar sanitary gear, Justice Scalia said that wasn't the full story.

"Some of them wear, what, chain mail to protect them from the knives, right?" he said. "Some of them wear other protective gear. And that's what is claimed to create the discrepancy," he said.

Unlike the two prior cases, the Tyson suit was brought under the Fair Labor Standards Act of 1938, which spells out rules for overtime pay. Several justices observed that a 1946 precedent, Anderson v. Mount Clemens Pottery Co., involved circumstances similar to those in the Tyson case—a dispute regarding overtime pay with an employer that failed to keep hourly records.

The precedent suggests "that certain kinds of statistical evidence are completely appropriate" in wage and hour cases, Justice Elena Kagan said.

Justice Kennedy agreed, but added he would subject statistical evidence in class actions to greater scrutiny if presented outside the special provisions of labor law.

Chief Justice John Roberts appeared concerned a ruling for the workers could expand the use of statistical evidence more broadly, at least in wage cases.

"You agree it would be an extension of Mount Clemens to apply it at the liability stage as opposed to the damages stage, right?" he told Justice Department attorney Elizabeth Prelogar, referring to the 1946 case. The government argued in favor of the workers' position.

Ms. Prelogar said the Mount Clemens case supported such use of statistics because the ruling "recognized at the outset that the burden of proving that you have performed work for which you were not properly compensated shouldn't be an 'impossible burden."

Write to Jess Bravin at jess.bravin@wsj.com

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(END) Dow Jones Newswires

November 10, 2015 15:45 ET (20:45 GMT)

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