What Employers And Employees Need To Know About The Sixth Circuit Ruling

Sixth Circuit adopts heightened standard for FLSA collective actions

 

Highlights:

1. The Sixth Circuit introduces a "strong likelihood" requirement for FLSA collective action certification, departing from the lenient Lusardi approach.
2. Until the U.S. Supreme Court weighs in, Lusardi will be the default standard.
3. Outside of the Sixth and Fifth Circuits, the court will likely continue to follow the two-step certification process.

Legal Background

The Fair Labor Standards Act of 1938 (FLSA) generally requires payment of minimum wage and overtime to non-exempt employees. 29 U.S.C. § 206(a). Employees may litigate their FLSA claims on behalf of themselves and other “similarly situated” employees. 29 U.S.C. § 216(b). “Similarly situated” employees must affirmatively consent to join a collective action by “opting-in” to such a lawsuit. Id.
 

The U.S. Supreme Court has recognized that “district courts have discretion, in appropriate circumstances … [to] facilitate notice to potential plaintiffs.” 29 U.S.C. § 216(b); see also Hoffman-La Roche v. Sperling, 493 U.S. 165, 169 (1989) (alteration to the original). From this, federal district courts have been deemed to have an implicit power to send notice to “similarly situated” employees regarding FLSA claims under § 216(b), when “appropriate.” Id. The critical question is how plaintiffs must show their similarity to other employees in order for a district court to approve sending notice to these putative plaintiffs.

With no guidance from either the statute or Hoffman, the majority opinion in Lusardi v. Xerox Corp held that a two-step certification approach was required, and district courts have generally applied this standard for decades. 118 F.R.D. 351, 361 (D.N.J. 1987). This historical standard, however, could now change with the Sixth Circuit’s decision in Clark v. A&L Homecare and Training Ctr., LLC, 2023 U.S. App. LEXIS 12365 (6th Cir. 2023).

Lusardi required a two-step process for collective action certification. First, for “conditional certification,” a plaintiff must show that the other employees are “similarly situated” to the original plaintiff. If a plaintiff meets this burden, a district court may send notice of the FLSA suit. See e.g., Pritchard v. Dent Wizard Int’l Corp., 210 F.R.D. 591, 595 (S.D. Ohio 2002). The first step of “conditional certification” requires only a “modest factual showing.” Id. (citing Severtson v. Phillips Beverage Co., 137 F.R.D. 264, 266 (D. Minn. 1991). This standard is generally considered lenient and, therefore, not difficult to meet (i.e., it is considered “employee-friendly”). See e.g., Knecht v. C & W Facility Servs., 534 F.Supp.3d 870, 873 (S.D. Ohio 2001) (“[t]he standard employed … is fairly lenient.”).

In order to meet the “similarly situated” threshold, courts analyze various factors to determine whether a plaintiff is able to show common factual circumstances to other employees, such as similar job duties or similar alleged unlawful policies. Plaintiffs must ultimately show they are “similarly situated” to other individuals allegedly subject to the same violations of the FLSA in order to secure conditional certification of a collective action. If conditional certification is granted, after completion of discovery, courts have applied a stricter standard to determining whether other employees are actually ‘similarly situated’ to the named plaintiff. Id. at 874. Only after this “second step” certification could a case then proceed as a collective action.

Lusardi was the controlling standard until Swales v. KLLM Transp. Servs., L.L.C., 985 F.3d 430 (5th Cir. 2021). In Swales, the Fifth Circuit court rejected Lusardi. In their opinion, the Fifth Circuit noted that the statute itself says nothing about “conditional certification” and noted that district courts have had different approaches to certification. The court explained that although “two-stage certification of § 216(b) collective actions may be common practice, it is not necessarily precedent.” Id. at 440. The Swales court then outlined its own process for determining whether other employees were ‘similarly situated.’

First, district courts should identify the relevant facts and legal considerations that are material to finding other employees to be “similarly situated.” Second, the court should allow the parties to conduct preliminary discovery to determine whether to “send notice to potential opt-in plaintiffs.” Lastly, the court must determine whether the putative class is, in fact, similarly situated. The importance of Swales was that it was the first time the Lusardi standard was expressly rejected, sparking the potential for other circuits to follow suit in the FLSA context.

Facts of Clark

A&L Home Care and Training Center employed hourly, non-exempt employees to provide home health care for their clients. The plaintiffs in Clark alleged that they regularly worked overtime, but were not paid any overtime rates. Instead, they received a “shift differential rate” for time spent working during the very early mornings, late evenings, and weekends. However, this shift differential rate was not calculated in their overtime work. Further, these aides were asked to travel frequently and often went to multiple clients’ homes during single shifts. They were not given credit nor reimbursed for these expenses, instead received a paid rate of $0.25 per mile. This had the cumulative effect of reducing their overall pay below state and federal minimum wage requirements. Shortly after filing suit, the Clark Plaintiffs sought conditional certification of three groups of former A&L employees. The district court went through the Lusardi approach and conditionally certified two of these employee groups.

Holding

In Clark v. A&L Homecare and Training Ctr., LLC, the Sixth Circuit rejected both the Lusardi and Swales approach. The court held, “for a district court to facilitate notice of an FLSA suit to other employees, the plaintiffs must show a ‘strong likelihood’ that those employees are similarly situated to the plaintiffs themselves.” Id. at *12 (emphasis added). This burden is lower than showing a preponderance of the evidence but higher than what is required to create a genuine issue of fact. The court further stated that the inquiry into whether outside parties are ‘similarly situated’ should be investigated as soon as possible. Because the statute of limitations for FLSA claims is normally two years, district courts should not delay after the plaintiff’s motion for conditional certification. Id. at *13 (citing 29 U.S.C. § 255(a)). The Sixth Circuit ultimately ruled the district court’s order vacated and remanded the case for proceedings consistent with their decision.

Importantly, the panel agreed that district courts could consider the impact of different defenses to which potential members of the collective action may be subject in making the notice/conditional certification determination. This consideration extends to those potential plaintiffs who have allegedly agreed to arbitration. Indeed, the court noted that this is a proper defense for defendants to raise in determining whether plaintiffs are “similarly situated.”

Key Takeaways

The most significant implications from this case relate to Lusardi and the standard used for conditional certification, and whether SCOTUS will weigh in on the circuit split on this issue. Under Swales and Clark, two federal circuits have now directly rejected the Lusardi standard, creating a more lenient two-step certification procedure in FLSA collective actions. This has the direct consequence of complicating how plaintiffs will notify outside employees of pending FLSA suits. As such, employers in the Sixth Circuit (i.e., Ohio, Michigan, Kentucky, and Tennessee) will seek to utilize this favorable standard.

The implications in the Sixth Circuit are immediate. Under the new Clark standard, potential plaintiffs will likely receive notice of a lawsuit later in the litigation, precluding some or all of their claims based on the applicable limitations period. Plaintiffs must first go through discovery and demonstrate how they have a “strong likelihood” to be similarly situated to other employees. However, the implications outside of the Sixth Circuit are less clear. Now, there is a split as to the best approach to be taken. Outside of the Sixth and Fifth Circuits, the court will likely continue to follow the two-step certification process, which is more employee-friendly. Until the U.S. Supreme Court weighs in, Lusardi will be the default standard.

Authors’ Bios

	Abad Lopez is an Assistant Practice Group Leader of Dykema Gossett PLLC Labor and Employment practice.
	Nicholas M. Ustaski is a Client-Centric Labor and Employment Associate at Dykema Gossett PLLC.