The Fair Labor Standards Act (FLSA) provides a process by which an employee or a small group of employees can sue for unpaid wages, often in the form of overtime, and can also claim to be representing all others “similarly situated.” 

This process, called a “collective action,” is a form of class action, whereby the original claimants seek to send notices to a large group of current and/or former employees, offering these persons the opportunity to “opt in” (i.e., join) to the case seeking allegedly due but unpaid wages. 

These collective actions are burdensome to employers because the standard used in many courts allowing notices to large groups requires the original claimants to make only a very minimal showing of “similarly situated” for others to be included in the initial notice. In many of these cases, the early proceedings over the recipients of the “opt-in” notices will determine practically the outcome of the case – the larger the group of recipients, the more pressure is placed on the employer to settle and avoid costly litigation. 

In a recent ruling, the Sixth Circuit Court of Appeals has modified the standard. The new standard requires a claimant to meet a more robust standard of “similarly situated” before allowing a notice to a large group of current and/or former employers.

On May 19, the Sixth Circuit Court of Appeals issued its split opinion in Clark, et al. v. A&L Home Care and Training Center et al. (Case Nos. 22-301 and 22-3102), establishing a new standard for certifying FLSA collective actions and rejecting the familiar two-step certification procedure from a 1987 district court ruling in Lusardi v. Xerox Corp., 118 F.R.D. 351, 361 (D.N.J. 1987), which most district courts have since adopted.

Overview

Under the FLSA of 1938 (FLSA), plaintiffs may file suit to receive federal minimum wage and overtime payments, and a plaintiff may pursue their own claims as well as claims on behalf of other “similarly situated” employees. 29 U.S.C. § 216(b). But “[n]o employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”  Thus – assuming they are “similarly situated” – other employees can become parties to an FLSA suit only if they affirmatively choose to do so. Hence, courts have allowed for notices to other potential claimants, allowing them – if they agree in writing to do so – to opt in to the case.

The issue before the Sixth Circuit in the Clark case concerned the showing of similarity that the plaintiffs must make for the district court to send notice of an FLSA suit to other current or former employees as “potential plaintiffs.” As U.S. Circuit Judge Raymond M. Kethledge noted in the opinion, “the decision to send notice of an FLSA suit to other employees is often a dispositive one, in the sense of forcing a defendant to settle—because the issuance of notice can easily expand the plaintiffs’ ranks a hundredfold.” Yet, neither the statute nor any traditional practice at common law or equity gives much guidance on the requisite showing.

Facts of the Case

In September 2020, the named plaintiffs – a number of former “home-health aides” – sued A&L Homecare and Training, LLC and its owners under the FLSA, alleging that A&L paid them less than the correct overtime rate and under-reimbursed their vehicle expenses and in consequence reduced their pay below the federal and state minimum wages. The plaintiffs then moved for the district court to facilitate notice of their action to three groups of other employees who had worked for A&L.

The district court adopted the Lusardi two-step “certification” procedure, in which the district court – using a “fairly lenient” standard – first decides if there are other workers who are “similarly situated” to the lawsuit’s lead plaintiff and then oversees how notices are sent out to the other workers. Using this two-step procedure, the district court in Clark “conditionally certified” two of the three groups as “collectives” for purposes of receiving notice of the suit. However, the court further held that it would not facilitate notice to employees who had left A&L more than two years before or had signed a “valid arbitration agreement” with A&L.

The issue before the Sixth Circuit was review of the district court’s decision whether to send notice of the FLSA suit to “other employees” of A&L. The plaintiffs argued the Sixth Circuit should adopt the Lusardi approach and its lenient standard for “conditional certification” for purposes of sending notice of an FLSA suit to the other employees. A&L countered that the Sixth Circuit should adopt the Fifth Circuit’s recently formulated approach in Swales v. KLLM Transport Services, L.L.C., 985 F.3d 430, 434 (5th Cir. 2021) under which, as A&L understood it, the district court must make a “final” determination of substantial similarity before facilitating notice of the suit to other employees.

The Sixth Circuit adopted neither. Instead, Judge Kethledge compared a district court’s determination to facilitate notice in an FLSA suit to a court’s decision whether to grant a preliminary injunction and adopted part of the preliminary-injunction standard.

The New Standard

The new standard requires the plaintiffs to first show a “strong likelihood” that other employees are similarly situated to the plaintiffs themselves before a district court can facilitate notice of an FLSA suit to those employees. This new standard requires a showing greater than the one necessary to create a genuine issue of fact but less than the one necessary to show a preponderance. As Judge Kethledge explained, “[t]he strong-likelihood standard is familiar to the district courts; it would confine the issuance of court-approved notice, to the extent practicable, to employees who are in fact similarly situated; and it would strike the same balance that courts have long struck in analogous circumstances.” Judge Kethledge noted that, “[i]n applying this standard, district courts should expedite their decision to the extent practicable.”

Accordingly, the Sixth Circuit Court remanded the Clark case back for the district court to use the new “strong-likelihood” standard.

Of course, employers should remain vigilant that their pay practices conform to the wage and hour laws in providing at least the minimum wage for all hours worked, pay at 1.5 times an employee’s regular rate for all hours worked in a week in excess of 40, or, if relying on an overtime exemption, ensuring that those exemptions are properly applied. 

If you have questions about the new certification procedure and how it may affect your business, please contact the author.