Key Takeaways

• In a welcome change for employers, the Sixth Circuit in Clark has provided a more even playing field for employers defending burdensome and costly wage and hour collective actions under the FLSA.
• The Sixth Circuit rejected the concept of “conditional certification" and now requires plaintiffs to meet a "strong likelihood of success" burden to show they are similarly situated prior to the sending of any court-approved notices to other employees. This is akin to a preliminary injunction standard.
• Lower courts have reacted favorably to the Sixth Circuit's decision, but other lower courts have hesitated to adopt the new Clark approach. The decisions, including additional appellate activity in other circuits, should be closely monitored particularly because the standards are vastly different. Employers are encouraged to audit their wage and hour practices in an effort to prevent claims in this nuanced and ever-changing area of the law regardless of the legal standard that applies for defending the claims.

A major change in Fair Labor Standards Act (FLSA) wage and hour jurisprudence has taken place, with BakerHostetler at the helm. In Clark, et al. v. A&L Home Care & Training Center, the Southern District of Ohio conditionally certified in part a collective action against defendants (a home healthcare business and its cofounders). The proposed class was comprised of home health aides seeking overtime and shift differential pay. On August 4, 2021, the Southern District of Ohio denied in part and granted in part plaintiffs’ motion for conditional certification. While the Southern District of Ohio partially granted certification, it did so with reservations, emphasizing defendants’ argument that the Sixth Circuit had never formally adopted the conditional certification framework, and the Fifth Circuit had recently rejected the framework altogether in Swales v. KLLM Transport Services, L.L.C., 985 F.3d 430 (5th Cir. 2021). The court thus made the rare move of certifying interlocutory appeal under U.S.C. § 1292. Defendants thus promptly appealed and filed a petition under Section 1292(b) with the Sixth Circuit. On Feb. 4, 2022, the Sixth Circuit granted defendants’ petition to allow the matter to be fully briefed and heard on appeal. Before the Sixth Circuit, defendants outlined the problematic and antiquated conditional certification process as rooted in a pre-Iqbal/Twombly district court decision in Lusardi v. Xerox Corporation, 118 F.R.D. 351 (D. N.J. 1987), that often resulted in cases being resolved without consideration of defendants’ evidence due to litigation expenses. The action was fully briefed and sent to oral argument on December 7, 2022.

On May 19, 2023, The Sixth Circuit ruled in favor of the employer abrogating the long-standing “lenient” Lusardi standard for plaintiffs in conditional certification actions. Clark v. A&L Homecare & Training Ctr., LLC, 68 F.4th 1003 (6th Cir. 2023). Indeed, the Sixth Circuit rejected the concept of “conditional certification” as a whole. Id. at 1009. As a result, the “two-step” framework previously used in FLSA class actions has been overturned. The Sixth Circuit thus weighed the Swales approach as a replacement. The Sixth Circuit found that Swales requires a plaintiff to show that “similarly situated employees” exist by a “preponderance of the evidence” but that this standard sets too high a bar. Id. at 1009-10. On the other hand, the Sixth Circuit also found that the Lusardi approach requiring only a “modest showing” sets too low a bar. Id. at 1010. The Sixth Circuit looked to the law on preliminary injunctions to create a new yet familiar standard. Id. at 1010-11. Under the new standard, “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. (quoting Memphis A. Philip Randolph Institute v. Hargett, 2 F.4th 548, 554 (6th Cir. 2021)). The Sixth Circuit held that “district courts should expedite their decision to the extent practicable” but left the discretion to the district courts as to how to proceed with the new standard. Id. at 1011.

The Sixth Circuit’s ruling in Clark not only represents a monumental change for employers in the Sixth Circuit but also provides momentum for similar reforms nationally. Just as the Fifth Circuit’s holding in Swales inspired reconsideration of the conditional certification framework, the court’s holding in Clark may do the same in other jurisdictions. Employers in the Sixth Circuit states of Ohio, Michigan, Kentucky, and Tennessee will no longer be faced with the real prospect of class certifications being sent to thousands of individuals without employers having a chance to make their case. This greatly minimizes the risk of baseless collective actions being filed and allows employers to actually vet allegations in discovery before any collective action notices are sent. Clark ultimately stands as a major win for employers and as a fundamental change to the notoriously plaintiff-friendly FLSA collective action certification standards. To be sure, the prior Lusardi approach of “shoot first; ask questions later” that resulted in courts sending notices based on little to no evidence is no longer the law.

Only time will tell how district courts manage the new system and how/if discovery proceeds under the new standard. Since the Clark decision, multiple courts have already either reconsidered previous holdings or made favorable rulings for employers under the new standard.

For example, in Foley v. Wildcat Investments, LLC, No. 2:21-cv-5234, 2023 WL 4485571, at * 2 (S.D. Ohio July 12, 2023), the district court dealt with a motion to send court-approved notice. Plaintiff had provided as purported evidence of similarly situated employees his own affidavit alleging vague knowledge of other employees subject to an allegedly FLSA-violating policy. Id. at *3-4. The employer was able to rebut this affidavit with documents showing that its drivers were paid differently and had different duties. Id. at *4. The district court found that the record did not show a “substantial likelihood” that other similarly situated drivers existed and denied the motion.

Similarly, in Hutt v. Greenix Pest Control, LLC, 2:20-cv-1108 (S.D. Ohio July 12, 2023), the district court denied a similar motion for court-approved notice. The district court rejected the introduction of hearsay evidence (an issue of considerable dispute pre-Clark) and found that simply showing that a company-wide policy of some form existed was insufficient for court-approved notice. Id. at 7. Indeed, the court found that “the mere fact that a company has a company-wide compensation plan is not necessarily evidence of company-wide FLSA violation.” Id. Instead, the court found that plaintiff was required to show that “his FLSA injury resulted from a corporate-wide decision to refuse to pay overtime.” Id. The district court thus denied plaintiff’s motion.

While Clark represents a sea change within the Sixth Circuit, it remains to be seen what impact the decision will have outside the jurisdiction. To date, no other circuit has weighed in on whether to adopt the reasoning of Clark. District courts in the Eastern District of Virginia, Southern District of New York and Western District of Arkansas have declined to accept the Clark approach. See, Hernandez v. KBR Serv., LLC, No. 3:22-cv-530, 2023 WL 5181595, at *7 (E.D. Va. Aug. 11, 2023); Thornton v. Tyson Foods, Inc., No. 5:22-CV-05077, 2023 WL 4712035 (W.D. Ark. July 24, 2023); Lazaar v. Anthem Co., 22-cv-3075, 2023 WL 4113034 (S.D.N.Y. June 22, 2023). Nonetheless, the holding in Clark now gives employers yet another circuit court holding (in addition to Swales) to cite in their favor against the “modest” Lusardi standard. In sum, the Clark decision updates decades of precedent and allows employers to be on a more equal footing when facing an FLSA collective action in the Sixth Circuit. Gone are the days when a plaintiff could expect the proverbial rubber stamp and easy settlement of FLSA collective claims. Regardless of which legal standard of proof applies in a particular location, employers are encouraged to audit their wage and hour practices in an effort to prevent claims in this nuanced and ever-changing area of the law. 

[View source.]