Summary
The Fair Labor Standards Act of 1938 (“FLSA”) includes a collective-action mechanism that allows courts to direct that notice be sent to individuals who are “similarly situated” to the named plaintiffs concerning their rights to opt in to the suit. District courts have for many years exercised this authority through a “lenient” two-step process that sets a low bar for named plaintiffs to establish whether prospective recipients of the notice are “similarly situated.” Recently, both the Fifth Circuit and the Sixth Circuit have departed from this approach in favor of a more stringent standard. In light of this division among the courts of appeal, the Supreme Court may be asked to resolve this newly created divide and clarify a uniform standard for notice in FLSA collective actions.
Background
The FLSA articulates certain protections for employees, including minimum wage requirements and overtime pay. Section 216(b) of the statute includes a collective-action mechanism that allows plaintiffs to bring claims on behalf of “similarly situated” individuals. The statute does not define what it means for individuals to be “similarly situated.”
In contrast to the opt-out structure of class action damages suits under Federal Rule of Civil Procedure 23(b)(3), FLSA collective actions have an opt-in requirement for “potential plaintiffs.” For years, most courts have applied the two-step process established in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), for certifying collective actions under the FLSA. At step one, commonly known as “conditional certification,” courts permit notice to be sent to potential opt-in plaintiffs if the named plaintiffs show that they and the proposed notice recipients are “similarly situated.” Courts have described the required evidentiary showing as “modest,” because step one generally takes place at the outset of discovery. At step two, after individuals have opted in and the parties have gone through discovery, the court decides whether the collective action may go forward by applying a stricter standard to the evidence presented after the benefit of discovery to determine whether the opt-in plaintiffs are, in fact, “similarly situated” to the named plaintiffs.
Recent Decisions Departing from the Lusardi Standard
Although the Lusardi standard had long been the approach adopted by federal courts nationwide, two circuit courts of appeal recently have adopted more stringent requirements for obtaining collective action certification. In January 2021, in Swales v. KLLM Transp. Servs., L.L.C., 985 F.3d 430 (5th Cir. 2021), the Fifth Circuit rejected the Lusardi approach and held that a district court must “rigorously scrutinize the realm of ‘similarly situated’ workers, and must do so from the outset of the case, not after a lenient, step-one ‘conditional certification.’” Id. at 434. The court reasoned that this higher level of scrutiny more accurately reflects guidance provided by the Supreme Court in Hoffmann-La Roche, Inc. v. Sperling, 493 U.S. 165 (1989), that notice should serve case management purposes, and is not intended to “stir up litigation.” Swales, 985 F.3d at 434.
Under the Fifth Circuit’s approach, the district court should determine at the outset “what facts and legal considerations will be material” to the similarity determination, and authorize the extent of discovery to be conducted accordingly. Id. at 441. The court noted that the district courts have broad discretion to determine the amount of discovery necessary to determine when a group of employees is similarly situated, but emphasized that the determination must be made by the district court, and should be made as early in the case as possible.
More recently, on May 19, 2023, the Sixth Circuit rejected both the “lenient” approach in Lusardi, as well as the “rigorous scrutiny” of Swales. In Clark v. A&L Homecare & Training Ctr., L.L.C., 2023 WL 3559657 (6th Cir. May 19, 2023), the Sixth Circuit maintained a two-step approach for determining whether “potential plaintiffs” are “similarly situated,” but raised the bar for plaintiffs at step one. Rather than making a “modest showing,” plaintiffs must demonstrate a “strong likelihood” that the “potential plaintiffs” to be sent notice are “similarly situated” to the named plaintiffs. Id. at *4.
In reaching its decision, the court rejected the Fifth Circuit’s “rigorous scrutiny” standard, reasoning that a district court likely will not have the information necessary to make that determination at an early stage in litigation. At the same time, sending notice to “potential plaintiffs” who are not in fact “similarly situated” to the plaintiffs, and therefore ineligible to join the collective action, “amounts to solicitation of those employees to bring suits of their own.” Id. Therefore, the court adopted a “strong likelihood” standard akin to the standard required for issuance of a preliminary injunction. The court reasoned that “[a] district court’s determination to facilitate notice in an FLSA suit is analogous to a court’s decision whether to grant a preliminary injunction” because both decisions are “provisional,” but also “have immediate consequences for the parties.” Id. The Sixth Circuit held that district courts must consider the evidence presented by the parties in reaching their initial decisions regarding the similarity requirement, including that which may also relate to the merits of the claim and possible defenses such as the statute of limitations and arbitration agreements.
An opinion concurring in part and dissenting in part agreed with the majority in rejecting the Fifth Circuit’s heightened approach in Swales, but disagreed with the standard the court adopted, explaining that it “depart[s] from the ‘fairly lenient’ standard long used in this circuit and nationwide” and that the Lusardi standard “serves plaintiffs, defendants, and judicial economy.” Id. at *7, *9.
Implications
After decades of courts applying Lusardi, these recent cases stand as notable departures from the “lenient” two-step process for issuing notice in collective actions and signal the potential for further developments. The standards articulated in Lusardi, Swales, and Clark reflect different approaches to striking the balance between promoting efficiency and ensuring fairness to all parties, as well as recognizing FLSA’s goal of allowing employees to enforce their rights through collective action and preventing abuses of this mechanism. In light of the newly created divide among circuit courts of appeal, this issue may be ripe for Supreme Court review.