Businesses, Workers Alike Cheer New FLSA Collective Action Test

Khorri Atkinson, Senior Labor & Employ

May 26, 2023, 5:10 AM

• Equitable tolling benefits workers; companies see lower burden

• Attorneys watching how district courts apply standard

A newly created standard for certifying wage-and-hour collective actions under the Fair Labor Standards Act is drawing praise from the Biden administration and the plaintiffs’ bar despite also scoring a win for businesses, signaling a potential compromise path forward. A divided three-judge panel of the US Court of Appeals for the Sixth Circuit last week instructed its district courts to no longer rubber-stamp collective actions without first requiring plaintiffs to show a “strong likelihood” that would-be claimants have similarly experienced FLSA violations. If this requirement is met, court-approved notices of the lawsuit can be sent to potential plaintiffs informing them of their right to opt in.

The majority modeled the test after the standard for determining whether to issue preliminary injunctions.

The new standard is a game changer for employers, said Eric R. Magnus, a principal and co-leader of Jackson Lewis PC’s class actions and complex litigation practice group. “It’s a step toward abolishing” a more lenient, two-step certification process that most courts still use, he said. That process allows “conditional certification” after plaintiffs make a “modest factual showing” that potential opt-in plaintiffs were similarly injured, Magnus said. Later on, district courts allow discovery and rigorously scrutinize whether opted-in plaintiffs are similar enough to sue as a group.

The two-step process gives plaintiffs too much leverage and places formidable pressure on employers to settle, Magnus argued. “So in our view, this is a very positive step to make the burden of getting notice out and having a class action certified have a legitimate, real standard behind it,” he said.

But worker-side attorneys are also claiming victory because the Sixth Circuit didn’t adopt the Fifth Circuit’s heightened certification test, which requires early discovery and rigorous scrutiny of whether potential opt-in plaintiffs are similarly situated to each other before court notices can be disseminated.

This approach undercuts the FLSA’s intent of protecting employees from oppressive working conditions, they argued.

“Our position was not completely adopted but we’re pleased to see that the circuit did not adopt the Fifth Circuit’s position,” Solicitor of Labor Seema Nanda said Wednesday at a conference hosted by New York University School of Law in response to a question from Bloomberg Law. The agency had filed an amicus brief backing the workers in the Sixth Circuit case.

Equitable Tolling

The Sixth Circuit’s test will limit the number of opt-in plaintiffs at the early stages of an FLSA putative collective action, but it’s nonetheless “reasonable” and not as extreme as the Fifth Circuit’s, said Christopher M. McNerney, a partner with worker-side firm Outten & Golden LLP’s class action practice.

“It’s a similar showing to what plaintiffs were already making previously” in some instances, he said.

For McNerney, the icing on the cake is that two judges agreed that equitable tolling should be available for absent class members who may otherwise miss the two-year statute of limitations if they’re not notified of the pending case.

Judge John Bush, who joined the majority in establishing the new certification standard, co-authored a partially concurring opinion with dissenting Judge Helene White on this issue. The judges advocated for a standard similar to the tolling doctrine in the US Supreme Court’s 1974 decision American Pipe and Construction Co. v. Utah , which pauses the deadline for all members of a putative class to file their own suits during the pendency of a class action. “If that standard is adopted, that’s a big deal,” McNerney said.

The doctrine would prevent individual plaintiffs from racing to court—either to intervene in a class action or sue separately—to ensure their claims aren’t time-barred, he said.

‘Wait and See’

Attorneys are now keen to see how district courts within the Sixth Circuit will apply the new certification standard and whether it may gain traction in other circuits.

The FLSA allows “similarly situated” workers to bring federal wage-and-hour collective actions against their employers, but neither Congress nor the US Supreme Court has clarified the proper procedure to certify these cases.

“It’s hard to say” whether other lower courts will find it persuasive, said Sarah E. Pawlicki of Eastman & Smith Ltd.'s labor & employment group in Toledo, Ohio.

But the widening circuit split on the FLSA certification procedure “makes it more likely that the issue will be addressed by the Supreme Court in the future,” she said.

An immediate Supreme Court review is likely premature because most circuit courts haven’t yet weighed in on the certification issue, McNerney said.

Until the high court intervenes and more circuit courts take up the issue, the fallout will continue to unfold at the district court level, attorneys said.

“I see both the plaintiff and defense side saying that the case came out in their favor. But it all depends on how it’s applied by the courts,” Pawlicki said. “It’s sort of a wait and see.”

To contact the reporter on this story: Khorri Atkinson in Washington at katkinson@bloombergindustry.com To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Genevieve Douglas at gdouglas@bloomberglaw.com