In a recent decision, the federal Fifth Circuit Court of Appeals took a fresh look at the appropriate procedure for determining whether to certify a class of plaintiffs under the Fair Labor Standards Act. Under this new procedure, it is likely fewer classes will be certified. It remains to be seen whether other circuit courts will adopt the new approach. The following are some excerpts from the appellate court’s opinion.
Plaintiffs claimed that KLLM Transport Services misclassified them, and all other truck drivers, as independent contractors. Plaintiffs wanted to pursue their wage claims as a collective action, which the FLSA allows for those “similarly situated.” As is common practice, Plaintiffs moved for “conditional certification” of their proposed collective. Such certification results in the sending of court-approved written notice to employees who, in turn, become parties to a collective action only by filing written consent with the court.
The court of appeals noted that Congress amended the FLSA’s collective action procedure. Section 216(b)’s opt-in mechanism differs from Rule 23 class actions, where members are bound by the judgment or settlement unless they affirmatively opt out.
The appeals court observed that while collective actions have some benefits, they also pose dangers: (1) the opportunity for abuse (by intensifying settlement pressure, no matter how meritorious the action); and (2) the appearance of court-endorsed solicitation of claims (by allowing benign notice-giving for case management purposes warp into endorsing the action’s merits, or seeming to, thus stirring up unwarranted litigation).
This interlocutory appeal concerned the threshold dispute of any wage claim collective: How rigorously, and how promptly, should a district court probe whether potential members are “similarly situated” and thus entitled to court-approved notice of a pending collective action?
The near universal practice of the district courts has laid out a two-step process to determine whether prospective opt-in plaintiffs in a proposed collective are “similarly situated” enough to satisfy the FLSA.
The court explained that step one involves an initial ‘notice stage’ determination that proposed members of a collective are similar enough to receive notice of the pending action. This initial step is referred to as “conditional certification.” District courts typically base their decisions at the first step on the pleadings and affidavits of the parties They may require a little more than substantial allegations that the putative collective members were, together, the victims of a single decision, policy, or plan.
Step two occurs at the conclusion of discovery (often prompted by a motion to decertify). Because it has the benefit of full discovery, the court makes a second and final determination—utilizing a stricter standard—about whether the named plaintiffs and opt-ins are “similarly situated” and may therefore proceed to trial as a collective.
The appeals court was not in favor of this approach. The court said, “[i]nstead of … any test for ‘conditional certification,’ a district court should identify, at the outset of the case, what facts and legal considerations will be material to determining whether a group of “employees” is ‘similarly situated.’ And then it should authorize preliminary discovery accordingly. The amount of discovery necessary to make that determination will vary case by case, but the initial determination must be made, and as early as possible.” The district court should dictate the amount of discovery needed to determine if and when to send notice to potential opt-in plaintiffs.
Considering earlier in the case whether merits questions can be answered collectively has nothing to do with endorsing the merits. Rather, addressing these issues from the outset aids the district court in deciding whether notice is necessary. It also ensures that any notice sent is proper in scope—that is, sent only to potential plaintiffs.
To determine whether and to whom notice should be issued in this case, the district court needs to consider all of the available evidence.
After considering all available evidence, the district court may conclude that the plaintiffs and opt-ins are too diverse a group to be ‘similarly situated’ for purposes of answering whether they are in fact employees, or at least that Plaintiffs have not met their burden of establishing similarity. If that is the case, it may decide the case cannot proceed on a collective basis.
Harry Swales, et al. v KLLM Transport Services, L.L.C., ___ F. 3d ___, 2021 WL 98229 (January 12, 2021, 5th Cir.)