Collective action claims under the Fair Labor Standards Act (FLSA) remain the most popular filing in federal courts, due in large part to the fairly lenient standard applied by courts to determine whether the claims should be conditionally certified pursuant to 29 U.S.C. § 216(b).  If conditional certification is granted, the court authorizes plaintiffs’ counsel to send notice to similarly situated employees, offering them the opportunity to join the lawsuit. Discovery on the collective claims then begins, and an employer should expect to incur substantial defense costs before reaching the second stage certification decision, where whether the plaintiffs are actually similarly situated is subject to a more searching review.

In Beecher v. Steak N Shake Operations, Inc., Civil Action No. 1:11-cv-04102-ODE, Docket No. 81 (N.D.Ga. Sept. 27, 2012), a federal district court recently denied the plaintiffs’ motion for conditional certification of a group of all hourly employees nationwide, based in part on the employer’s presentation of detailed evidence of its processes for ensuring that all time worked was recorded, audit detail for changes to employee time, and explanations as to why local management would legitimately need to correct employee time records. The court explained that “[v]ia these time records and related declarations, [the employer] has undercut some of Plaintiffs’ broad assertions that all hourly-paid employees were not properly compensated.”

Although the court noted that the employer’s restaurants had the same positions, internal reports, and methods for recording work time, proof of plaintiffs’ claims of unpaid off-the-clock work or improper changes to work time were still “too individualized,” particularly where “individual store managers typically make changes to the payroll records.” Finally, because the employer’s records and practices undercut the allegations of a nationwide policy or practice in violation of the FLSA, the court found that where only 23 plaintiffs had joined the action prior to conditional certification, that was insufficient to demonstrate interest for purposes of a putative group of 65,000 employees.

Practical application: Although employers may not be able to avoid the filing of collective action claims against them, Beecher confirms that an employer’s ability to demonstrate the following will provide strong arguments against collective treatment:

  • detailed policies and practices requiring employees’ accurate time entry, including providing employees with receipts for time worked and tip reporting;
  • audit trail records reflecting upward or downward adjustments to time made by local management and the reasons for same;
  • utilization of time-keeping reports for valid purposes, including management of labor costs; and
  • diligent correction of any unwarranted alterations to employee work time, including thorough investigation of concerns and appropriate discipline and or termination of managers who engage in falsification of time or compensation records.