After eight years of protracted litigation, the Third Circuit in Zavala v. Wal-Mart Stores, Inc., No. 11-2381, 2012 WL 3217522 (3d Cir. Aug. 9, 2012), recently ruled in favor of Wal-Mart in an action brought by undocumented immigrant workers who provided cleaning services at Wal-Mart stores nationwide. The employees originally brought suit in the U.S. District Court for the District of New Jersey in 2003 seeking compensation for unpaid overtime and certification of a collective action under the Fair Labor Standards Act (“FLSA”), civil damages under RICO and additional damages for false imprisonment. On this appeal to the Third Circuit, the plaintiffs challenged the District Court’s dismissal of their RICO claims, its decertification of the conditionally-certified FLSA class action, and its grant of summary judgment for Wal-Mart on the false imprisonment claims.

The Third Circuit ultimately affirmed the District Court’s decision to decertify the collective action under the FLSA. For the first time, the Third Circuit explicitly spelled out the applicable standard for certifying an FLSA collective action for trial: the District Court must determine whether the members of a collective action are “similarly situated.” The burden of meeting this standard lies with the plaintiffs, who must demonstrate that they are “similarly situated” by a preponderance of the evidence. In assessing whether to grant final certification, the Third Circuit advised that courts should apply an ad-hoc approach and analyze each case on its own facts. Relevant factors courts should consider include, but are not limited to, “whether the plaintiffs are employed in the same corporate department, division, and location; whether they advance similar claims; whether they seek substantially the same form of relief; [ ] whether they have similar salaries and circumstances of employment” and “the existence of individualized defenses.”

Applying this standard here, the Third Circuit concluded that the plaintiffs failed to satisfy the “similarly situated” standard, thereby affirming the district court’s decision to deny final certification. As the District Court noted, the putative class members worked in 180 different Wal-Mart stores in 33 states and for 70 various contractors and sub-contractors, and Wal-Mart might have different defenses with respect to each proposed plaintiff. The Third Circuit stated that, “[t]he similarities among the proposed plaintiffs are too few, and the differences among the proposed plaintiff are too many. . . . Being similarly situated does not mean simply sharing a common status, like being an illegal immigrant. Rather, it means that one is subjected to some common employer practice that, if proved, would help demonstrate a violation of the FLSA.”

The Third Circuit also upheld the District’s Court’s summary judgment dismissal of the plaintiffs’ RICO claims, finding that the plaintiffs failed to sufficiently plead predicate acts. While the plaintiffs alleged some challenging working conditions, the Court declared that they “demonstrated nothing ‘akin to African slavery’ or any modern analogue.” Furthermore, the plaintiffs did not claim that they were compelled to come to work or forced to remain there once their work was done.

Finally, the Third Circuit also upheld the dismissal of plaintiffs’ false imprisonment allegations, finding that emergency exits were available at Wal-Mart stores and that the plaintiffs impliedly consented to their “imprisonment” because they were aware of Wal-Mart’s policy to lock the main doors of its stores at night.

A key takeaway from the Third Circuit’s opinion is the Court’s clarification of the high standard for certifying a collective action under the FLSA. By setting out such a comprehensive discussion of standards and burdens of proof, the Third Circuit has provided practitioners with a road map for navigating complex collective action cases.