Executive Summary: The two-step conditional certification process in Fair Labor Standards Act (FLSA) collective action lawsuits, known as the Lusardi standard, has been the law of the land for over 30 years. The conditional certification process heavily tips the scales in favor of plaintiffs and is costly and burdensome for employers. The Fifth Circuit, in 2021, became the first appellate court in 30 years to reject the Lusardi two-step process and, just this month, the Sixth Circuit followed suit. A circuit split has developed, as both courts have established their own standards for what level of evidence a plaintiff must provide to establish that she is similarly situated to a group of employees that she seeks to represent, before a district court authorizes notice to be sent to the putative class of plaintiffs. This circuit split provides an opportunity for the U.S. Supreme Court to take up this issue.
What is the Lusardi Standard?
The FLSA requires employers to pay a federal minimum wage and overtime premium to certain types of employees. Under the FLSA, employees can sue for alleged violations of those requirements on behalf of themselves and other similarly situated employees (referred to as FLSA collective actions). Currently, if an employee wants to be a plaintiff in any such action, they must affirmatively opt-in in writing.
In Lusardi v. Xerox Corporation, 118 F.R.D. 351 (D.N.J. 1987), the court created a two-step conditional certification approach to determine when a court should certify a collective action for purposes of sending notice to the putative class members. Under the first step, courts conditionally certify a collective action upon a “modest factual showing” that all employees are “similarly situated” to the original plaintiff. This low bar allows plaintiffs to conditionally certify a collective action with minimal showing. Following the decision in Lusardi, district courts around the country began adopting the standard and applying it to FLSA collective actions nationwide. Since the creation of the Lusardi standard, courts have been very lenient in granting conditional certification in a majority of FLSA cases, permitting notice of a collective action lawsuit to be sent to a large swath of employees with no analysis into the merits of whether the case is properly litigated on a collective basis.
Step two allows employers to decertify the class, but this process is extremely expensive and burdensome. Employers often have to spend hundreds of thousands of dollars to get to the decertification stage, which puts an onerous financial burden on the employer, just to prove the putative class is not “similarly situated” under the Lusardi standard. This has artificially driven up the cost of settlement for these claims and has led to FLSA collective actions being among the most highly litigated civil claims in the country.
Fifth Circuit Rejects Lusardi
In January 2021, the Court of Appeals for the Fifth Circuit became the first federal appeals court in over 30 years to reject the Lusardi standard. In Swales v. KLLM Transp. Servs LLC, 985 F.3d 430 (5th Cir. 2021), the Fifth Circuit found that the FLSA text does not require any certification process. Instead, the Fifth Circuit held that lower courts must review the facts that would be material to determining whether a group of employees is similarly situated before notice goes to potential plaintiffs to opt-in to the suit. Thus, under this standard, trial courts are authorized to examine the merits at the initiation of the case in determining whether to certify a collective action and send out a notice.
Sixth Circuit Follows Suit and Rejects Lusardi
Just this month, the Court of Appeals for the Sixth Circuit followed the Fifth Circuit’s rejection of Lusardi in Clark v. A&L Homecare and Training Center, LLC, No. 22-3101, 2023 WL 3559657 (6th Cir. May 19, 2023). The Sixth Circuit rejected Lusardi and, in doing so, also rejected the standard created by the Fifth Circuit in Swales. Instead, the Sixth Circuit created its own standard, requiring the plaintiffs to show a “strong likelihood” that the employees the plaintiff seeks to represent are in fact similarly situated to the plaintiff herself. The court likened the analysis to a preliminary injunction standard, requiring the plaintiff to demonstrate to a certain degree of probability that she will prevail on the underlying issue when the court renders its final decision. The court explained that the standard requires a showing greater than the one necessary to create a genuine issue of fact, but less than the one necessary to show a preponderance.
The Bottom Line
The Fifth Circuit rejection of Lusardi after 30 years was a significant change in FLSA collective action litigation. Now, with another federal appeals court rejecting Lusardi, but implementing a different standard, the issue is ripe for review and clarification by the U.S. Supreme Court. This is a positive change for employers around the country who have felt the pressure of FLSA collective actions for the better part of three decades. These decisions give employers an opportunity to argue the merits of whether a putative class is truly similarly situated at the outset of a case – raising the chances of defeating certification and avoiding the court issuing notice to employees. We will continue to keep you updated on developments in this area.