Back in April, the U.S. Court of Appeals for the Second Circuit issued an opinion that appears to make it much easier for collective actions under the Fair Labor Standards Act to proceed to trial. Last week, the court hit the “pause” button on enforcement of its order so that the employer could seek review by the U.S. Supreme Court. If the Supreme Court agrees to review the case, all employers may get clarity on the showing required to pursue a collective action under the FLSA and, hopefully, some relief from the feeding frenzy that wage and hour litigation has become.
If you have not experienced the thrill of an Order denying collective or class action certification in a wage and hour lawsuit, you should. With the stroke of the pen a judge transforms a case involving hundreds or thousands of employees, and millions of dollars in potential liability, into one involving a handful of employees and potential exposure that is best characterized as “chump change.” On the other hand, an Order granting certification sets the stage for a settlement in which the employer pays less than its worst-case scenario but far more than “chump change.” As a result, the legal standard by which certification is decided can have substantial, real-world implications for all employers.
In keeping with our mantra that “Legalese Is Not Spoken Here,” I will not attempt to break down the Second Circuit’s 44-page opinion issued in April, or the eight-page dissent, or their descriptions of the legal principles applicable to the grant or denial of collective action or class action certification. Rather, I will summarize the court’s troubling conclusion. According to the majority opinion, collective action certification is appropriate if the plaintiffs “share one or more similar questions of law or fact material to the disposition of their FLSA claims.” As the majority recognized, it was setting a standard for certification that is lower than the standards required for class certification, joinder of parties, or consolidation of cases at trial.
For those of us who defend employers, this standard can severely undermine an employer’s ability to convince a judge that a collective action trial will break down into hundreds or thousands of mini-trials due to the differing facts applicable to each employee’s claims. Indeed, and as the dissenting opinion recognized, this new standard will “force courts to certify a collective [action] if Plaintiffs share a single common issue” and preclude it from being able to “weigh the similarities and dissimilarities” between employees in order to determine whether they are sufficiently similar to permit a collective action to proceed to trial.
The Second Circuit’s one-sentence decision last week to hit “pause” provided no rationale. However, there appears to be a split between the federal circuit courts as to the appropriate standard for determining whether a collective action should be decertified or allowed to proceed to trial on a collective basis. In addition, considering the tidal wave of wage and hour class and collective action litigation over the past 10-15 years, there can be little doubt that this is a matter of national significance. A circuit court split, on an issue of national significance, checks two critical boxes on the checklist for Supreme Court review.
Fingers crossed that review is granted on this one. Toes crossed that it results in favorable clarity for the employers who can see the sharks in the water.