Former brokers of Fordham Financial Management will have to put this one in the “loss” column. Judge Paul Crotty of the Southern District of New York granted Fordham’s motion to decertify the FLSA collective in their lawsuit alleging they were misclassified as independent contractors.
The brokers initially succeeded in obtaining conditional certification of their misclassification claims under the relatively lenient FLSA standard in Griffith v. Fordham Financial Management, Inc. About a year later, the Plaintiffs moved for class certification under Rule 23, but the court denied the motion because they “failed to demonstrate that the primary dispute–whether Defendants ‘misclassified potential class members as independent contractors, rather than employees’–was capable of resolution by classwide proof.” Buoyed by that success, the Defendants then sought decertification of the FLSA collective action.
The court granted that motion. The court noted that plaintiffs must meet a higher standard at the second stage of the FLSA certification analysis – specifically, a burden “similar to Rule 23’s commonality requirement.” Taking the analogy further, Judge Crotty said that “functionally there is little difference” between the commonality inquiry and the second stage of FLSA certification.
Judge Crotty then held that the issue of employee vs. independent contractor status for the Fordham brokers “require[s] highly individualized inquiries.” Specifically, he noted that the deposition testimony of the opt-ins revealed widely differing schedules and contractual arrangements, as well as varying levels of control exercised over the plaintiffs’ daily responsibilities. On the whole, the court said, the case would require “individualized inquiries into each plaintiff’s work schedule, compensation, and the level of control Fordham exerted.”
Judge Crotty further noted that the low opt-in rate among the potential members of the collective, while not dispositive, suggested an “apparent lack of enthusiasm” and that individualized actions were more appropriate. (He did not state how low the rate was.)
Griffith is a potent reminder that all is not lost when FLSA conditional certification is granted. Where there is compelling evidence that the ultimate issue will require individualized factual determinations, employers can and should return to the judge to highlight those distinctions among the opt-in plaintiffs–and, if applicable, the low opt-in rate–in an effort to reverse their fortunes without the yoke of the “lenient standard” of stage one. Given the importance of certification to the outcome of cases, the effort can yield high dividends.