Collective Actions under Federal Labor Standards Act

Nicholas Fortuna, November 24, 2014.

Claims that employers are not properly paying their employees for over-time or otherwise complying with federal and state wage and hour laws have risen to dizzying heights. The Federal Labor Standards Act (FLSA) requires employers to pay employees over-time at the rate of one and one-half their regular hourly rate for each hour worked over 40 hours in a given week. In addition, an employee is entitled to an extra hour of pay for each day that employee works 10 or more hours even if the total hours for that work week do not exceed 40. There are certain exemptions. Management and administrative personnel are not entitled to over-time pay. Many of the claims brought are for wrongfully classifying employees as exempt. The FLSA gives the employee a private right of action that allows him to sue on his own behalf as well as other employees similarly situated. This is considered a collective action under section 216(b) of the FLSA.

A collective action differs from a class action in that collective actions under FLSA require putative class members to opt into a case, while no such requirement exists for class actions. The FLSA specifically provides that “no employee shall be a party to any such action unless he gives his consent in writing to become a party and such consent is filed in the court in which the action is brought.” These opt-in employees are party plaintiffs, unlike unnamed class members in a class action.  Once an action is brought as a collective action, the district court must certify it in order for it to proceed as a collective action.

To be certified as a collective action, the employees bringing the action are required to demonstrate they are similarly situated. There is no statutory guidance as to what is required to be similarly situated. A majority of the courts use a two-stage process to determine whether those that opted in meet the requirements.

In the first stage, known as the notice or conditional certification stage, the court determines if notice of the action should be issued to potential plaintiffs and if the action should proceed initially as a collective action. The court looks to see if at this stage the plaintiff(s) are able to make a threshold showing that the members of the proposed collective action are similarly situated. Courts generally require little more than substantive allegations supported by declarations or discovery that the plaintiffs and putative members are similarly situated. If the court conditionally certifies the collective action, potential plaintiffs are given notice of the action and the opportunity to opt-in.

The second stage of certification typically occurs at the end of discovery. The defendant(s) will most likely file a motion requesting that the court decertify the action. At this juncture, the court uses a more stringent standard to determine if the opt-in plaintiffs are similarly situated than previously used to determine if the action should go to trial as a collective action. Courts will generally consider three factors in deciding if the plaintiffs are similarly situated: (1) the disparity or similarity of the factual and employment settings of the individual plaintiffs, (2) the various defenses available to the defendant and whether those may be asserted collectively or individually as to each plaintiff, and (3) fairness and procedural considerations.

As to the first factor, the plaintiff must establish that their factual claims and employment backgrounds are sufficiently similar to warrant collective treatment. The courts will consider job duties, geographic locations, employer supervision, compensation, and whether a common employer policy, practice or plan allegedly violates the FLSA.

Looking at the second factor, the more a defendant’s defenses are general in nature and apply to the entire class, the more likely the action will be certified to proceed as a collective action. Conversely, the more the defendant’s defenses are individualized to each plaintiff, the more likely decertification is warranted.

The third factor has courts consider whether it is fair to both sides and procedurally feasible to adjudicate the action collectively. In the end, courts lean toward allowing collective actions to proceed.

The downside of collective actions for employers: plaintiff’s counsel will seek access to employees’ names and contact information for use to build a bigger case; notice will be distributed to putative class members as required by the court; word of the case will spread through social media and may attract union interest; the press may publish stories about the case; and there is an increased cost of defense.

The news is not all grim for employers: opt-in rates are generally low; other plaintiffs’ attorneys are discouraged from looking for similar cases because someone beat them to the courthouse; there is always the option of trying to get the action decertified if enough differences can be demonstrated among the plaintiffs.

 

 

 

 

 

 

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