In recent times, collective actions under the Fair Labor Standards Act of 1938 have been one of the fastest growing areas of representational litigation, far outpacing discrimination class actions in terms of case filings across the nation. Also, these cases have caused general counsel to have sleepless nights worrying about the exposure that FLSA violations present. Further complicating matters is that FLSA collective actions do not follow the traditional certification paradigm of Fed. R. Civ. P. 23 and its corresponding opt-out procedures. Instead, Section 216(b) of the FLSA provides for a unique, opt-in class action where certification is generally analyzed at two different stages in the litigation process.
By way of background, in a Rule 23 class action, each person who falls within the definition of a class member is bound by the judgment, whether favorable or not, unless the case is under Rule 23(b)(3) and the person has opted out. By contrast, in a FLSA collective action, a putative plaintiff must affirmatively “opt in” to the action by filing a written consent with the court in order to be considered to be a class member and to be bound by the outcome of the action. But perhaps the most substantive difference between Rule 23 and Section 216(b) is the lenient standard employed in FLSA collective actions to conditionally certify a class under the “similarly situated” analysis, compared to Rule 23’s more rigorous analysis for certification.
In this regard, many circuit courts have approved a two-step “ad hoc” approach in determining whether plaintiffs are “similarly situated” for purposes of Section 216(b). Under this approach, a court typically makes an initial notice stage determination of whether plaintiffs are similarly situated. In other words, the district court determines whether a collective action should be certified for purposes of sending notice of the action to potential class members. For conditional certification at the notice stage, many courts require nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy or plan. At the end of the discovery period, the court then revisits certification and makes a second determination of whether the plaintiffs are similarly situated using a stricter standard. During this second stage analysis, a court reviews several factors, including the disparate factual and employment settings of the individual plaintiffs; the various defenses available to the defendant that appear to be individual to each plaintiff; and fairness and procedural considerations.
In a typical Rule 23 class action, the battle is often won or lost at the class certification stage because defendants cannot fathom the risk of losing a class case at trial or because class counsel has lost the incentive to continue in a case if the theory relies heavily on the use of costly experts. However, because of the lenient standard in conditionally certifying FLSA collective actions, the real battle in those cases is at the end of the discovery period when the employer files a motion to decertify the collective action.
In FLSA collective action litigation, employee challenges have focused on two primary theories. First, employees often allege that they are misclassified as exempt when in fact they are really non-exempt employees who are owed overtime compensation for hours worked in excess of 40 in a given workweek. These claims are generally premised upon the theory that the employees at issue do not fall within one of the white-collar exemptions for executive, administrative or professional employees, or the theory that they were not paid on a true salary basis as the FLSA requires. Second, non-exempt employees often allege that they have not been paid overtime for off-the-clock compensable work, ordinarily in the context of pre-shift and post-shift work, or work performed during meal and rest periods. In recent times, there has been a steady increase of “donning and doffing” cases where employees claim that the time spent putting on and taking off their work-related clothing and/or other gear is compensable time under the FLSA. While donning and doffing theories first became popular in the poultry industry, the theory has been expanded to other industries where workers customarily wear specialized protective gear.
Because the opt-in mechanism traditionally has been believed to result in lower participation rates for class members compared to Rule 23 class actions, some named plaintiffs in collective actions also have sought to certify state law claims under Rule 23 in order to gain a larger participation rate for putative plaintiffs. These actions are known as “hybrid” collective actions. Some courts, however, have been reluctant to certify such state law claims alongside FLSA collective actions, finding that Section 216(b)’s opt-in mechanism is incompatible with a class action under Rule 23. Courts that have denied Rule 23 certification of the state law claims have done so by declining supplemental jurisdiction on the basis that the state law claims would predominate over the federal claims or by finding that the named plaintiff could not satisfy Rule 23(b)’s requirement that a class action be the superior method for fair and efficient adjudication of the controversy. Other courts, however, have entertained these hybrid cases.
While many FLSA collective actions end up being decertified at the end of the discovery period, many proactive employers have sought to minimize their chances of being sued in this area of law by voluntarily reviewing their workforce practices and modifying policies where appropriate. Notably, many companies have started to engage in self audits to analyze whether employees in certain positions are properly classified as exempt from the FLSA’s overtime requirements. Additionally, many companies periodically review their time-keeping practices applicable to non-exempt employees to ensure that they are paid for all hours worked, including work from the beginning of the first principal activity of the workday to the end of the last principal activity of the workday. Also, many companies are reviewing and modifying their policies to comply with the FLSA and its myriad of regulations regarding waiting time, on-call time, rest and meal periods, training time, travel time, commuting, protective gear, time clock rounding, recordkeeping and deductions from pay, to name a few.