A recent court opinion from the Sixth Circuit Court of Appeals clarified an important point of law concerning the Fair Labor Standards Act (“FLSA”), specifically what “showing … is necessary for a district court to facilitate notice of an FLSA suit to employees who were not originally parties” to the lawsuit. This case, Clark v. A&L Homecare and Training Center, L.L.C. (6th Cir. 2023), applies to FLSA litigation in Kentucky, Michigan, Ohio, and Tennessee (which comprise the Sixth Circuit) and adds a third standard that district courts across the country will use to decide whether to send notice in FLSA cases. Let’s unpack what all this means and how this new standard will affect FLSA litigation in the Sixth Circuit and across the country.
Background: Competing Standards
Until recently, the generally accepted standard for deciding whether individuals were “similarly situated” was lenient. First articulated by the District of New Jersey in Lusardi v. Xerox Corp, 975 F. 2d 964 (3d Cir. 1992), courts adopted a two-step approach to this question: first, at a stage called “conditional certification,” a federal district court would facilitate notice of the suit to other employees upon a “modest factual showing” that the proposed class members were “similarly situated” to the original plaintiffs. Only later, after the completion of discovery, would the Court take a closer look at whether the new employees were similarly situated to the original plaintiffs, i.e., the decertification stage.
In its 2021 Swales v. KLLM Transport Services, L.L.C., 410 F. Supp. 3d 786 (5th Cir. 2021)opinion, the Fifth Circuit discarded the Lusardi standard and articulated a new approach requiring plaintiffs to show they were “actually similar” to the class to whom notice was sent. Under this approach, district courts would not be permitted to approve notice be sent to prospective FLSA plaintiffs unless the employees were “actually similar” to the named plaintiffs. The defendants in Clark specifically asked the Sixth Circuit to adopt the more stringent Swales standard. Instead, the Court articulated a new standard altogether, adding another layer of complexity to this area of law.
The Sixth Circuit Weighs In
In its opinion issued on May 19, 2023, the Sixth Circuit adopted a “middle course,” repudiating both the “fairly lenient” Lusardi standard while also rejecting the “actually similar” Swales standard. Specifically, the Court held that “for a district court to facilitate notice…the plaintiff must show a ‘strong likelihood’ that those employees are similarly situated to the plaintiffs themselves.” So, what does that mean?
The Court explained that its new standard “requires a showing greater than one necessary to create a genuine issue of fact [i.e., summary judgment], but less than one necessary to show a preponderance [of the evidence].” But make no mistake; this is a higher standard than what previously existed in the Sixth Circuit. The Clark Court analogized its new standard to that which is required to obtain a preliminary injunction: “that the [plaintiff] demonstrate a certain degree of probability that she will prevail on the underlying issue when the court renders its final decision,” i.e., whether the employees who are to be notified are “similarly situated” to the plaintiff. But how?
Previously, plaintiffs could rely mostly on the Complaint and somewhat conclusory personal declarations to meet their burden. Courts specifically avoided weighing factual disputes between the parties. That is no longer the case. Under Clark, determining whether a plaintiff has presented sufficient proof to establish a “strong likelihood” that absent individuals will ultimately be found to be “similarly situated” will require courts to evaluate and weigh the evidence in a previously off-limits way. Now, parties may even be required to engage in discovery focused on the issue of whether the plaintiff is “similarly situated” to the individuals they seek to join in the case to aid the Court in making its preliminary finding on that issue. The Sixth Circuit specifically instructed district courts to consider “promptly initiati[ng] discovery relevant to the motion [for notice], including by ‘court order.’”
Statute of Limitations Considerations
As part of its analysis, the Sixth Circuit acknowledged the tension between its newly articulated (and heightened) standard and the FLSA’s two-year statute of limitations (three years for willful conduct), which continues to run until an individual files a consent and “opts in” to the action. Conscious of that fact, the Court stated that district courts “should expedite their decision to the extent practicable” and “should waste no time in adjudicating the motion [for notice].” In a concurring opinion, Judge Bush went a step further and suggested that the Court’s new standard “create[d] the need” to toll the FLSA’s statute of limitations until the issue is decided, analogizing to the American Pipe rule in Rule 23 class actions in which class members’ claims are deemed to relate to the date of filing of the class action complaint.
Arbitration: “A Defense Like Any Other.”
Finally, the Sixth Circuit stated that courts should evaluate the existence of arbitration agreements when deciding whether other employees were “similarly situated” as this was “a defense like any other.” As the Court explained, “[t]he very point of the ‘similarly situated’ inquiry is to determine whether the merits of other-employee claims would be similar to the merits of the original plaintiffs’ claims – so that collective litigation would yield [an] ‘efficient resolution in one proceeding of common issues of law and fact arising from the same allegedly discriminatory activity.’” The same is true when deciding whether prospective “class” members have a viable claim based on the applicable statute of limitations.
In order words, the merits of the case – at least concerning whether the named plaintiff is “similarly situated” to the individual employees they are asking to be notified of the lawsuit – should be evaluated from the beginning.
Rule 23 Class Certification and FLSA Collective Notice: A Crucial Difference
In its opinion, the Clark Court went to great lengths to differentiate FLSA collective actions from class actions under Rule 23 of the Federal Rules of Civil Procedure. The implications of this aspect of the decision are significant for how FLSA litigation unfolds going forward.
Declaring “the issue is not one of semantics,” the Sixth Circuit ruled that “courts have mistakenly assumed that ‘conditional certification’ actually changes the character of the case,” when in fact, the issuance of notice under §216(b) of the FLSA was simply a mechanism to “add parties to the suit.” Arguably, the Sixth Circuit’s rejection of the term “certification” in the context of FLSA litigation eliminates the need for the “two-step inquiry” all too familiar to lawyers on either side of the “v” in such actions. After all, if FLSA cases cannot be “conditionally certified,” how can they subsequently be “decertified?” It should be noted, however, that in her partially consenting/dissenting opinion, Judge White observed that “today’s ruling still supports a two-step approach by contemplating notice before a final similarity determination.” Time will tell what becomes of the second step of the two-step approach.
Finally, the Court made clear that FLSA actions are not in any way comparable to Rule 23 class actions, even calling into question whether plaintiffs can use “representative proof” to prove their case, stating that a “number of courts have [mistakenly] asserted that, after conditional certification, the case then ‘proceeds’ as a ‘collective’ or even a ‘representative’ action.” This language may prompt defendants to push for broader discovery in the form of individualized discovery as opposed to discovery of a “sampling” of opt-in plaintiffs, although district courts continue to possess the authority to manage litigation to achieve the “just, speedy, and inexpensive determination of every action and proceeding” according to Federal Rule of Civil Procedure 1. Thus, the Clark decision’s effect on the scope of discovery in FLSA actions remains to be seen.
The Impact on FLSA Litigation in the Sixth Circuit
So how much will the Clark decision ultimately impact FLSA litigation in the Sixth Circuit? While it is too early to predict all the ramifications, there is no doubt that its impact will prove significant in certain cases.
The heightened standard that a plaintiff must meet before a court will facilitate notice will likely result in notice going out in fewer cases. Defendants’ ability to rely on defenses (such as the existence of an arbitration agreement) will be a powerful weapon in minimizing potential exposure to liability in litigation. It will also require plaintiffs’ lawyers to be more diligent on the front end in identifying the group of employees who are arguably “similarly situated” rather than relying on the lenient Lusardi standard to cast as wide a net as possible on the front end and address potential dissimilarities down the road.
Whether district courts in the Sixth Circuit will revisit a determination about whether individuals who join a case are similarly situated to the named plaintiffs remains to be seen. Given the heightened standard, once a federal trial court determines that a group of employees is “similarly situated” to the named plaintiff and allows those employees to join the lawsuit, it seems somewhat doubtful that a court would reevaluate that decision later, especially if discovery has already transpired. Whether a mechanism even exists for even doing so is unclear at this point.
Finally, if Clark precludes plaintiffs from relying on “representative proof” in a given case, cases previously tried “collectively” could readily devolve into a group of individual cases being prosecuted simultaneously against a common defendant. Again, only time will tell.
How district courts in the Sixth Circuit will manage this new standard is unclear for all the reasons above. At the very least, this decision makes it much more likely that the U.S. Supreme Court will resolve the conflict that now exists among appellate courts regarding what a party must show for a trial court to facilitate notice of an FLSA lawsuit to employees who were not originally part of the action. However, it is clear that this new standard certainly “front-loads” the process in a way that will require lawyers representing both plaintiffs and defendants to be hyper-vigilant from the beginning about who should be invited to the “party.”
About the Author:
Joshua Burgener is a Member and South Region Litigation Practice Group Co-Chair located in the firm’s Nashville office. He focuses his practice on complex commercial and business litigation, employment disputes, class action litigation, and real estate litigation. He can be reached at 615-620-1757 or JBurgener@dickinsonwright.com, and his bio can be accessed here.
Reid Estes is a member in Dickinson Wright’s Nashville office where he has a robust practice focused on labor and employment law including mediation and arbitration, litigation, class actions, non-compete & anti-solicitation agreements. He can be reached at 615-620-1737 or REstes@dickinson-wright.com, and his bio can be accessed here.