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Sixth Circuit Set to Weigh in on the Current, Burdensome Two-Step Collective Action Standard

Many employers already have personal experience with the costly two-step process for collective overtime or minimum wage claims under the Fair Labor Standards Act (“FLSA”). This process permits employees to commence expensive class-type lawsuits against an employer with almost no factual support for their ability to represent other employees. However, this soon may change. The Sixth Circuit Court of Appeals is scheduled to review the proper process for certifying FLSA collective actions, and potentially could reduce the significant costs employers now routinely endure when defending themselves in wage and hour litigation. The outcome of Clark v. A&L Home Care and Training Center, LLC could change the course of numerous wage and hour cases in Michigan, Ohio, Kentucky and Tennessee.

Currently, courts in the Sixth Circuit permit employee plaintiffs to bring a claim for unpaid overtime or unpaid minimum wages under a two-step process that imposes burdensome defense costs on defendant employers. In step one, often called “conditional certification,” the court first authorizes notice of the lawsuit to issue to other employees who may then choose to join the lawsuit. At step two, which typically takes place after expensive class-type discovery, the court then makes a determination as to whether the plaintiff employee and the individuals who joined are “similarly situated” and can actually proceed as a “collective” to trial, a process called certification. 

The problem for employers is that under current standards, courts often approve the first step – opt-in notices to a large pool of employees – on the basis of little or no evidence that the plaintiff employee should represent the employee group and has claims similar to the group. Some courts have even held that step one notices could be sent out based on a single conclusory affidavit from the plaintiff employee. Between steps one and two, the employer must manage wide-ranging document production obligations concerning the employee group and expend time and resources on witness depositions. Only after incurring significant expense can the employer then challenge, at step two, whether the collective action should proceed. Unsurprisingly, many FLSA cases settle between steps one and two, as employers seek to limit discovery costs and the burden of litigating against a large group of current and former employees.  

In A&L Home Care and Training Center, the Sixth Circuit will decide whether FLSA collective actions must proceed using the current two-step process, or if the courts can take a closer look at the plaintiff’s case and rule on the viability of the collective action before opt-in notices issue. The lower court, the Southern District of Ohio, approved stage-one notice but certified the question of what process was appropriate to the Sixth Circuit for a decision. The defendant has argued that the Sixth Circuit should adopt a standard similar to the Fifth Circuit Court of Appeals, as set forth in its 2021 decision, Swales v. KLLM Transport Services. The Fifth Circuit rejected the two-step process and held that trial courts should conduct a rigorous analysis as to whether the lead plaintiff and potential plaintiffs are similarly situated before any opt-in notice issues. Under Swales, employers could potentially defeat certification before notices are issued and plaintiffs could not rely on threadbare allegations to obtain the benefits of a notice process. Other federal courts continue to follow the two-step process and the plaintiff in A&L Home Care and Training Center has asked the Sixth Circuit to endorse the two-step process. 

The Sixth Circuit heard oral argument on December 6, 2022 and a decision is expected this spring. The court could take one of several approaches in A&L Home Care and Training Center: (1) affirmatively reject the two-step process and follow the single-step standard adopted by the Fifth Circuit in Swales; (2) endorse the two-step process as a requirement for FLSA cases and mandate its use by lower courts; or (3) adopt a new standard that gives trial courts discretion to choose between a one-step and two-step process. Any outcome short of a requirement that courts use the existing two-step process could potentially save employers significant defense costs in opposing certification in FLSA cases.

  • Matthew E. Radler

    Matthew Radler is a labor and employment attorney who focuses his practice on wage and hour matters and assists in litigating noncompete, trade secret and employment dispute matters.

    • Counsels clients through various stages of ...
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