Seventh Circuit Adopts New Standard for FLSA Collective Action Notices

The Seventh Circuit’s recent decision in Richards v. Eli Lilly & Co. marks a pivotal shift in how district courts manage collective actions in Illinois, Indiana, and Wisconsin. In a major development for employers, the court moved away from the long-standing two-step Lusardi framework for authorizing notice, instead requiring district courts to weigh evidence from both sides and exercise discretion before notice is sent to hundreds or thousands of potential opt-in plaintiffs.

The ruling not only reshapes Fair Labor Standards Act (FLSA) collective actions in the Seventh Circuit, but also extends to other statutes that adopt the FLSA’s enforcement mechanism, such as the Age Discrimination in Employment Act (ADEA) and the Equal Pay Act. This heightened standard enables courts to more closely scrutinize the merits of proposed collective actions and to exercise discretion over both certification and notice, giving employers a powerful tool to challenge weak claims early and reduce the risk of costly, large-scale litigation.

Case Background

The case involved a 55-year-old sales employee who alleged that Eli Lilly denied promotions to older workers in violation of the ADEA. The plaintiff sought to notify all employees age 40 and above who had allegedly been denied promotion opportunities since February 2022.

The central dispute concerned which standard should apply to the plaintiff’s request for court-authorized notice. While the plaintiff urged use of the traditional Lusardi “modest showing” test, the employer pushed for a heightened approach modeled on other circuits—such as the Fifth Circuit’s Swales framework, which allows notice only if plaintiffs establish by a preponderance of the evidence that proposed opt-ins are actually similar to the named plaintiffs, and the Sixth Circuit’s Clark standard, which requires plaintiffs to demonstrate a strong likelihood that additional employees are similarly situated.  The district court applied the lenient Lusardi standard, but on appeal, the Seventh Circuit took the opportunity to set a new path.

The Seventh Circuit’s Approach

In its decision, the Seventh Circuit formally set aside the long-applied Lusardi two-step method for issuing notice in collective actions. The court found that Lusardi’s lenient “modest showing” threshold was inconsistent with the principles of judicial neutrality, accuracy, and efficiency. By allowing notices to be sent broadly at the outset, the Lusardi standard risked drawing in employees who were not actually similarly situated.

Rather than follow the stricter approaches adopted by the Fifth and Sixth Circuits, the Seventh Circuit charted a middle course. Under the new rule, plaintiffs must now present some evidence demonstrating a material factual dispute as to whether the proposed collective is similarly situated. Allegations alone are not enough, but plaintiffs are not required to prove similarity by a preponderance of the evidence at the notice stage.

Equally important, the framework gives defendants a meaningful role early in the process. District courts must consider evidence submitted by both parties—including rebuttal evidence offered by employers—before deciding whether to authorize notice. The court stressed that this evidence-based review helps maintain neutrality and reduces the risk of prematurely endorsing one side’s claims.

The decision also underscores the flexibility of district courts. Judges may permit limited, pre-notice discovery when necessary to resolve disputes about similarity, defer ruling until more information is available, or deny notice altogether if plaintiffs fail to meet the new threshold. Courts are not required to ignore evidence that overlaps with the merits, provided it is relevant to the similarity inquiry.

Key Takeaways for Employers

Employers in the Seventh Circuit now have the ability to present affidavits, data, and other evidence to oppose or narrow proposed collective action lawsuits before notice is issued. This makes early preparation essential, as courts must weigh submissions from both sides, requiring employers to quickly gather facts and develop defenses at the outset. Working closely with experienced counsel from the beginning will help shape the record and maximize the chances of defeating or limiting notice. For more information, please contact one of Honigman’s Labor and Employment attorneys here.