Authored by Noah Finkel and Dennis Clifford

We often question the utility of the “lenient standard” for conditional certification under the FLSA.  All too often, courts grant conditional certification of a collective action based on nothing more than a recitation of the “lenient standard” involving a “modest factual showing,” followed by reference to scant evidence that provides no insight into whether the case ever could be tried as a collective action in a courtroom.  And indeed, when the Plaintiffs’ proof is subjected to a more searching review at the ultimate certification stage, those same courts often decertify the collective action.

In the typical case, the result is that conditional certification leads to many opt-in plaintiffs joining the case, which forces an employer to spend considerable resources in defending a case through discovery, and thus brings substantial settlement pressure to bear upon an employer, even though the employer’s chances of defeating ultimate certification often are strong.

All this could be avoided if courts would give greater consideration to an employer’s evidence at the conditional certification stage.

A recent case from the Northern District of Illinois provides a clear example of how this unfolds, but with an interesting twist:  the court conditionally certified a collective action under the FLSA, even though — in the very same opinion — it rejected certification of a state law overtime class under state law — a holding that should lead to decertification of the collective action several months (and dollars) later.

In Tamas v. Family Video Movie Club, Inc., No. 11-c-1024 (N.D. Ill Aug. 13, 2013), the plaintiff brought a collective and class action, alleging she and other store managers were misclassified as exempt under both the FLSA and Illinois state law.  In standard fashion, the plaintiff offered a handful of declarations from putative class members to establish their job duties were primarily non-exempt, and the defendant countered by offering several declarations from managers to establish their job duties were primarily exempt.

In considering the state law overtime claim under Rule 23, the Court recognized there is no way to resolve this dispute on a class-wide basis, holding that “[T]he parties have presented an array of disparate facts … the resolution of which will ineluctably require individualized inquiries into duties that each member of the proposed class actually performed.  Such differences potentially exist at the state, regional, and local levels.”  As a result, the Court denied certification of an Illinois class under Rule 23 and held that predominance was lacking because individual questions of liability predominate over common ones.

But in the same opinion, the Court conditionally certified a nationwide class under the FLSA.  How?  Thank the lenient standard for conditional certification under the usual two-step process:  “[T]he Court cannot at this stage of the litigation adopt Family Video’s argument that individualized inquiries are necessary to determine whether each putative member was properly exempt. … Although this argument may have merit, it is appropriately made at the second stage of the FLSA class certification inquiry.”  As a consequence, the court authorized the sending of notice of the lawsuit to thousands of employees at over 700 stores in 19 states.  Family Video is now likely to see hundreds of its current and former store managers join this case.  It will face the heightened risk a conditionally certified collective action brings, and will have to bear considerable expense to defend the case through discovery and decertification briefing, at which point Family Video will have strong arguments for decertification.

This is the same bind any employer faces after conditional certification.  The “lenient standard” at conditional certification asks merely for a “modest factual showing” and often results in conditional certification, but the employer nevertheless possesses very strong arguments for decertification.

Family Video throws this into stark relief.  Indeed, based on the Seventh Circuit’s recent decision in Espenschied (discussed here), the standard for ultimate certification of a collective under the FLSA is the same as the standard for Rule 23 certification of a wage-hour class action.  And here, the Court has already rejected Rule 23 class certification.  Therefore, it seems inevitable that the Court will reach this same conclusion at the decertification stage for the FLSA collective action.  Yet Family Video nevertheless must endure conditional certification, notice being issued to thousands of its current and former employees, discovery of their claims, and decertification briefing.

Family Video serves as a good example of the inefficiency of the two-step process.  Once a case is conditionally certified under the FLSA, the employer is placed in a difficult position:  spend substantial resources to continue litigation through the decertification phase; or succumb to the economic pressure to settle the case on a class-wide basis.  Even if the employer decides to spend resources to stay the course through decertification, a decertification order will often result in multiple individual lawsuits filed by hundreds of former opt-in plaintiffs.

So what should an employer do?  In every collective action, it is important to stress at the outset that the Court has discretion under Hoffmann-La Roche to refuse to authorize the sending of notice, and that heightened scrutiny of the evidence is appropriate when the factual record demonstrates that individual issues will prevent the case from ever being tried as a collective action. Employers would be wise to stress these facts at every stage of litigation, from the initial Rule 26(f) conference, to the Rule 16 conference, and in every pleading and motion filed with the court.  Employers also can highlight for the court what happens when a case that never should have been certified is later decertified.  When that happens, the federal district courts can be flooded with numerous individual lawsuits from the former opt-in plaintiffs, many (if not all) of whom would have never initiated a lawsuit but for their receipt of an opt-in notice.  In other words, it is wise to point out that courts are actually creating more lawsuits by conditionally certifying collection actions that are destined to be decertified.