By: Robert S. Whitman

Seyfarth Synopsis: The Second Circuit has held that the standard for final FLSA collective action certification is less stringent than the standard for class action certification under Rule 23.

Wage-hour litigators have long been familiar with the proposition that a plaintiff’s burden to obtain initial collective action certification under the Fair Labor Standards Act is “lenient,” “minimal,” or some similar label conveying an easygoing level of court review.  Defense lawyers, who don’t typically relish briefing motions when the plaintiff’s burden is so low, have taken comfort in knowing that, once discovery is complete, the plaintiff will be held to a much higher burden at the “final” certification stage.

Unfortunately, while everyone acknowledged that the burden at the second stage was higher, courts have not been crystal clear about precisely what the plaintiff had to prove.  In the absence of clarity, many courts have relied on the standards of Rule 23 by analogy, importing class certification standards into the collective action question.

The Second Circuit has now declared that this approach is improper.  In a 2-1 decision, it held that “the requirements for certifying a class under Rule 23 are unrelated to and more stringent than the requirements for ‘similarly situated’ employees to proceed in a collective action” under the FLSA.

As we previously reported, the case, Scott v. Chipotle, involved Apprentices at Chipotle restaurants around the country.  The plaintiffs alleged that these employees, whose roles appeared to be somewhat comparable to assistant managers, were improperly classified as exempt under the FLSA and several states’ laws.  After conditional FLSA certification was granted, 516 individuals opted in, joining the seven named plaintiffs.

After years of discovery, including over 80 depositions, Chipotle moved to decertify the collective action on the grounds that the named plaintiffs are not similarly situated to the opt-in plaintiffs. The plaintiffs simultaneously moved for class certification of their state law claims under Rule 23.  The district court granted Chipotle’s motion to decertify and denied the plaintiffs’ motion to certify.  The plaintiffs took an interlocutory appeal of both rulings.

The appellate decision was a mixed burrito for the employer.  On Rule 23, the Second Circuit affirmed the lower court’s denial of class certification, upholding its findings that there was insufficient cohesion in the testimony about the Apprentices’ primary duty and that these differences “proved fatal” to certification.

But the court flipped the tortilla when it turned to the FLSA inquiry.  That inquiry, which focuses on whether the opt-in plaintiffs are “similarly situated,” was an issue of first impression for the Circuit, and in light of prior case law was about as clear as a bowl of guacamole for FLSA litigators.  The court sought to cut through the uncertainty by holding:  “[To] be ‘similarly situated’ means that named plaintiffs and opt-in plaintiffs are alike with regard to some material aspect of their litigation. . . . If the opt-in plaintiffs are similar to the named plaintiffs in some respects material to the disposition of their claims, collective treatment may be to that extent appropriate, as it may to that extent facilitate the collective litigation of the party plaintiffs’ claims.”

The double italics of “to that extent” in the above quotation were in the original.  They underscored the court’s holding that final collective certification need not pertain to the entirety of the opt-ins’ claims, or even a majority, but only as to the material respects on which their claims are similar.

The dissenting judge took the majority to task for this portion of the decision, arguing that they were slicing the avocado too thin by allowing final certification when the opt-ins “share a single common issue” without regard to broader dissimilarities among the plaintiffs.  The majority responded:  “[W]e do not hold that the named plaintiffs and opt-in plaintiffs are ‘similarly situated’ for purposes of a collective action … when they share “any similarity”; rather, we hold that the standard is met when there is similarity with respect to ‘an issue of law or fact material to the disposition of their FLSA claim.’”

This analysis, the court held, need not have anything to do with the standards of Rule 23.  “[W]e hold that analogies to Rule 23 … are inconsistent with the language of [FLSA] § 216(b) and that the question of whether plaintiffs may proceed as a collective under the FLSA is to be analyzed under the separate and independent requirements of § 216(b).”

The majority also sharply rejected the dissenter’s critique that they were announcing a “newly minted” standard:  “[P]roviding clarity is not making something new. The standard we adopt here is plainly compelled by the statutory text and Supreme Court precedent and has been endorsed by courts outside of this circuit along with lower courts within this Circuit.”  The “courts outside of this circuit” include the Ninth and Third Circuits, which reached similar holdings, but not the Seventh, which has held that Rule 23 standards “are as relevant to collective actions as to class actions.”

What’s next?  Since the decision gave a partial win to each side, either or both may seek en banc review by the full Second Circuit or review by the Supreme Court, which has never opined on the similarities or differences in certification standards under Rule 23 and the FLSA.  Or perhaps the case will go back to the district court for trial — surely an extra-spicy prospect for both sides in a case with more than 500 opt-in plaintiffs.

The effect of the decision on FLSA collective action litigation in the longer run will be harder to discern.  Read in conjunction with the relatively low bar for initial certification, the decision will seem to plaintiffs’ lawyers like a 2-for-1 taco special with free sour cream.  But the court’s refusal to allow class certification was a strong positive for the defense side, especially since opt-out classes usually involve far greater numbers of employees than opt-in collectives.  So, for both sides, half a burrito is better than none at all.