Seyfarth Synopsis: As reported by Seyfarth, the Fifth Circuit’s January 2021 decision in Swales v. KLLM Transport Services, LLC and the Sixth Circuit’s May 2023 decision in Clark v. A&L Homecare and Training Center, et al. represent significant shifts in the standard for court-authorized notice in Fair Labor Standards Act collective actions. Last week, the Eastern District of Wisconsin followed suit in Laverenz v. Pioneer Metal Finishing LLC, and adopted Swales, furthering the already-underway shift away from the long-standing “fairly lenient” two-step framework used in most FLSA cases. 

Raising the Bar for FLSA Certification: From Lusardi to Swales and Clark

In Hoffmann-La Roche, Inc. v. Sperling (1989), the Supreme Court allowed courts to send notice of an FLSA collective action to potential opt-in plaintiffs. Courts initially followed the Lusardi v. Xerox Corp. (1987) two-step process fashioned by the District of New Jersey: conditional certification based on minimal evidence, followed by a stricter decertification stage after discovery. Under Lusardi’s approach, stage one certification has historically been a “lenient standard” under which the plaintiff must make only a “modest showing” to clear the “low burden” necessary to send notice. While many employers are successful on decertification, any win can taste bittersweet due to the expenditures of time and money involved in litigating a collective action through discovery and decertification briefing.

The Fifth Circuit’s 2021 Swales decision rejected Lusardi, requiring proof of similar situation, and discovery on issues affecting that determination if necessary, before certifying a collective action.  The Sixth Circuit in 2023 also decried Lusardi’s leniency at the “conditional” certification stage, but did not reject outright the sending of notice prior to a final determination about whether plaintiffs are similarly situated. Instead, Plaintiffs in the Sixth Circuit now must demonstrate a “strong likelihood”—a standard Clark likened to that for granting a preliminary injunction—that they are similarly situated to the potential collective members to justify court-authorized notice.

The Western District of Wisconsin Adopts Swales, Tightening FLSA Certification Standards

Laverenz adopted Swales and its bright line prove-similarity-before-notice-issues rule in a case involving an employer rounding employees’ time punches to the nearest quarter hour and compensating them based on the rounded time values. The plaintiff moved for conditional certification of a collective action, arguing that she and all hourly employees subject to time rounding were similarly situated.

The court first noted that the Seventh Circuit has never required a specific certification procedure, with district courts generally following the lenient Lusardi framework.  It then identified a key issue with the Lusardi process: it risks notifying and including employees who are not “similarly situated,” as required by the FLSA. Although decertification can occur at the second stage, said Laverenz, by then many employees may have joined the suit, potentially without valid claims, which contradicts the FLSA’s plain text and intent.

Laverenz also found that Lusardi can compromise the appearance of judicial neutrality and conflicts with the Portal-to-Portal Act, which aimed to reduce the financial burden on employers from extensive data requests. Lusardi, the court reasoned,leads to notice and significant discovery before a final similarly situated determination, forcing employers to litigate the case as if it were a certified collective, thus favoring plaintiffs and increasing settlement pressure on employers.  Citing Seyfarth’s Workplace Class Action Report, Laverenz noted that courts granted 81% of conditional certification motions in 2021, but later decertified the majority (53%) of those. This suggests many notices go to employees who are not similarly situated, contrary to the FLSA’s intent.

A more rigorous initial review like that mandated by Swales, by contrast, would ensure efficiency and fairness. Adopting that approach, the court permitted pre-certification discovery into facts and legal considerations relevant to the similarly situated inquiry. Thereafter, it applied a preponderance of the evidence standard and assessed three factors—factual and employment settings, individual defenses, and fairness. 

Laverenz ultimately found that the plaintiff had not met her burden to show her similarity to other employees. Significant individual differences in how the rounding policy affected employees, Lavarenz’s personal de minimis damages, the employer’s individualized defenses, and the inefficiency and unfairness of litigating such personalized claims in an aggregate setting led the court to deny the plaintiff’s certification motion. 

Takeaways From Swales, Clark, and Laverenz

Swales, Clark, and now Laverenz pave the way for additional district and appellate courts to depart from Lusardi and apply a certification rubric that adheres more closely to the FLSA’s text and does not create perverse incentives in favor of one side or the other, minimizes untoward settlement pressure on employers, and limits the costs of litigating collective actions to those cases that in fact involve similarly situated plaintiffs.