By: Alex Simon and Kyle Petersen

Seyfarth Synopsis: In a welcome turn of events, the Seventh Circuit has taken up the question of what is the appropriate standard for court-authorized notice in collective actions.

When this Blog wrote two weeks ago, “Swales, Clark, and Laverenz pave the way for additional district and appellate courts to depart from Lusardi,” we did not expect the Seventh Circuit to take up the issue so quickly.

But just eight days after Judge Griesbach’s blistering opinion came down in Laverenz, criticizing the still-predominant “modest factual showing standard” for being contrary to the FLSA’s text—the Seventh Circuit has authorized an interlocutory appeal to answer a question raised by an appellant-employer about when a court overseeing a collective action may authorize notice to “similarly situated” potential plaintiffs.

More specifically, in a pending collective action brought under the Age Discrimination in Employment Act (“ADEA”)—which explicitly incorporates the FLSA’s collective action procedure—the Seventh Circuit Court of Appeals will weigh in for the first time on whether a district court may order this notice upon a “modest showing” of similarity without regard to the evidence submitted by the defendant.

After ordering nationwide notice to a collective based on the lax Lusardi framework, the district courtcertified the matter for interlocutory review and stayed issuance of notice pending that review. Initially, the Seventh Circuit denied the petition for permission to appeal. While the  Court admitted that “certifying a collective action under the Fair Labor Standards Act is a recurring issue for district courts,” it concluded that it would be “better” to review that process on a more complete record (i.e. after the second step of the two-step process).

In response, the employer filed a petition for rehearing and petition for rehearing enbac—respectfully pushing back on the notion that review after the second step of the two-step process would be “better.” Specifically, the employer explained that a review at that time would be “impossible,” and completely defeat the purpose of their interlocutory appeal. After all, the very issue to be reviewed on appeal concerns the harms that district courts can cause when they authorize the distribution of notice to a collective on an undeveloped factual record—harms such as “soliciting baseless claims, imposing unfair settlement pressure, and subjecting defendants to costly merits discovery for ‘collectives’ that could never hold up.”

Fortunately, this persuaded the Court of Appeals to take up the cause. This means that it will now decide whether district courts in the Seventh Circuit will be required to determine whether plaintiffs have made a meaningful showing, under all of the evidence, that employees in a collective action are “similarly situated” before notice can be sent.

The lower court’s decision to authorize notice upon a mere “modest” factual showing highlights the harmful and unfair nature of that standard. The plaintiff successfully convinced the court that she should be able to send notice to all of the employer’s 40+ year old employees who had been denied promotions in the last three years, even though she had just four supporting affidavits, and the employer produced substantial evidence that the plaintiff was not similarly situated to anyone. While not every district court that uses the “modest” factual showing standard sets the bar so low, there are some that certainly do. New guidance from the Seventh Circuit clarifying what courts must consider and find before authorizing notice is certainly welcome.

Should the Seventh Circuit decide to follow the Fifth and Sixth Circuits in setting a higher evidentiary bar for plaintiffs to clear before sending notice to “similarly situated” employees—it would send a very clear signal across the country that the Lusardi framework must be discarded. Indeed, the very fact that the Seventh Circuit has taken on this appeal sends a message to district courts throughout the country that just because the “modest factual showing” standard may have been “endorsed” in the past, does not mean that it will hold up on appeal going forward.

In the end, the Seventh Circuit’s willingness to consider this very important issue at this stage of the litigation is a welcome development. We will continue to monitor the case for updates. In the meantime, if you are facing a collective action in the Seventh Circuit, it may be in your interest to seek a stay of the pre-notice proceedings pending a decision about the appropriate standard for notice moving forward. Courts in the Sixth Circuit were, by and large, willing to do this pending the decision on Clark.