gavelsc.jpgCo-authored by Andrew Paley and Kevin Young

In the six weeks since the Supreme Court’s monumental decision in Dukes v. Wal-Mart, the FLSA arena has been abuzz with speculation as to whether the decision’s rationale can be used to defeat large-scale FLSA collective actions as early as the conditional certification stage.  On July 22, 2011, in an order denying conditional certification of a nationwide class in MacGregor et al. v. Farmers Insurance Exchange, a South Carolina federal district court answered that it can.

While the MacGregor court acknowledged that Rule 23 and the FLSA’s collective action provisions are different, it found Dukes “nonetheless illuminating” as early as the initial certification stage, where the asserted commonality between the plaintiffs and those whom they purport to represent is rooted in “decentralized and independent action by supervisors that is contrary to the company’s established policies.”  In such a case, the court explained, Dukes teaches that “individual factual inquiries are likely to predominate and judicial economy will be hindered rather than promoted by [collective treatment].”  

This was the case in MacGregor, where three former claims representatives asked the court to approve notice to a nationwide class of all property claims representatives.  At the heart of their dispute was an overtime-preapproval policy under which they were to seek their respective supervisor’s approval to work overtime hours.  This requirement was separate, however, from the company’s policy that employees must accurately record their actual hours on their timecard, even non-preapproved overtime. 

To show that they were “similarly situated,” a threshold for FLSA collective action certification, the plaintiffs had to demonstrate that they and the potential class members were victims of “a common policy or plan that violated the law.”  Attempting to demonstrate this nexus, they argued that their supervisors frequently refused to preapprove overtime, and discouraged claims representative from reporting any unauthorized overtime. They also acknowledged, however, that company policy prohibited them from working “off the clock” and required that all hours worked, preapproved or not, be paid.

At the heart of the court’s assessment was its finding that the plaintiffs’ allegations were not rooted in a common policy that itself was unlawful, but rather in the enforcement decisions of individual supervisors, which, if true, contradicted company policy.  Based on this finding, the court cited and sided with various FLSA decisions in which collective treatment has been denied due to the inextricability of the alleged violations and the actions of individual supervisors.  And while the court noted that it could have ended its analysis there, it proceeded to draw upon Dukes, a decision it described as “clearly reasoned” and instructive where the grounds for certification rest upon “decentralized and independent action” that violates company policy.

Dukes is still just six weeks old, and it is all but certain that decisions addressing the case in the FLSA arena will continue to follow.  For now, MacGregor stands as the most thorough decision applying Dukes to an FLSA collective action, and it did so in denying conditional certification.  The court’s decision represents a clear win for employers, who have over the past decade been subject to a growing tide of massive FLSA collective actions and a lenient conditional certification standard.  Of course, it is by no means novel for employers to argue that collective treatment is inappropriate where individualized inquiries abound.  Nevertheless, with Dukes now supporting this argument, other courts may very well follow MacGregor’s lead in finding that Dukes limits the appropriateness of collective certification.