For janitors cleaning Wal-Mart stores after business hours, the differences among members of the proposed class doomed their FLSA collective action. Although the janitors worked for Wal-Mart’s cleaning contractors, the janitors claimed that they were also employees of Wal-Mart and sued for unpaid wages. Zavala v. Wal Mart Stores, Inc. The Third Circuit’s decision delineates the two-part test for FLSA collective actions, which it recently adopted in Symczyk v. Genesis Healthcare Corp., a case that will be reviewed by the Supreme Court next term, as we reported in a blog post last June.
At the first stage, the Third Circuit affirmed its prior ruling that, to meet the conditional certification standard of making a “modest factual showing,” the named plaintiffs are required to present evidence “‘beyond pure speculation,’ of a factual nexus between the manner in which the employer’s alleged policy affected [them] and the manner in which it affected other employees.” At the second stage—final certification—the district court must determine whether the plaintiffs who have opted-in are in fact “similarly situated” to the named plaintiffs.
Until now, the Third Circuit had left “specifically unresolved” the “exact test” for final certification of an FLSA collective action. The Third Circuit articulated that test in Zavala, holding that final certification depends on a factual finding—made in light of the claims and the defenses and “all the relevant evidence”—that the proposed plaintiffs are “similarly situated.” By adopting this standard, the Third Circuit endorses the “ad-hoc approach,” adopted by all other circuit courts to decide this issue, which considers such factors as whether the plaintiffs work in the same department, whether they advance similar claims, whether they seek substantially the same relief, and whether they have similar circumstances of employment. As to this finding, the plaintiff has the burden of proof by a preponderance of the evidence. Individualized defenses, the Third Circuit found, may result in a finding of dissimilarity.
The Third Circuit also expounded upon the appellate standard for reviewing a district court’s certification decisions. Although courts have used “abuse of discretion” to describe the appellate standard, the Third Circuit clarified that an FLSA final certification actually has two components: (1) selecting the right legal standard to see whether the proposed plaintiffs are similarly situated, and (2) applying that standard to make the required factual finding. The standard of review for a district court’s selection of a legal standard is de novo, as a pure issue of law, while the district’s factual finding is reviewed only for clear error. As to the impact of the factual finding, the Third Circuit concluded, “We do not believe that the statute gives the district court discretion to deny certification after it has determined that plaintiffs are similarly situated.”
In applying these standards, the Third Circuit upheld the district court’s decertification of the janitors’ claims because, although Wal-Mart had a maintenance manual that specified cleaning procedures, and some Wal-Mart employees directed cleaning crews in their work, the janitors worked at 180 stores in 33 states for 70 cleaning contractors. In addition, the individuals worked varying hours and for different wages depending on the contractor. Moreover, the district court noted that Wal-Mart had different defenses available, including that Wal-Mart was not the individual janitors’ employer under the FLSA and that Wal-Mart paid cleaning contractors an adequate amount to support an appropriate wage for the cleaners. The Third Circuit reasoned that “common links are of minimal utility in streamlining resolution,” because “[l]iability and damages still need to be individually proven.” The court explained that similarly situated does not mean “simply sharing a common status” such as an illegal immigrant. Rather, similarly situated means that proposed plaintiffs were subjected to “some common employer practice that, if proved, would help demonstrate a violation of the FLSA.” The Third Circuit concluded: “The similarities among the proposed plaintiffs are too few, and the differences among the proposed plaintiffs are too many.”
This lawsuit was an overzealous exercise on behalf of thousands of janitors, claiming they were illegal immigrants, against an entity that was not their formal employer but rather was the company contracting with the cleaning companies for which the janitors worked. The lawsuit also featured creative theories of liability, including civil RICO and false imprisonment claims, both of which were dismissed. The FLSA claim faced the hurdle of proving that Wal-Mart—the principal of the cleaning contractors who employed the janitors—was an employer of the janitors. Proving employment status on an agency theory or a joint-employer theory depends on multiple factors that could hardly be the same across a purported class comprising the employees of 70 cleaning contractors at almost 200 stores.
If the lawsuit was doomed to failure from the outset, it did provide the Third Circuit with an excellent opportunity to clarify its standards for FLSA certification. Notably, the Third Circuit did not opine on how the Supreme Court’s decision in another Wal-Mart case, Wal-Mart Stores, Inc. v. Dukes, relates to the Third Circuit’s singular focus on whether proposed plaintiffs are “similarly situated.” Nonetheless, like Dukes, the Third Circuit struck another blow to plaintiffs seeking expansive relief against the world’s largest private employer.