By: Noah A. Finkel

Seyfarth Synopsis:  The Seventh Circuit Court of Appeals last week affirmed a district court’s denial of class certification of a state overtime claim on numerosity grounds, reasoning that the touchstone for that element is whether joinder of putative class members is practicable, and a factor to consider is how easily the plaintiff could contact those class members for joinder.  Because the FLSA’s collective action mechanism makes joinder easy, this ruling suggests that district courts should consider whether to reject class treatment when a collective action is available for members of a proposed class.

Outside of California, the FLSA’s collective action mechanism long has garnered the greatest amount of attention of most wage-hour practitioners because it applies nationally, contains the most developed case law, and allows for early conditional certification of a collective action based on a “lenient standard” under which a plaintiff need made only a “modest showing” to carry a “low burden.”  Indeed, as our colleagues showed us last month in Seyfarth’s annual Workplace Class Action Report, federal district courts granted 84% of conditional certification motions in 2020.

But collective actions have their limits.  While conditional certification of a collective action results in a notice of the lawsuit being sent to all of those eligible to be in the collective, participation in a collective action requires one to affirmatively file a consent to join, or opt in.  Anecdotally, we tend to see about 5 to 25 percent of those eligible actually join a collective action, thus limiting a defendant’s FLSA exposure.

Enter state overtime laws, however.  Usually very similar to the FLSA substantively, state overtime laws differ from the FLSA in one huge way: they allow for an opt-out class action, rather than an opt-in collective action.  An opt-out class action does not require a class member to do anything to participate.  Once a state overtime law class is certified, a class member is a participant unless they opt out, and opt outs are very rare.  A case that has, say, 15% participation under the FLSA often sees 100% participation under state overtime class action claim, thus inflating a defendant’s potential exposure.  This is why the plaintiff’s wage-hour bar prefers to file hybrid collective/class actions rather than just one or the other.

Last week, however, the 7th Circuit may have made hybrid cases more difficult for the plaintiff’s bar in Anderson v. Weinert Enterprises, Inc., No. 20-1030 (7th Cir. Jan. 28, 2021), by putting some teeth into Rule 23(a)(1)’s numerosity requirement.  It is rare to see class treatment denied on numerosity grounds.  Indeed, courts often have assumed that a 40-member class meets numerosity.  This approach, however, miscomprehends the numerosity requirement, reasoned the 7th Circuit.  A class plaintiff bears the burden of proving that a class is, in the language of Rule 23(a)(1), “so numerous that joinder of all members is impracticable.”  To do so, they must show that “it is extremely difficult or inconvenient to join all members of the class.”  Answering that question, the 7th Circuit reasoned, involves evaluating “the nature of the action, the size of the individual claims, and the location of the members of the class … .” In the Anderson case, the 7th Circuit held that the district court did not abuse its discretion in declining to certify a class action, given (i) the proposed class’s geographic dispersion (the class members all worked at the same facility), (ii) the overall size of the class (it numbered 37, but the 7th Circuit said that if it were larger, it probably wouldn’t have mattered), (iii) the dollar amounts involved with each individual claim (considering the availability of attorney fee shifting), and (iv) the plaintiff’s ability to easily contact the class members.

The last two factors discussed by the 7th Circuit warrant emphasis.  Wage-hour claims typically involve a relatively small dollar amount for each individual claim, which might help a plaintiff show that joinder is impracticable.  But the 7th Circuit noted that fee-shifting provisions, which are present in the FLSA and all state overtime laws, lower the barrier to joinder of these claims.

The plaintiff’s ability to easily contact the class members, which the 7th Circuit weighed against finding numerosity in this case, is present in just about every hybrid collective/class action.  If conditional certification is granted, the defendant is compelled to provide the plaintiff with the name and address or other contact information for all collective action members, and there likely is substantial overlap between the collective action and class action members.  The plaintiff is then authorized to send notice to each of them to invite them join the case.  The collective action mechanism thus is a practicable method for joinder — and one that may preclude class certification.

To be sure, and as the 7th Circuit recognized, availability of a collective action does not mean that every class action in a hybrid matter fails to establish numerosity.  But the 7th Circuit’s decision is a reminder that Rule 23 numerosity requires the plaintiff to show the impracticality of joinder, and that, the availability of the collective action device may mean the plaintiff cannot show that.