In a provocative  decision in the case known as  Swales v. KLLM Transport Servs., L.L.C., No. 19-60847 (5th Cir. 2021), the U.S. Court of Appeals for the Fifth Circuit broke from the pack by upending the standard two-step process for Fair Labor Standards Act (“FLSA” or the “Act”) collective certification. The Court opined that the two-step process followed by many, if not most, district courts throughout the country wrongly permitted conditional certification of collective actions without the appropriate evidentiary support to properly determine whether members of the putative collective are “similarly situated” to the named plaintiff(s) in the underlying lawsuit.

The decision could have a tremendous impact upon FLSA litigation going forward, particularly if other courts adopt the Swales Court’s analysis.

FLSA Conditional Certification and the Lusardi Framework

The FLSA provides that employees may proceed collectively when they are “similarly situated” -- a term that is not defined anywhere in the Act. Nor does the FLSA reference “certification” or “notice” with regard to collective actions, which left the courts to create the FLSA collective action process.

The U.S. District Court for the District of New Jersey was a trailblazer in FLSA collective action procedure with its decision in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), in which the Court crafted a two-step certification process for an FLSA collective.  The first step of the collective certification process, referred to as “conditional certification,” requires plaintiffs to allege that they and others similarly situated were subject to an employer’s policy, plan or practice that was in violation of the FLSA.  When considering whether to grant conditional collective certification, district courts often rely on scant evidence, such as self-serving declarations in which putative members of the collective attest that they are similarly situated to the named plaintiff and that their employer maintained a common policy, plan or practice that was in violation of the FLSA. If the court determines that plaintiff has cleared this evidentiary “low bar,” it will then permit plaintiff to disseminate notice to members of the putative collective inviting them to join the action.

The second-step of the collective certification process occurs at the conclusion of discovery when defendant can file a motion with the court to decertify the conditionally-certified collective, relying on documentary and testimonial evidence demonstrating that the members of the collective are not, in fact, similarly situated to the named plaintiff.

The Fifth Circuit Rejects Lusardi

The plaintiffs in Swales brought suit for violation of the FLSA’s minimum wage requirement, arguing that their employer, a refrigerated goods transportation company, misclassified them – and other allegedly similarly situated drivers – as independent contractors rather than employees.  Applying Lusardi, the District Court conditionally certified a collective action, but in so doing, also authorized defendant to pursue an interlocutory appeal, which paved the way for the Fifth Circuit to examine the issue before the District Court’s decision became a final judgment.

In rejecting the Lusardi framework, a panel for the Fifth Circuit criticized the two-step certification process, stating that instead of “applying ad hoc tests of assorted rigor in assessing whether potential members are ‘similarly situated,’” district courts “must rigorously scrutinize” whether potential opt-in plaintiffs are similarly situated “at the outset of litigation.” Eschewing the lenient first-step of the process, the Court crafted a test whereby district courts must first identify, at the outset of a case, what facts and legal considerations will be material to determining whether a group of employees is “similarly situated” before authorizing preliminary discovery. The amount of discovery will vary case by case, but the initial determination must be made as early as possible. The Court opined that its more rigorous initial step of the collective certification process adopts a “workable, gatekeeping framework for assessing, at the outset of litigation, before notice is sent to potential opt-ins, whether putative plaintiffs are similarly situated – not abstractly but actually.”

In pronouncing its alternative gatekeeping framework, the Court noted that nothing in the FLSA or relevant Supreme Court precedent interpreting it requires or recommends any certification process. Instead, the law provides that the district court’s job is ensuring that notice goes out to those who are “similarly situated” in a way that avoids endorsing the merits of the case. Ignoring this analysis at the outset runs the risk of crossing the line from using notice as a case-management tool – its intended purpose – to using notice as a claims-solicitation tool.

What’s Next?

The Fifth Circuit’s “gatekeeping” approach may serve to benefit employers through avoidance of “rubber stamped” conditional collective certification that sets the stage for often sprawling and expensive discovery, and subsequent costly motion practice for defendants to attempt to decertify the conditionally-certified collectives.  On the other hand, the Fifth Circuit’s ruling may result in significant early discovery to determine whether potential members of the collective are similarly situated, which could be costly to employers.

Only time will tell whether the Fifth Circuit’s approach creates efficiencies and advantages for employers.  It also remains to be seen whether other circuits will likewise abandon the two-step Lusardi approach and adopt the Swales analysis. At the very least, pending an unusual development, the Swales test will be the law in the Fifth Circuit.

*Law Clerk – Admission Pending 

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