THIRD CIRCUIT CLARIFIES FINAL CERTIFICATION STANDARD FOR FLSA COLLECTIVE ACTIONS
December 28, 2012 | By: Patrick W. McGovern, Esq.
The Third Circuit Court of Appeals recently clarified the procedure applicable to collective actions filed under the Fair Labor Standards Act. Still certain questions remain regarding the implications of a plaintiff’s failing to seek final certification and how the Third Circuit’s standard will be applied. The increasingly popular FLSA collective action can be maintained and proceed to trial only on behalf of a group of similarly situated plaintiffs. There are two steps to collective action certification – conditional certification and final certification. Conditional certification is determined shortly after the action is filed but before discovery begins and requires only a modest factual showing that plaintiffs are similarly situated. Allegations that employees were victims of a single employer decision, policy, or plan can be enough to support conditional certification. Upon conditional certification the court orders notices sent to potential claimants to advise them of their rights to opt into the action and sets a discovery schedule. At least until the Third Circuit’s recent ruling, the practice had been that unless the employer challenged the conditional certification, plaintiffs were not required to ask the court for a final certification of the collective action and there was no clear standard in the Third Circuit for final certification of a FLSA collective action. In Zavala v. Wal-Mart Stores, 691 F.3d 527 (3rd Cir. 2012), the Third Circuit clarified the procedure and the standard applicable to final certification. The court held that final certification must be proven by a preponderance of the evidence, using an ad hoc approach, with the burden of proof borne by the plaintiffs. Further, any appeal from the district court’s determination will be reviewed under a clearly erroneous standard. The ad hoc approach requires the court at the second step, generally after discovery concludes, to consider all factors relevant to whether the plaintiffs are similarly situated. These factors include, but are not limited to, whether the plaintiffs: are employed in the same corporate department, division, and location; advance similar claims; seek substantially the same form of relief; and have similar salaries and circumstances of employment. Additionally, the court will consider whether the defendant has individualized defenses as to each plaintiff. This factor can be sufficient grounds for decertification. The court can also take into account other fairness and efficiency concerns. In Zavala the conditionally certified class consisted of 114 Wal-Mart janitorial workers who alleged FLSA overtime violations. The Third Circuit found that the plaintiffs did not establish by a preponderance of the evidence that they were similarly situated. The plaintiffs worked at more than 180 different stores in 33 states and were employed by 70 different contractors and sub-contractors. The plaintiffs alleged a common scheme to hire and underpay illegal immigrant workers, but the court found that these allegations were not useful in streamlining resolution of the claims because of the many differences among the plaintiffs’ claims. Accordingly the Third Circuit affirmed the lower court’s decertification of the action. To date, no District Court within the Third Circuit has applied Zavala to a motion for final certification of a collective action. Outside of the Third Circuit, however, the Zavala decision has been considered in connection with the disposition of a motion for final certification. In Marshall v. Amsted Rail Co., 2012 U.S. Dist. LEXIS 161768 (S.D. Ill. Nov. 13, 2012), 478 plaintiffs alleged FLSA underpayment and overtime violations. The District Court noted that the Seventh Circuit “has not announced a test to determine this FLSA ‘similarly situated’ question” so the court looked to the Zavala decision and others and decertified the claims of 476 opt-in plaintiffs, leaving only the two named plaintiffs to proceed in the action. The Illinois court considered the factual and employment settings of all the plaintiffs, individualized defenses of the employer, and other fairness and procedural concerns and found that each consideration weighed in favor of decertification. The Zavala decision has important implications for FLSA collective actions going forward. At the close of discovery in a conditionally certified FLSA collective action, the plaintiff has the affirmative burden to prove, by a preponderance of the evidence, that the claimants are not only similarly situated to each other, but arguably are similarly situated to the named plaintiff as well, in order to have the action finally certified. As of this writing, it is unclear how courts within the Third Circuit will treat a conditionally certified FLSA action when the plaintiff fails to move for final certification after discovery and the employer fails to move to decertify the action. If you have any questions or for more information about decertifying FLSA collective actions, please contact Patrick W. McGovern, Esq., firstname.lastname@example.org, or Rebecca Fink, Esq., email@example.com, in the Labor Law Practice Group.