KHVPF Insight

The Fair Labor Standards Act and its accompanying regulations—governing overtime and minimum wage rules—are perhaps the most complicated and confusing set of laws that employers face on a day-to-day basis. And the penalties for violating the FLSA are harsh, even if accidental. For instance, if an employer
classifies an employee as salaried and exempt from overtime, but that classification is later determined to be incorrect, an employer will be forced to retroactively pay that employee overtime going back at least two,  and maybe three years. Further, the statute effectively presumes that double-damages will be paid (that is, twice the unpaid amount), and is liable for attorney’s fees. These elements of the FLSA make the statute a favored tool of plaintiff’s attorneys, who seek to use a single plaintiff as a vehicle to bring claims on behalf of dozens, hundreds, or even thousands of other “similarly-situated” employees. By this collective-action certification process, a single mistake involving one employee’s pay can balloon into the threat of millions of dollars in liability.

For decades, certification decisions proceeded in two steps: first, “conditional certification,” a relatively light burden that forced employers to disclose potentially similar employees to the plaintiff’s attorneys, who could then solicit those employees to join the lawsuit. After

conditional certification, discovery (often time-consuming and expensive) would follow. After discovery, the employer could move to “decertify” the conditional collective on grounds that the other employees were not similar enough to the plaintiff. Because of the tremendous stakes, FLSA actions are won or lost at certification—if a collective action is certified, the employer is often forced to settle to avoid crushing financial liability. Even the exorbitant costs of discovery are often enough to force smaller employers with valid defenses to settle.

Only weeks ago, however, the Sixth Circuit (overseeing Michigan, Ohio, Tennessee, and Kentucky) radically altered the evidentiary burden that a plaintiff must show to obtain certification, eliminating the “conditional certification” process altogether. In Clark v. A&L Homecare and Training Center, LLC, the Court held that before a court can authorize a plaintiff to provide notice to potentially large groups of

employees seeking opt-ins to the lawsuit, it must determine whether “in fact” employees are similarly situated first—effectively moving this step up to the front of the certification process. In describing this new standard, the Court analogized the plaintiff’s burden to that of a preliminary injunction standard, which requires a “likelihood of success on the merits.” Among other things, the plaintiff would need to address factors including whether the plaintiff and proposed collective action members performed the same tasks or were subject to the same policies. It will also need to address whether there are common defenses to each proposed plaintiff’s claims, and whether the merits turn on similar issues of law and fact.