Sixth Circuit Adopts New Certification Process in FLSA Collective Actions

On May 19, 2023, in Clark v. A&L Home Care and Training Center, LLC., the United States Court of Appeals for the Sixth Circuit rejected the familiar two-step certification procedure in collective actions under the Fair Labor Standards Act (FLSA), instead requiring lead plaintiffs to demonstrate a “strong likelihood” that other employees they seek to represent are “similarly situated” to the original plaintiffs. In so ruling, the Sixth Circuit became just the second circuit court to expressly reject the familiar two-step certification procedure in FLSA collective actions.

Quick Hits

• The Sixth Circuit has adopted a new standard for certifying Fair Labor Standards Act collective actions.
• In Clark v. A&L Home Care and Training Center, LLC, the Sixth Circuit rejected the familiar two-step approach for certifying FLSA collective actions, requiring instead that lead plaintiffs show a “strong likelihood” that other employees are similarly situated to the plaintiffs before facilitating notice of the lawsuit to other employees.
• The Sixth Circuit became the second circuit court to expressly reject the more lenient two-step certification procedure in FLSA collective actions.

In applying the two-step procedure, a district court first employs a very lenient standard to decide if there are other workers who are similarly situated to the lead plaintiffs. As the Sixth Circuit observed, that determination typically depends on whether the plaintiffs have offered some evidence that other employees “performed the same tasks and were subject to the same policies—as to both timekeeping and compensation—as the original plaintiffs.” Then the court oversees how notices are sent to the other workers, so they become aware of the lawsuit and can choose to opt in. Thereafter, and after merits discovery is complete, the court will take a closer look at whether the putative class members are, in fact, similarly situated and then either grant “final certification” or decertify.

The Sixth Circuit’s decision in Clark, however, rejected that approach and instead required district courts to apply a new standard where plaintiffs have to demonstrate a “strong likelihood” that other employees are similarly situated before certifying FLSA collectives. The “strong likelihood” standard is analogous to a district court’s decision regarding whether to grant a preliminary injunction. On that point, the Sixth Circuit deviated in approach from the Fifth Circuit, which also has rejected the two-step standard, but has articulated a different burden for plaintiffs seeking to represent allegedly similarly situated employees under the FLSA.

The Sixth Circuit’s decision in Clark also rejected the holdings of the Fifth and Seventh Circuits that district courts should determine, by a preponderance of the evidence, whether employees agreed to arbitrate their claims before sending notice. Rather, arbitration agreements should be considered as a defense and a factor in the determination as to whether to authorize the issuance of notice.

The Sixth Circuit’s decision will significantly impact FLSA collective action litigation in Ohio, Michigan, Kentucky, and Tennessee. Furthermore, the issue is ripe for review by the Supreme Court of the United States, given the importance of the issue and a broadening circuit split.

The Sixth Circuit’s Decision in Clark v. A&L Home Care

The issue before the Sixth Circuit was the showing of similarity necessary for a district court to facilitate notice of a lawsuit under the FLSA to employees who were not originally parties to the lawsuit. The Sixth Circuit began its analysis by noting that the issue was purely a question of law under the FLSA, and that district courts nationwide have had little guidance as to what that showing should be. The plaintiffs in Clark argued that district courts should apply the familiar and lenient two-step standard for “conditional certification” for purposes of sending notice of an FLSA suit to other employees. The defendant in Clark argued that district courts should adopt the standard applied by the Fifth Circuit, under which district courts must make a final determination of substantial similarity before facilitating notice of a suit to other employees.

The Sixth Circuit rejected both positions. According to the Sixth Circuit, the two-step procedure is untenable, in part, because the notice determination should not be characterized as “certification”—a term of art borrowed from class actions under Federal Rule of Civil Procedure 23. Class actions are fundamentally different from collective actions under the FLSA because plaintiffs must affirmatively opt in to FLSA collective actions and are given the option of opting out of class actions under Rule 23. As such, the Sixth Circuit observed, district courts mistakenly have assumed that “conditional certification” actually changes the character of the case and have operated under the assumption that, after conditional certification, the case then “proceeds” as a “collective” or even a “representative” action. That premise is no longer accurate under Clark because such a procedure is not supported by the FLSA.

Likewise, the Sixth Circuit rejected the defendant’s position because a district court cannot, as a practical matter, conclusively make “similarly situated” determinations as to employees who are in no way present in the case. Thus, discovery is necessary on the issue of similarity before a district court can make any decision. That discovery, and the court’s subsequent fact-based adjudication, the Sixth Circuit reasoned, should address not only the lead plaintiffs’ allegations that other employees are similarly situated to them with respect to job duties and workplace policies, but the merits of a defendant’s defenses, including the enforceability of putative arbitration agreements. In so holding, the Sixth Circuit rejected the holdings of the Fifth and Seventh Circuits that district courts should determine, by a preponderance of the evidence, whether employees agreed to arbitrate their claims prior to sending notice. Instead, the Sixth Circuit ruled that evidence of arbitration agreements should be introduced as evidence of whether the employees are “similarly situated” because that is a “defense like any other.”

Accordingly, in Clark, the Sixth Circuit held that a district court’s determination to facilitate notice in an FLSA suit is analogous to the decision regarding whether to grant a preliminary injunction. Both decisions are provisional, in the sense that a district court renders a final decision on the underlying issue (whether employees are “similarly situated” in the FLSA setting or whether a “strong likelihood of success on the merits” exists in the preliminary injunction context) only after the record on the issue has been fully developed. Thus, for a district court to facilitate notice of an FLSA suit to other employees, the lead plaintiffs must show a “strong likelihood” that the other employees they seek to represent are similarly situated to the lead plaintiffs themselves. That standard requires a showing greater than the one necessary to create a genuine issue of fact but less than the one necessary to ultimately prevail on the question of similarity. The Sixth Circuit emphasized that the “strong-likelihood” standard is familiar to the district courts and confines the issuance of court-approved notice, to the extent practicable, to employees who are in fact similarly situated. Importantly, while noting that the FLSA’s statute of limitations is typically two years, the Sixth Circuit held that district courts should “expedite their decision to the extent practicable,” including by promptly initiating discovery relevant to the motion.

Notably, in articulating the “strong likelihood” standard, the Sixth Circuit expressly rejected the Fifth Circuit’s approach in Swales, which held that court-approved notice may be sent only to employees “who are actually similar to the named plaintiffs”—a standard the Sixth Circuit interpreted as akin to “preponderance of the evidence.”

Importantly, Clark does not address decertification, so open questions remain as to whether a defendant can move to decertify an FLSA collective on any basis other than Rule 56 prior to trial.

Concurrence and Dissent in Clark

Circuit Judge John Bush fully joined the majority’s opinion but wrote separately to address the issue of equitable tolling. The statute of limitations for claims under the FLSA is typically two years and, under the new standard in Clark, potential plaintiffs are unlikely to receive notice of a lawsuit until later in the litigation, which could preclude some or all of their claims. According to Judge Bush, equitable tolling should apply automatically and claims of collective actions members should relate back to the date the original complaint was filed, similar to class actions under Rule 23.

Circuit Judge Helene White dissented in part but concurred with the majority’s determination that before deciding the merits of any FLSA claims district courts should consider arbitration agreements and statute-of-limitations defenses only in determining whether plaintiffs are similarly situated. However, Judge White noted that although the new standard in Clark was reasonable, the prior two-step approach better served the remedial purposes of the FLSA.

Key Takeaways

Clark will significantly impact FLSA collective action litigation in the Sixth Circuit. The decision opens the door for accelerated discovery on both the merits of plaintiffs’ claims and defendants’ defenses before district courts determine whether lead plaintiffs have met the “strong likelihood” standard. That determination, in turn, will inform whether courts will authorize the issuance of notices to other current and former employees and permit them the opportunity to opt in to lawsuits.

Moreover, Clark broadens the split among the federal courts of appeals, rendering it increasingly likely that the Supreme Court will weigh in on the question. The Sixth Circuit’s “strong likelihood” standard deviates not only from the lenient two-step standard that most other circuits apply, but from the Fifth Circuit’s requirement that lead plaintiffs demonstrate that other employees are “actually similar” to them before notice can issue.

Ogletree Deakins’ Class Action Practice Group will continue to monitor developments with respect to collective actions under the FLSA and will post updates on the Class Action and Wage and Hour blogs as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs. For additional updates, please follow us on Twitter and LinkedIn.