By Jeffrey T. Johnson

Employers can thank the Seventh Circuit Court of Appeals for raising the standard that employees must meet when seeking final certification of a Fair Labor Standards Act (FLSA) collective action or state wage and hour law class action.   In an opinion written by Judge Richard Posner, the Court recently refused to certify a proposed class of 2,341 employees, finding that a trial would not be manageable due, in large part, to the differences in damages among the class members.  Espenscheid v. DirectSat USA, LLC, No. 12-1943 (7th Cir. Feb. 4, 2013).  The ruling will likely make it more difficult for plaintiffs to get a wage and hour class certified at the critical final certification stage.

Court Finds No Reason for Different Certification Standards

FLSA collective actions are similar in many respects to class actions brought under Rule 23 of the Federal Rules of Civil Procedure—both permit an individual (or small group) to file suit on behalf of all similarly situated individuals.  One key difference, however, is that Rule 23 sets forth relatively rigorous standards for certifying a class while FLSA collective actions are reviewed under a more lenient “similarly situated” analysis, typically pursuant to a two-step approach.  The Seventh Circuit’s recent decision turns that distinction on its head.

Noting that Rule 23’s procedural provisions are intended to promote efficiency, Judge Posner stated “there isn’t a good reason to have different standards for the certification of the two different types of action.”  Moreover, he wrote that “[s]implification is desirable in law,” especially given the fact that plaintiffs often join a collective action and a class action in one lawsuit.  This collapse of differing class certification standards gives employers beneficial language to argue against collective action certification on the basis of Rule 23 commonality, numerosity and typicality requirements.

Decertification Proper Where Trial would be Unmanageable

The Court went on to reject certification of the proposed DirectSat “class,” finding that the plaintiffs had not presented a feasible trial plan.  The proposed “class” consisted of 2,341 technicians who installed and repaired home satellite dishes.  They worked directly in customers’ homes and were paid on a per job basis, not a fixed hourly wage.  They alleged that DirectSat forbid them from recording time spent on certain tasks, such as filling out paperwork and picking up tools, and that they often worked more than 40 hours a week without being paid overtime. 

Plaintiffs’ arguments to achieve class certification failed.  Judge Posner held that lack of uniformity on the amount of damages suffered by each technician doomed certification.  Plaintiffs’ proposal to use 42 “representative” members of the class to determine damages on behalf of the entire class was rejected.  A further complication was the piece-rate pay basis where those technicians who completed jobs quickly made a higher “hourly” rate than those who worked slower.  In the end, plaintiffs’ counsel admitted that it would “be difficult for Plaintiffs to provide an objective framework for identifying each class member within the current class definitions without making individualized findings of liability.”  The failure to provide a feasible litigation plan to address these complexities doomed the plaintiffs’ effort to obtain final class certification.

Good Development for Employers

This is a significant decision for employers facing wage and hour collective actions.  The standards for final class certification are not very well-developed in most jurisdictions, and Judge Posner’s well-reasoned opinion will carry substantial weight well beyond the Seventh Circuit.  Further, if the more stringent Rule 23 standard is to be applied upon final certification, it is only logical that courts will also begin applying it at the earlier conditional certification stage, thereby making class certification more difficult for plaintiffs.  Judge Posner and the Seventh Circuit have provided employers with an important tool to defend against these types of class and collective claims.