Labor & Employment Law

FLSA Class Actions: The Bane Of The Employer's Existence

By Mark E. Tabakman, Esq.

It is always possible for one person to sue their employer for wages or alleged back due overtime. What is far more pernicious and what is, regretfully, happening far too often over the last several years, is a so-called “class action.” In a class action, a group of employees, ranging anywhere from a handful to several thousand, sue their employer, sometimes in a class that encompasses the entire nation. In that scenario, the stakes are geometrically multiplied.

Importantly, FLSA collective actions differ in one dramatic way from class actions filed under other federal or state laws. In FLSA cases, the employee(s) must opt in, meaning that they must affirmatively sign a document evidencing that they wish to be a part of the lawsuit. In other class actions, the employee is presumed to be a part of the class and if he wishes to refrain from the litigation, he must opt out. The difference between the FLSA and other laws can often work to the employer’s advantage, especially if the employer believes that it has arguably broken the law, because of the statutory framework. There is a two-year statute of limitations (with limited exceptions) for FLSA overtime claims; an action for opt-in plaintiffs only commences when they sign a written consent to become a party and file it with the court.

The most crucial element is the necessity that the employees be deemed “similarly situated” for purposes of a collective action. Employees are “similarly situated” for purposes of FLSA collective wage suits if they are subject to a common policy, plan or design, that stretches across company departments or locations. If there is no commonality, there is no collectiveness and the action will be dismissed. On the other hand, “similarly situated” does not mean “identically situated.”

Part of the process by which a court will certify a class occurs in the so-called “notice stage.” In this preliminary stage, the trial court will make an initial decision as to whether notice of the action should be given to other potential class members and will make that decision based on any existing commonality (or lack thereof). Certification at this point is seen as a “conditional certification” and is based on a fairly lenient standard. This certification also begins the process of court-authorized notice.

The crucial, proactive strategy is to quickly and at an early stage of the litigation assess: 1) whether a common policy or practice exists which would likely militate a finding that a collective action is appropriate; and, 2) determine if the policy/practice at issue is illegal or questionable. If so, the prudent course is to change the offending practice or policy and then allow the course of the litigation to continue. The change in improper policy stops the clock from running, as it terminates any valid claims from that point forward. Remember---an individual’s own lawsuit does not start until he signs the consent and opts in. If the issue is an alleged misclassification of employees as exempt, a careful and objective internal audit of the positions at issue should ensue because these classification decisions are fact sensitive and are coupled with an overlay of highly nuanced federal regulations. In addition, classification decisions carry numerous implications besides whether the employees should receive overtime.

Full post as published by Wage & Hour - Development & Highlights on July 17, 2007 (boomark / email).