As our overtime lawyers have blogged before, wage theft is an endemic problem in the United States. While some forms of wage theft might be obvious, most of the time it is insidious, or worse, employers lie to employees about their entitlement to the minimum wage and overtime. In many cases, employees just assume their employer is paying them correctly, or they might fear that doing something about their pay might cost them their job.
For example, take “regular rate” violations. While most people assume that the overtime rate is just one and one-half times the hourly rate, this is not what the law actually says. Under both the Fair Labor Standards Act (“FLSA”) and the Ohio Minimum Fair Wage Standards Act (“OMFWSA”), employers must instead base the overtime rate on the “regular rate,” or your “true” hourly rate once accounting for all pay during a given time period, such as non-discretionary bonuses and shift differentials. In case like these, we have found that most employees just assume they are being paid all overtime properly because they get paid “time and a half” based on their hourly rate. In fact, in nearly every case we have brought on behalf of employees for “regular rate” violations, the employee came to us about some other issue, and was completely unaware that they were being cheated. It was only after an experienced wage and hour attorney reviewed their pay records that the violation was discovered.
Fortunately, employees have a tool to help make their fellow workers aware of wage theft and to give them an opportunity to recover the wages they are owed called a “collective action.” With the collective action, a single employee can provide notice to thousands of other current and former employees that they may have a claim under the FLSA or the OMFWSA and further, invite these employees to join his or her case. For decades, the standard for gaining court approval to issue notice to other workers has been fairly low, and minimal evidence was needed. This was balanced by the “two-step” process, which allowed employers to argue that some or all of the workers who joined the case were not in fact “similarly-situated” later in the case, after both sides completed discovery.
Yesterday, in Clark v. A&L Homecare and Training Center, LLC, the Sixth Circuit Court of Appeals upended this well-established process in a way that will make it much more difficult for workers to issue notice to others by eliminating the “lenient” standard that used to apply for issuing notice and replacing it with a “preponderance of the evidence” standard. As justification for this change, the Court claimed there was a lack of legal justification (while ignoring thirty years of precedent) and openly worried that the lenient standard created just too much settlement pressure on wage thieves:
the decision to send notice of an FLSA suit to other employees is often a dispositive one, in the sense of forcing a defendant to settle—because the issuance of notice can easily expand the plaintiffs’ ranks a hundredfold.
In other words, the Sixth Circuit considered the plight of unpaid hourly employees deprived of the wages they are owed, and said “but won’t someone please think of the businesses?
Under the new “preponderance of the evidence” standard, plaintiffs will be required, in most case, to obtain a significant amount of discovery regarding the potential group of employees who might otherwise be part of the collective. And, if the Court determines that a group of employees is in fact similarly situated, those who opt into the litigation will be considered parties to the case going forward, and no longer subject to “decertification,” i.e, the second phase of the former “two-part process.” For this reason, the Court explained that it was not appropriate to address a motion for approval to distribute notice as “certification, conditional or otherwise”:
The issue is not one of semantics. Instead, courts have mistakenly assumed that “conditional certification” actually changes the character of the case. For example, any number of courts have asserted that, after conditional certification, the case then “proceeds” as a “collective” or even a “representative” action. See, e.g., Brittmon v. Upreach, LLC, 285 F.Supp.3d 1033, 1042 (S.D. Ohio 2018); Mickles v. Country Club Inc., 887 F.3d 1270, 1276 (11th Cir. 2018). Those assertions are mistaken: “other employees” become parties to an FLSA suit (as opposed to mere recipients of notice) only after they opt in and the district court determines—not conditionally, but conclusively—that each of them is in fact “similarly situated” to the original plaintiffs. 29 U.S.C. § 216(b); Canaday, 9 F.4th at 403. True, in Hoffmann-La Roche, the Supreme Court indicated that a district court may permit discovery for purposes of those “similarly situated” determinations. 493 U.S. at 170, 110 S.Ct. 482. But—whether called “conditional certification” or otherwise—the notice determination has zero effect on the character of the underlying suit.
At the same time, the Court recognized that the relatively short statute of limitations for FLSA claims – two years (or three when a violation is willful) will mean that the statute of limitations could expire for many workers, whom the trial court may not determine are “similarly situated” until it is too late. The majority opinion held that for this reason, Courts should expedite discovery in these cases, as well as their rulings on motions to issue notice. The separate concurring opinions of Judges John Bush and Helene White go further, expressly endorsing the use of equitable tolling (freezing the statute of limitations) for similarly situated employee for the time period the issue of whether they are in fact similarly situated is being litigated.
So, what does all of this mean? While at first blush Clark seems like an employer-friendly decision, the practical realities of how it changes collective action litigation may actually be a net-positive for employees:
- The more work a plaintiff’s attorney has to do to “prevail” in a wage and hour case, the more attorney’s fees and cost an employer will ultimately be on the hook for. Under the old standard, a plaintiff’s attorney would only have to bill for their pre-litigation investigation, drafting the complaint, and drafting the “conditional certification” motion. If a group of employees with relatively small damages was then certified, an employer could resolve the case with less fee exposure. Under the new standard, a plaintiff’s attorney has to do much more work to reach the standard now required to issue notice, even if the underlying claim is still low value. This will force employers to give considerable thought as to whether the fight – and associated expense – is worth it, or if they should just stipulate to issuing notice.
- Clark explicitly authorizes early discovery, which could also include depositions of persons the Plaintiff alleges to be similarly situated. For example, if an employer argues that a potential class member signed an arbitration agreement, the employee might deny that they signed it, or raise some other argument as to why it is not enforceable. The only way to find out is to depose them, which means that they will learn about the lawsuit. There is no reason why that person couldn’t then reach out to the plaintiff’s attorney to join the case. At the same time, if a plaintiff wants to depose 200 potential class members, this could also create considerable settlement pressure because, as discussed above, fees.
- Clark also seems to expressly endorse equitable tolling, which means that little to no harm will result to most employees, even if they do not receive notice until late in the case. In the meanwhile, the decision appears to create a permanent group of Plaintiffs should the court find they are similarly situated.
By giving Plaintiffs’ attorneys a lot of work to do which the law requires an employer to pay them for (if they win); creating opportunities for early discovery which may include potential class member depositions; building equitable tolling into the notice process; and creating a mechanism for semi-permanent classes post notice, wage and hour attorneys who fight for employees actually don’t have a lot to complain about. This is also great for employees, who may find that their employers rationally choose to avoid much of these risks by simply agreeing to issue notice up-front.
Best Wage Attorney Blogs On Point:
- There’s $4 Billion In Overtime Wage Theft Every Year – How Much Of That Is Yours?
- Top Wage Lawyer Reply: Can I Bring A Class Action Overtime Case?
- Don’t Count On Judges To Do What You Expect.
What should I do if I think I am not being paid correctly?
As this blog makes clear, wage and hour laws are complex, so much so that many violations are invisible to people who are not specifically trained to recognize them. There are a lot of factors that go into determining if you have been wrongly denied overtime pay or even underpaid for your overtime pay. If you believe that your employer is not paying you all of your wages or all of your lawfully earned overtime compensation at a rate of one and half times your regular rate as required under the FLSA or the OMFWSA or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The experienced wage and hour lawyers at Spitz will provide you with the top options for your overtime pay dispute situation. (Read: What is the Spitz No Fee Guarantee?). And remember: there is no equitable tolling for employees who wait to take action.
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