The Sixth Circuit Joins the Fifth Circuit in Rejecting the Traditional Two-Step Conditional Certification Process in FLSA Collective Actions

In Clark v. A&L Homecare and Training Center, LLC, Nos. 22-3101/3102, a split three-judge panel for the U.S. Court of Appeals for the Sixth Circuit held that notice to potential plaintiffs should only be issued if lead plaintiffs show a “strong likelihood” that such absent employees are “‘similarly situated’ to the plaintiffs themselves.” In so holding, the Sixth Circuit joined the Fifth Circuit in rejecting the long-standing “lenient” two-step collective action certification process.  The Sixth Circuit declined, however, to apply the Fifth Circuit’s approach and adopted a “strong likelihood” standard.  The Clark decision, issued on May 19, 2023, will significantly impact FLSA collective action litigation in favor of employers in federal district courts in Ohio, Michigan, Kentucky, and Tennessee.  The widening Circuit split ripens this issue for review by the Supreme Court of the United States.

The Traditional Two-Step Conditional Certification Process: The Lusardi Standard

Over three decades ago, the district court in Lusardi v. Xerox Corporation, 118 F.R.D. 351 (D.N.J. 1987), created a two-step procedure (the “Lusardi Standard”) to determine when a district court can certify a collective action in order to distribute notice to putative class members.  Under the first step of the Lusardi Standard, courts “may facilitate notice of an FLSA suit” to collective members through conditional certification, based upon a “modest factual showing” that named plaintiffs are similarly situated to the individuals they seek to represent in a collective action.  This is a low bar for plaintiffs to clear.

Following the Lusardi decision, districts courts nationwide have applied the Lusardi Standard to FLSA collective actions, resulting in courts leniently granting conditional certification in the vast majority of such actions without analyzing the merits of whether a lawsuit can be properly litigated on a collective basis.

After notices are issued, parties engage in discovery, after which defendant employers may seek “decertification” of the conditionally certified class (the second step).  This process to demonstrate that the putative class is not “similarly situated” under the Lusardi Standard, however, is costly and burdensome.

The Fifth Circuit’s Rejection of the Lusardi Standard: The Swales Standard

In January 2021, the Fifth Circuit became the first federal appeals court in over three decades to reject the Lusardi standard, in Swales v. KLLM Transport Services LLC, 985 F.3d 430 (5th Cir. 2021).  The unanimous panel held that a district court must “rigorously scrutinize the realm of ‘similarly situated’ workers, and must do so from the outset of the case, not after a lenient, step-one ‘conditional certification,’” unlike the Lusardi Standard, which reserves the analysis of the merits of whether a case can be properly litigated on a collective basis until after parties have engaged in discovery.

The Circuit Split Widens: The Sixth Circuit Rejects Both the Lusardi Standard and the Fifth Circuit’s Swales Standard

The Sixth Circuit not only rejected the Lusardi Standard but also declined to apply the Fifth Circuit’s Swales Standard.  Like its sister Circuit, the Sixth Circuit created its own standard, requiring plaintiffs to show a “strong likelihood” that other employees are similarly situated to the plaintiffs before the court issues notice.  The court analogized this standard to a preliminary injunction standard, which requires plaintiffs to demonstrate to a certain degree of probability that they will prevail on the underlying issue when the court renders its final decision.  The Sixth Circuit, however, clarified that its decision does not mean that district courts should require only a modest showing or apply a lenient similarly situated standard.  The court explained that its “standard requires a showing greater than the one necessary to create a genuine issue of fact, but less than the one necessary to show a preponderance. . . . it would confine the issuance of court-approved notice, to the extent practicable, to employees who are in fact similarly situated; and it would strike the same balance that courts have long struck in analogous circumstances.”

According to the Sixth Circuit, the notice determination should not be characterized as certification, “conditional or otherwise,” and that sending notice does not require a conclusive finding that potential plaintiffs are similarly situated.  Because FLSA collective actions require other employees to opt in, those who do so become parties with the same status as the named plaintiffs.  For that reason, conclusively determining whether other employees are similarly situated to the named plaintiffs before those other employees join the action is impracticable and unnecessary.

Implications for Employers

Now that the Sixth Circuit has joined the Fifth Circuit in rejecting the longstanding Lusardi Standard, the issue is ripe for review and clarification by the Supreme Court.  Employers litigating within the Sixth Circuit — Michigan, Ohio, Kentucky, and Tennessee federal district courts — now may argue the merits of whether a lawsuit can be properly litigated on a collective basis at the outset, increasing the likelihood of defeating certification and nullifying the issuance of notices entirely.