How to Avoid Disney’s Not-So-Fairy Tale $3.8 Million Payment of Employee Back Wages

On Friday, March 17, 2017, the U.S. Department of Labor (“DOL”) and two subsidiaries of The Walt Disney Co. (“Disney”), the Disney Vacation Club Management Corp., and the Walt Disney Parks and Resorts U.S. Inc., reached an agreement to resolve claims under the Fair Labor Standards Act (“FLSA”), requiring the payment of back wages of over $3.8 million to more than 16,000 employees of the two Florida-based Disney companies.

According to the DOL, Disney deducted a uniform (or “costume”) expense from employee pay, which lead some employees’ hourly rate to fall below the federal minimum wage rate of $7.25 per hour. The subsidiaries also did not compensate the employees for performing pre- and post-shift duties while additionally failing to maintain required time and payroll records.

As part of the agreement, Disney agreed to start training all Florida-based managers, supervisors, and non-exempt employees on what constitutes compensable worktime and emphasizing the need to record all records pertaining to time accurately.

There are certain steps that employers can do to avoid the significant damages Disney incurred including:

  • Maintain accurate payroll, time, and schedule related records. This is particularly important to our hospitality and restaurant clients where record keeping can be especially difficult.  Also, remember that under the FLSA, the records must be  maintained for a minimum of three years for payroll records and six years under New Jersey and New York law.
  • Deductions are an easy target for the plaintiffs’ bar. Employers must make sure that any deductions are legal under state law and that the deductions if permissible do not bring the affected employee below the state or federal minimum wage;
  • Perform a wage and hour self-audit every two years to avoid misclassification issues and to ensure your recordkeeping and pay practices are consistent with the law;
  • To avoid donning and duffing claims (claims involving changing into and out of uniforms, costumes, and protective equipment for example), employers must take care to distinguish between non-compensable time when changing into and out of the uniform is merely for the employees’ convenience as opposed to compensable time when the job cannot be accomplished without wearing the designated uniform or costume or safety equipment and it is impractical to arrive at work wearing same.

If you have any questions or would like to discuss best practices in complying with federal wage regulations, please contact John R. Vreeland, Esq., Partner & Chair of the  Wage and Hour Compliance Practice Group at jvreeland@nullgenovaburns.com or call 973-533-0777 or Harris S. Freier, Esq., a Partner in the Employment Law and Appellate practice groups, at hfreier@nullgenovaburns.com, or call 973-533-0777.  Mr. Vreeland and Mr. Freier routinely work together in defending wage and hour class actions.  Please visit our free Labor & Employment Blog at www.labor-law-blog.com to stay up-to-date on the latest news and legal developments affecting your workforce.

Supreme Court Punts on Whether Service Advisors Are Exempt from FLSA Overtime Premium Pay

The United States Supreme Court recently issued its long awaited decision in Encino Motorcars, LLC v. Navarro. At issue in the case was whether “service advisors” employed by car dealerships are exempt from the Fair Labor Standards Act’s overtime premium pay requirement, as well as the validity of a related 2011 United States Department of Labor regulation. Unfortunately, the Court did not decide whether service advisors are exempt. Instead, the Court remanded the case to the Ninth Circuit Court of Appeals with the instruction that the Ninth Circuit decide the issue “without placing controlling weight” on the DOL’s 2011 regulation.

The issues in Encino Motorcars were rooted in a provision of the FLSA that expressly provides that “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” is exempt from the FLSA’s overtime premium pay requirement. The FLSA is silent as to whether service advisors qualify for this exemption. In 1970, the DOL issued an interpretive regulation in which it concluded that service advisors do not fall within the exemption. Several courts rejected the DOL’s interpretation, and in a 1978 Opinion Letter the DOL changed course and took the position that service advisors are exempt. The DOL maintained this position until 2011, when it issued a regulation that, without explanation, excluded service advisors from the exemption.

The Supreme Court’s opinion in Encino Motorcars arose from a Ninth Circuit decision in which the Ninth Circuit relied on the DOL’s 2011 regulation to hold that a group of service advisors were eligible for overtime premium pay. The service advisors at issue would meet with a customer, evaluate the customer’s car, suggest repairs and dealership service plans, and then send the car to a mechanic who repaired and/or serviced the car. In remanding the case, the Supreme Court found that the DOL failed to follow basic procedural requirements of administrative rulemaking, which require administrative agencies to explain their rules. The Supreme Court found this especially important here, where the DOL issued a rule contrary to its prior position. The Supreme Court was critical of the DOL for its failure to explain adequately its rationale for changing its position, and its failure to consider the public’s reliance on the DOL’s longstanding policy. Car dealerships will have to wait for the Ninth Circuit’s subsequent decision, and possibly another Supreme Court decision, before the issue of whether service advisors are exempt from the FLSA’s overtime premium pay requirement is resolved.

For more information regarding the potential impact of the Supreme Court’s decision, or regarding any other wage and hour issues, please contact John R. Vreeland, Esq. Director of the Firm’s Wage & Hour Compliance Practice Group, at 973-535-7118 or jvreeland@nullgenovaburns.com, or Joseph V. Manney, Esq. at 973-646-3297 or jmanney@nullgenovaburns.com.

Major Changes to Federal Overtime Regulations Take Effect December 1. Are You Prepared?

This week, President Obama and Secretary of Labor Thomas Perez announced the publication of a final rule to take effect December 1 that will overhaul the Fair Labor Standard Act’s overtime regulations. The U.S. Department of Labor (USDOL) estimates that these changes will add more than four million employees to the overtime rolls.

Right now, in general, an employee is exempt from overtime pay if the employee satisfies three tests:

  • Duties Test: The employee’s primary job duties qualify as executive, administrative, or professional in nature, as these terms are defined in the regulations.
  • Salary Basis Test: The employee is paid on a salary basis, meaning the employee receives a predetermined and fixed salary that is not reduced because of variations in the quality or quantity of the work performed (i.e., no docking).
  • Salary Level Test: The employee’s weekly salary meets the minimum amount specified in the regulations.

The most significant change in the USDOL’s new rule is to the Salary Level Test. Today, the minimum salary needed to qualify for exempt status is $455 per week, or $23,600 annually. On December 1, 2016, this minimum will increase to $913 per week! This means in order to be exempt, an employee must be paid an annual salary of at least $47,476.

By more than doubling the minimum salary amount, many salaried employees who work long hours and currently qualify for an overtime exemption will on December 1 become eligible for overtime pay unless their salaries are increased. An employee whose weekly salary is below $913 will become overtime-eligible and you will have to track the employee’s hours of work through a verifiable timekeeping method and pay time-and-a-half for each hour worked over 40 in a workweek.

Employers need to start preparing now. First, you must identify your exempt employees whose salaries are below the new salary threshold. Then perform a business analysis to determine whether it is more cost effective to increase employee salaries to the minimum threshold, or treat these employees as overtime-eligible. We also recommend that you take this opportunity to evaluate whether your exempt employees are satisfying the other two tests. Many times we find that an employee’s exempt status is based on a job description that no longer accurately reflects the employee’s actual job duties. We recommend that employers self-audit their job classifications at least every two years to ensure employees classified as exempt currently satisfy a duties test and that pay practices for exempt employees meet the Salary Basis Test. Periodic self-audits are especially important now because the USDOL’s new rule establishes a mechanism for automatically updating the salary level every three years.

Employers cannot afford to be out of compliance with the FLSA. The Departments of Labor at both the federal and state levels have already signaled that they intend to aggressively enforce wage and hour laws. In addition, plaintiffs’ lawyers have become focused on wage and hour claims. Wage and hour litigation is by far the fastest growing type of employment litigation. Last year, more than 9,000 FLSA lawsuits were filed in the United States; many of them were filed as “collective actions” – the FLSA’s version of a class action. That is a 450% increase since 2000. This trend will almost certainly continue as plaintiffs’ lawyers hope to catch employers flat-footed and out of compliance with the new overtime regulations.

Wage and hour litigation can be expensive for employers. The FLSA provides for 100% liquidated damages – or double damages. It also shifts the plaintiff’s legal costs to the employer, meaning if the plaintiff proves a single violation of the law, the employer pays the plaintiff’s attorneys’ fees. This typically makes it difficult to resolve these types of suits early as the FLSA creates an incentive for a plaintiff’s lawyer to work the case and then recover attorneys’ fees when the lawsuit finally ends.

Again, the time to prepare is now, not when you receive the lawyer’s demand letter or the Department of Labor’s enforcement notice. A thorough self-audit, especially with the assistance of counsel, is an employer’s best protection against costly wage and hour enforcement actions and lawsuits.

For more information regarding these recent developments, please contact John R. Vreeland, Esq. Director of the firm’s Wage & Hour Compliance Practice Group, at jvreeland@nullgenovaburns.com or 973-533-0777.

Second Circuit Rules Court Approval or USDOL Supervision of Settlements Required in FLSA Suits

On August 7, 2015, the Second Circuit ruled that suits brought under the Fair Labor Standards Act (“FLSA”) cannot be resolved privately and require approval of a federal court or supervision by the U.S. Department of Labor (“DOL”).

In Cheeks v. Freeport Pancakes House, Inc., 2d Cir., No. 14-299, 8/7/15, the plaintiff sued his former employer seeking to recover unpaid overtime wages, liquidated damages and attorneys’ fees under the FLSA and New York labor laws.  After engaging in some discovery, the parties reached a private settlement to dismiss the employee’s claims with prejudice and, pursuant to Rule 41 of the Federal Rules of Civil Procedure (“Rule 41”), filed a joint stipulation and order to dismiss the lawsuit.  Under Rule 41, parties may voluntarily agree to dismiss an action without court order unless there is a federal statute prohibiting such agreement.  The District Court denied the parties’ application to dismiss the lawsuit.

As part of its ruling, the District Court directed the parties to file a copy of the settlement agreement on the public docket and to “show cause why the proposed settlement reflects a reasonable compromise of disputed issues rather than a mere waiver of statutory rights brought by an employer’s overreaching.”  The parties jointly sought certification of an appeal to the Second Circuit instead, seeking a ruling on whether the parties could stipulate to dismissal of the action without court approval.

In affirming the lower court’s decision to deny the stipulation of settlement, the Second Circuit decided, given the unique policy considerations underlying the FLSA, that the FLSA fell within Rule 41’s “applicable federal statute” exception, thus making district court or DOL approval a requirement to dismiss an FLSA cause of action with prejudice via private settlement.  The Court reasoned that “the FLSA is a uniquely protective statute … with a strong remedial purpose: to prevent abuses by unscrupulous employers and remedy the disparate bargaining power between employers and employees.”  Accordingly, the Second Circuit held that judicial or DOL approval will protect susceptible employees from feeling coerced into accepting unreasonable or discounted settlement offers quickly.

The Cheeks ruling makes it clear that, at least in the Second Circuit, a privately negotiated settlement agreement requires court or DOL approval in order to extinguish FLSA claims in a lawsuit. This means the settlement agreement must be filed in open court.  Failure to do so in New York, Connecticut and Vermont puts the employer at risk that it will be sued again by the same claimants.

For more information regarding this decision and best practices, please contact John Vreeland, Esq., Director of the Wage & Hour Compliance Practice Group, at jvreeland@nullgenovaburns.com or 973-533-0777.

 

 

Second Circuit Outlines The Way for Employers to Hire Unpaid Interns

On July 2, 2015, in a matter of first impression, the Second Circuit issued a ruling in Glatt v. Fox Searchlight Pictures, Inc., Nos. 13-4478, 13-4481 (2d Cir. July 2, 2015), and provided a new test for whether a worker can be classified as an unpaid intern under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). and thus entitled to compensation, including minimum wage and overtime.  The ruling by the Second Circuit rejected both the Department of Labor (“DOL”)’s six-factor test to determine whether or not an intern should be classified as an employee, and the U.S. District Court for the Southern District of New York’s previous reliance on the DOL’s test.

In 2013, the U.S. District Court for the Southern District of New York followed the DOL’s 2010 guidance for whether unpaid interns working in the for-profit private sector should be classified as employees.  The DOL test lays out six factors, including, for example, whether the internship experience is for the benefit of the intern, whether the intern displaces regular employees, and whether the employer derives an immediate advantage from the intern’s work. The DOL test requires that each and every factor must apply in order for a position to be an unpaid internship.  The District Court held that since not all of the DOL’s six factors applied, the plaintiffs in Glatt should have been classified as employees under the FLSA and the NYLL.

The Second Circuit, however, held that a “primary beneficiary test” should be utilized when determining whether or not employers need to pay their interns.  In other words, it must be determined whether the employer, rather than the intern, is the primary beneficiary of the relationship.  The Second Circuit found that the DOL six factor test was “too rigid” and unpersuasive, and was not entitled to deference.

To aid in determining whether the worker or the employer is the primary beneficiary, the Second Circuit articulated a “non-exhaustive” list of seven factors that should be considered and balanced when deciding whether the employer or intern is the primary beneficiary of the relationship:

  • The extent to which the intern and the employer clearly understand that there is no expectation of compensation;
  • The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutes;
  • The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit;
  • The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;
  • The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning;
  • The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern; and
  • The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship

The Second Circuit made clear that no one factor is dispositive and that every factor need not point in the same direction to conclude that the intern is not an employee. Thus, Courts are free to look to other factors, and the failure to satisfy any one factor is not dispositive.  While the Second Circuit’s list of factors only adopted three of the DOL’s factors, it retained the DOL’s requirement that the position provide an educational value, suggesting that it is crucial to include an educational aspect in an unpaid internship.  The Second Circuit opined that this new test takes into account the “relationship between the internship and the intern’s formal education…by focusing on the educational aspects of the internship our approach better reflects the role of internships in today’s economy.”

The Glatt decision signals positive news for employers in New York, Connecticut and Vermont when determining whether or not they need to pay interns.  Private sector for-profit companies with internship programs should evaluate their programs to ensure that they are in compliance with all state and federal laws.  As the Second Circuit explained, a bona fide internship must “integrate classroom learning with practical skill development in a real-world setting.” It will be interesting to see whether or not other Circuit Courts find this ruling persuasive.

For more information regarding this decision and to learn how your business can implement best practices when implementing internship programs, please contact John C. Petrella, Director of the firm’s Employment Litigation Practice Group at jpeteralla@nullgenovaburns.com or Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com or 973-533-0777.

Lactation and Breast-Feeding Are “Pregnancy Related Conditions” Protected Under Title VII

In EEOC v. Houston Funding II, Ltd., the Fifth Circuit issued a landmark decision finding that terminating a female employee because she is lactating or expressing milk is unlawful sex discrimination under Title VII of the Civil Rights Act of 1964 (as amended by the Pregnancy Discrimination Act of 1978) (PDA).  The Court also found that lactation is a medical condition related to pregnancy.

Donnica Venters (“Venters”) took a leave of absence to give birth, and subsequently asked her supervisor whether she could use a breast pump at work.  Instead of responding to her inquiry, Venters was told that she was being discharged for job abandonment.  The EEOC filed suit claiming that Houston Funding discriminated against Venters based on her sex, including her pregnancy, childbirth, or related medical conditions (citing the language from the PDA).  The Fifth Circuit agreed that terminating Venters simply because she is lactating or expressing breast milk constitutes sex discrimination, and that an adverse action “motivated by these factors clearly imposes upon women a burden that male employees need not – – indeed, could not – suffer.”

The Fifth Circuit held that lactation is a physiological condition distinct to women who have undergone pregnancy and childbirth, and that men, as a matter of biological fact, cannot lactate. As such, the Court held that lactation is included in the term “pregnancy related conditions” and protected by Title VII and the PDA.  Female employees, who are lactating and/or breast-feeding, may now bring claims under Title VII and the PDA.  Employers should also be aware that the Affordable Care Act already amended the Fair Labor Standards Act (FLSA) to require an employer provide “reasonable time for an employee to express milk for her nursing child for 1 year after the child’s birth each time such employee has need to express the milk.”  Employers must take their obligation to provide time and space to express breast milk seriously and must also take caution when considering taking adverse action against such employees.  The EEOC has made pregnancy- related limitations one of its six national priorities to address in the context of equal employment law, so employers should critically analyze any request or inquiry from employees regarding pregnancy or post-pregnancy accommodations to avoid unnecessary negative liability.

For more information on the implications of the EEOC v. Houston Funding II, Ltd. decision and other sex and pregnancy policies and regulations in the workplace, please contact Dena B. Calo, Esq, dcalo@nullgenovaburns.com, Director of the Human Resources Practice Group and Partner in the Employment Law & Litigation Group, or Jane Khodarkovsky, Esq., Associate in the Employment Law & Litigation Group, at jkhodarkovsky@nullgenovaburns.com.

Supreme Court Holds that Early Offer of Judgment Moots Nascent FLSA Collective Action

On April 16, 2013 the U.S. Supreme Court reversed the Third Circuit’s decision in Genesis HealthCare Corp. v. Symczyk and held that a Fair Labor Standards Act (“FLSA”) collective action became moot once the employer’s made a Rule 68 offer of judgment that fully satisfied the damages claims of the employee who brought the suit.

In Genesis, the employee filed an action in U.S. District Court in Philadelphia for unpaid wages under the FLSA. In her complaint, the employee claimed to represent similarly situated individuals but no one else had joined the lawsuit when the employer made a Rule 68 offer of judgment to the employee. The offer of judgment was for $7500 plus counsel fees and costs as determined by the Court. The employee did not respond to the offer of judgment and on the employer’s motion, the District Court dismissed the entire suit. The District Court found that the employee’s claim was moot since it was satisfied by the employer’s offer and, since no other parties had joined the action at that time, the complaint was dismissed.

On appeal the Third Circuit agreed that the offer of judgment was effective to have the individual employee’s claim dismissed, regardless of whether the offer was accepted, but not the collective action claims. The Third Circuit reasoned that the employer’s attempt to “pick off” the plaintiff before the collective action could be conditionally certified “frustrated” the purpose of the FLSA collective action process and remanded the case to the District Court for possible conditional certification of the collective action.

The U.S. Supreme Court reversed the Third Circuit but avoided resolving the circuit split regarding whether a Rule 68 offer of judgment can moot a plaintiff’s claim. The Court ruled narrowly that both the District Court and the Third Circuit were in agreement that the employee’s claim was moot after she received the employer’s Rule 68 offer. Then disagreeing with the Third Circuit, the Supreme Court held that, in the absence of any other claimant’s opting in, the collective action claims became moot once the employee’s individual claim became moot, because Ms. Symczyk lacked any personal interest in representing others in the action. The Court further emphasized the distinction between a class action brought under Rule 23 of the Federal Rules of Civil Procedure and an FLSA collective action. Specifically, the Court stated that conditional certification under the FLSA is not tantamount to a Rule 23 class certification because “[t]he sole consequence of conditional certification is the sending of court-approved written notice to employees . . . who in turn become parties to a collective action only by filing written consent with the court.”

In light of the Supreme Court’s decision, an employer that is named in a putative collective action in federal district court now has another option for resolving the claims early, by making a Rule 68 offer of judgment to the named plaintiff early on, before other employees and former employees opt in.

For more information about FLSA collective actions, including defending these suits, please contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com, or Rebecca Fink, Esq., rfink@nullgenovaburns.com, in the Firm’s Labor Practice Group.

Nationwide Chain of Gyms Agrees to Pay Substantial Wage and Hour Settlement

24-Hour Fitness, a nationwide chain of fitness centers, recently agreed to pay nearly $17.5 million to settle a class action suit filed on behalf of trainers and managers who claimed that they were misclassified as exempt employees and denied overtime pay.

The 24-Hour Fitness settlement is a reminder to fitness center employers that not all managers and trainers are exempt from the FLSA’s overtime requirements. Determining whether an employee qualifies for an overtime exemption requires a fact-specific analysis of the employee’s duties and how the employee is paid. For instance, in the case of classifying a trainer as exempt, the employer must ensure the employee at issue successfully completed four academic years of pre-professional and professional study in a specialized curriculum accredited by the Commission on Accreditation of Allied Health Education Programs, and is certified by the Board of Certifications of the National Athletic Trainers Association Board of Certification.

For more information on our firm’s wage and hour audit services tailored to fitness centers, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Group, jvreeland@nullgenovaburns.com, or Douglas J. Klein, Esq., dklein@nullgenovaburns.com.

USDOL Continues to Crackdown on Unlawful Pay Practices in Restaurant Industry

Lyons Group, which owns over 25 major restaurants in the Boston-area, has agreed to pay nearly $500,000 in back wages and liquidated damages to resolve alleged FLSA violations for its restaurant workers who the USDOL found were not paid for all hours worked and for overtime. Lyons Group joins a long list of large and small restaurant operators throughout the country who have faced increased scrutiny from the USDOL in last two years.

A central issue in the case was the restaurant group’s contract with a third party vendor who provided most of the workplace labor and was responsible for payroll. The case is an important reminder for restaurant employers about the dangers of relying on a third party to oversee FLSA compliance. In reaching settlement with the Lyons Group, the USDOL reemphasized that utilizing contract labor does not absolve employers of their obligations under the FLSA.  The USDOL Regional Solicitor overseeing the settlement also reminded restaurant employers that, as a general rule, violators who underpay their employees will be on the hook for back wages and an equal amount in liquidated damages.

We recommend restaurant employers perform an audit every two years to ensure compliance with both federal and state wage and hour laws and regulations covering restaurants.

For more information on our firm’s wage and hour audit services tailored to restaurants, please contact John R. Vreeland, Esq., Director of the firm’s Wage & Hour Compliance Practice Group, jvreeland@nullgenovaburns.com, or Douglas J. Klein, Esq., dklein@nullgenovaburns.com.

THIRD CIRCUIT CLARIFIES FINAL CERTIFICATION STANDARD FOR FLSA COLLECTIVE ACTIONS

The Third Circuit Court of Appeals recently clarified the procedure applicable to collective actions filed under the Fair Labor Standards Act. Still certain questions remain regarding the implications of a plaintiff’s failing to seek final certification and how the Third Circuit’s standard will be applied.
The increasingly popular FLSA collective action can be maintained and proceed to trial only on behalf of a group of similarly situated plaintiffs. There are two steps to collective action certification – conditional certification and final certification. Conditional certification is determined shortly after the action is filed but before discovery begins and requires only a modest factual showing that plaintiffs are similarly situated. Allegations that employees were victims of a single employer decision, policy, or plan can be enough to support conditional certification. Upon conditional certification the court orders notices sent to potential claimants to advise them of their rights to opt into the action and sets a discovery schedule. At least until the Third Circuit’s recent ruling, the practice had been that unless the employer challenged the conditional certification, plaintiffs were not required to ask the court for a final certification of the collective action and there was no clear standard in the Third Circuit for final certification of a FLSA collective action.
In Zavala v. Wal-Mart Stores, 691 F.3d 527 (3rd Cir. 2012), the Third Circuit clarified the procedure and the standard applicable to final certification. The court held that final certification must be proven by a preponderance of the evidence, using an ad hoc approach, with the burden of proof borne by the plaintiffs. Further, any appeal from the district court’s determination will be reviewed under a clearly erroneous standard.
The ad hoc approach requires the court at the second step, generally after discovery concludes, to consider all factors relevant to whether the plaintiffs are similarly situated. These factors include, but are not limited to, whether the plaintiffs: are employed in the same corporate department, division, and location; advance similar claims; seek substantially the same form of relief; and have similar salaries and circumstances of employment. Additionally, the court will consider whether the defendant has individualized defenses as to each plaintiff. This factor can be sufficient grounds for decertification. The court can also take into account other fairness and efficiency concerns.
In Zavala the conditionally certified class consisted of 114 Wal-Mart janitorial workers who alleged FLSA overtime violations. The Third Circuit found that the plaintiffs did not establish by a preponderance of the evidence that they were similarly situated. The plaintiffs worked at more than 180 different stores in 33 states and were employed by 70 different contractors and sub-contractors. The plaintiffs alleged a common scheme to hire and underpay illegal immigrant workers, but the court found that these allegations were not useful in streamlining resolution of the claims because of the many differences among the plaintiffs’ claims. Accordingly the Third Circuit affirmed the lower court’s decertification of the action.
To date, no District Court within the Third Circuit has applied Zavala to a motion for final certification of a collective action. Outside of the Third Circuit, however, the Zavala decision has been considered in connection with the disposition of a motion for final certification. In Marshall v. Amsted Rail Co., 2012 U.S. Dist. LEXIS 161768 (S.D. Ill. Nov. 13, 2012), 478 plaintiffs alleged FLSA underpayment and overtime violations. The District Court noted that the Seventh Circuit “has not announced a test to determine this FLSA ‘similarly situated’ question” so the court looked to the Zavala decision and others and decertified the claims of 476 opt-in plaintiffs, leaving only the two named plaintiffs to proceed in the action. The Illinois court considered the factual and employment settings of all the plaintiffs, individualized defenses of the employer, and other fairness and procedural concerns and found that each consideration weighed in favor of decertification.
The Zavala decision has important implications for FLSA collective actions going forward. At the close of discovery in a conditionally certified FLSA collective action, the plaintiff has the affirmative burden to prove, by a preponderance of the evidence, that the claimants are not only similarly situated to each other, but arguably are similarly situated to the named plaintiff as well, in order to have the action finally certified. As of this writing, it is unclear how courts within the Third Circuit will treat a conditionally certified FLSA action when the plaintiff fails to move for final certification after discovery and the employer fails to move to decertify the action.
If you have any questions or for more information about decertifying FLSA collective actions, please contact Patrick W. McGovern, Esq., pmcgovern@nullgenovaburns.com, or Rebecca Fink, Esq., rfink@nullgenovaburns.com, in the Labor Law Practice Group.