Wage and hour class and collective actions have sky-rocketed in recent years. This increase in “bet the business” litigation has been facilitated, in part, by the unique process courts must follow under the Fair Labor Standards Act (FLSA) to certify an FLSA collective action (versus a typical class action under Rule 23 of the Federal Rules of Civil Procedure). Citing the “modest” showing necessary to conditionally certify an FLSA collective action, plaintiffs’ attorneys regularly obtain employee lists without establishing that a case actually can proceed on a class basis. Employers should know, however, that the fight is not over once a court conditionally certifies a collective action.

A recent opinion in the case of Griffith v. Fordham Financial Management, Inc., Case No. 12 Civ. 1117, decided by the Federal District Court for the Southern District of New York, illustrates that careful discovery, and a proactive defense strategy, can lead to the decertification of an FLSA collective action – reducing a potentially devastating class action into a much smaller lawsuit relating to a few named plaintiffs.

In Griffith, as in many cases, the plaintiffs claimed their former employer violated the FLSA and state law by misclassifying them as independent contractors and failing to pay overtime compensation. The named plaintiffs also sought to represent over 100 other “similarly situated” individuals and asserted class claims under Rule 23 and collective claims under the FLSA. Prior to discovery, the court granted the plaintiffs’ motion for conditional certification under the FLSA. Thereafter, notice was sent to potential plaintiffs informing them of their right to join the lawsuit. But the fight did not end there.

Following class discovery, in June 2014, the plaintiffs filed a motion to certify their state law claims under Rule 23. Clearly, the plaintiffs hoped the court would follow its prior ruling regarding conditional certification of the federal FLSA claims and permit them to pursue class claims under state law as well. However, on March 12, 2015, the court denied the plaintiffs’ motion for class certification under Rule 23, finding that the plaintiffs had failed to demonstrate that the misclassification dispute was “capable of resolution by class-wide proof.” 

After their victory over the Rule 23 class, the defendants filed a motion to decertify the FLSA collective action. In response, the plaintiffs argued that a different standard applied to FLSA collective actions and the court should continue to permit them to pursue FLSA claims on a representative basis. The court disagreed with the plaintiffs, granted the defendants’ motion, and decertified the FLSA collective action – requiring the plaintiffs to proceed on an individual basis only. 

In doing so, the court reviewed the two-stage certification process under the FLSA. The court noted that, at the first (notice) stage, the plaintiffs need only make a modest showing that they are similarly situated with others to proceed as a group. However, at the second stage (generally occurring after discovery) the court will determine based on a fuller record whether the plaintiffs are in fact similarly situated. Although the court recognized that the commonality test under Rule 23 is not technically the same as the FLSA’s “similarly situated” test, it found that in practice there is “little difference” between the two tests, as “both allow for consideration of the same or similar factors, and generally provide a district court with discretion to deny certification for trial management reasons.” 

Accordingly, the court similarly decertified the FLSA collective action. Among other things, the court found that the FLSA claims “were not capable of resolution by class-wide proof, and required highly individualized inquiries.” In particular, the record established that the putative plaintiffs worked for the employer over different, non-overlapping periods and under different policies. Likewise, deposition testimony proved that the putative class worked under different agreements and on varying work schedules. Furthermore, there was disagreement over the level of control the employer exercised over the group’s day-to-day responsibilities. Because of these variations, the court determined that the case would degenerate into individual inquiries and could not be maintained on a representative basis. The court also found that the low opt-in rate weighed against certification. 

The Griffith case should encourage employers embroiled in costly class wage and hour litigation to carefully review the facts of their case before throwing in the towel after conditional certification. In many circumstances, a case that was conditionally certified may be decertified after discovery. Griffith should also serve to caution would-be plaintiffs and their counsel. Not every wage and hour case can proceed as a class. The hopes of large class settlements should be tempered by the particular facts of each case. Moreover, courts are becoming increasingly skeptical about maintaining large collective actions. If there are significant factual differences among employees, or no global policy at issue, courts will not hesitate to decertify an FLSA collective action and require the named plaintiffs to proceed with their claims on an individual basis only.