Power in Numbers: FLSA Collective Actions and Class Actions
Class and collective actions under the Fair Labor Standards Act have made quite a few plaintiffs’ lawyers rich in recent years. These allow a wholesale approach to establishing liability for employers. The numbers can get very big, very fast. But some recent decisions from the Courts suggest that the sun may be setting on this lucrative area of practice. In this webinar, Senior Principal Larry Stine, who has handled dozens of such cases in his career, assesses the current state of the law and offers suggestions on how to limit, or even avoid, this kind of adverse legal exposure.
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Webinar Transcript
J. Larry Stine (00:00):
<Silence> Hello everybody. I'm Larry Stine, and this is my partner, Betsy Dorminey. And we're gonna talk about safety in numbers and changes to the class and collective action certification process, which is probably one of the more technical presentations we put since we've started the webinars. But it is an important decision. And we're beginning to see changes in the litigation of wage and I are collective actions. Betsy and I are gonna go back and forth on discussing this issue, but I thought just a little bit of background for the history of the Fair Labor Standard Act, and I am old, but no, I wasn't there in 1938 when they passed the law. So but when the Fair Labor Standards Act was first enacted, it was enact like every other statute and class action that began to proliferate under the Fair Labor Standards Act.
J. Larry Stine (00:59):
The, the unions, in fact, were the ones deriving a lot of the Fair Labor Standards Act. And the amount of money that was at risk in the 1940, early 1940s was astronom amount of money. And Congress reacted to that massive amount of litigation in the Fair Labor Standards Act by passing an act called the Portal Poor Act. And what the Portal Topo Act did is it took the Fair Labor Standards Act out of class actions. It's one of the rare statutes that has been literally the Congress that says, no, you cannot do a class action. But they said that you could file for people similarly situated. So what happens is we've got this provision, the Fair Labor Standards Act that says, Hey, you can sue for yourself and similarly situated employees. And that's all it says. And so the courts have been struggling with how to go about handling the lawsuits by a plaintiff and similarly situated employees.
J. Larry Stine (02:10):
And so what we have come to do as kind of a nomenclature, as we've called them, collective actions as opposed to class actions and in a lot of states where they have VA valuable FLSA type statutes, which are statutes and states, which you'll see in those states, is a combination of a class action and a collective action which is a little bit beyond what we're going to talk about today. But that is what happens in some states, other states like Georgia, where the wage general law is basically not the same and weaker than the failure standards, that you don't see that type of action. You just see a collective action. And so the, the courts had started struggling with, what do we do with these collective actions? The the funny thing is, I, I worked for the Department of Labor Solicitor's Office, and I left in 1989. And at the time, in 1989, 90% of all Fair Leader Standard Acts cases filed in federal court were filed by the Secretary of Leader. Now, you fast forward to about 2000, that ratio had changed to about 90% private actions and 10% secretary actions. So there was a proliferation of collective actions and the courts now had to start addressing. So Betsy, kind of kind of take us through what the courts originally did when they started having to handle these collective actions.
Elizabeth K. Dorminey (03:51):
Well let me back up just a little bit. One of the interesting things about the Fair Labor Standard Act, and one of the real drivers behind this is that it is unusual among American statutes in that it allows a prevailing plaintiff to recover attorney's fees for the stuff that they, you know, for the, the back wages and, and any unpaid overtime that they're claiming. Now, this was put into the law originally because it was believed that, well, you know, with some justification that the Secretary of Labor wasn't gonna have the manpower to go out there and address all the cases that needed addressing. Therefore plaintiff's lawyers who brought these lawsuits would be you know, sort of deputized, if you will defacto deputies of the Secretary of Labor doing, doing, you know, the secretary's work by bringing these lawsuits. But, you know, as as, as we became an even more litigious society as we've evolved that way there's a plenty of people out there who have realized that one good route toward in law practice toward getting paid is to bring a fair Labor Standards Act lawsuit, because you have the additional lever, not just of recovering back wages that are due to your to your client, but also getting your own hourly fees paid by the employer and not having that come out of the plaintiff's award.
Elizabeth K. Dorminey (05:20):
Because also, another limitation they imposed on the plaintiffs here was that they they really can't recover more than the amount of wages that they claim to have, you know, that they are found to be due doubled. So the Congress decided that liquidated damages, which would be a doubling of the amount of back wages due, was gonna be the upper limit, because they didn't wanna get into all of the the, the, the trial tactics about, you know, pain and suffering and compensatory damages and all the other stuff, just like keep it simple. But that's the way they they, they devised the law. So that led to a tremendous growth and popularity of fair Labor Standards Act lawsuits. Now, the, one of the cases that we're gonna focus on today was a decision that came out of New Jersey District Court of all places called ARDI v Xerox Corporation.
Elizabeth K. Dorminey (06:15):
And in luie, the court, as they sometimes are inclined to do, decided to develop a test. And they decided that when they're dealing with these collective actions, they were gonna go through a little bit of a two-step process. And step one was going to be that the plaintiff comes in and says, you know, I'm gonna sue on my behalf and behalf of all others similarly situated. And the court said, doesn't take much to get past that. But what we're going to do when you come in and say that you're similarly situated, is basically we're gonna say, you know, make a minimal threshold showing, and okay, here's what we're gonna make the employer do. We're gonna make them come up with a long list of people that you claim might be similarly situated to you, and who ought to be invited to join this lawsuit as additional plaintiffs.
Elizabeth K. Dorminey (07:07):
That being the essential difference between a true class action under Rule 23 and a collective action under the FLSA in a true class action, the plaintiff is a representative like, you know, the congressman from, you know, toxic tort or something, and as the representative, they sue on behalf of an in coate, an undetermined class. And then after the lawsuit is over, you know, everybody in the class is included in whatever recovery comes in. And then, you know they can choose to opt out or leave if they don't want to. So, you know, those are the cases that generate the little postcards that say, if you were, you know, if you bought such and such a toaster in 19 93, then you can get $5 off your next toaster when you go to the store and the attorneys get hundreds of thousands, if not millions of dollars in fees for that.
Elizabeth K. Dorminey (08:04):
But anyway, in a collective action, everybody who joins the lawsuit has to affirmatively opt in. They have to choose, and they have to let the court know that they're going to join the lawsuit and their recovery or their ability to sue are both determined by the date upon which they send in their notice that they want to join the lawsuit. So, going back to ardi, the court there said, you know, we'll send everybody a postcard or a note and we're gonna help you write the language. So it'll be more or less neutral. And we're going to let everybody know that if they worked for this employer between these and these dates and did certain things and are, you know, similarly situated with the plaintiffs, and they can send in a little paper to the attorneys for the plaintiffs and add their names to the lawsuit.
Elizabeth K. Dorminey (08:54):
Now this can generate lawsuit titles with, you know, hundreds and hundreds or thousands of, of names of individuals, but that's just the way the FLSA is structured. So that is the kind of first step of asking for it and getting the list and sending out the notices. The second step, which of the Liz case said, you know, after we get all this stuff in, then we're gonna look at the claims and the merits, and then we're gonna allow the defendant to come in and say, wait a minute, these people are not situ similarly situated, and here's why this one didn't work more than 40 hours a week. This one, you know, didn't work during the the period that was covered here. That one did a different kind of job, wasn't, you know, they were a salaried manager, they weren't an hourly employee, so on and so forth. And they would go through this second stage of decertification. Not surprisingly, decertification motions were granted a lot. So what's happened here, and I'll let Larry pick it up again, is that two courts of appeals have decided that maybe the approach that LDI took was not the best one, and maybe they should take a second look and revised their approach.
J. Larry Stine (10:10):
Okay? Now, part of the problem with the test and do understand this is still the test for all the circuits except for the fifth and sixth who've changed the test. But one of the criticisms for it has been the inefficiency of it. And while we're defendants and we want to be efficient and don't wanna have these large collectives, that inefficiency can now sometimes also come back to bite the plaintiff's attorneys. For example, Betsy and I handled a case in this process and the judge gave the initial certification and they got 2000 people to opt in, and they spent a lot of money and time and effort doing it. And you can imagine how happy they were when we won the decertification. All of a sudden they went from having 2000 plaintiffs to three named plaintiffs, and the value of the case collapsed, and they put all that work in.
J. Larry Stine (11:09):
So the inefficiencies aren't just necessarily for the employer. I've talked to a plaintiff's attorney one time who had one, and he successfully went through the whole process, went to trial, and the critical still remains. The trial has, the judge has to be able to manage the relief and the remedy for the, for the group. If he can't, he can't. This guy actually tried the case. The judge after the trial decided it was, couldn't manage it, and Chief de-certified the collective after trial. And, and the words of the plaintiff's attorney that I spoke to, he said, I took a bath. So it's not always necessarily a more efficient process is just to the benefit of the defendants. I think it's to the benefit of both parties to have a more efficient system. Now, what the, the Fifth Circuit decision was SWAs versus KLLM transportation services, LLC.
J. Larry Stine (12:10):
And they did not like this process that ARDI had. So instead of kind of going to the two-step process, they really are basically has kind of structured it so that what would happen is when the judge first got the case, what the judge is supposed to do is to look at the case and see that it's assembly situated and kind of make a determination related to, with the initial motions about the collective. You can either decide just from what I got, and I can see, I, I can tell right away, it's, it's not an appropriate for collective actions, I'm not gonna even do it. He could say, I've got certain categories that are so clearly similarly situated, I I'll go ahead and do it. But what really tends to happen is I'm gonna allow a discovery period to make a determination. So I get a much greater picture, more facts related to the collective.
J. Larry Stine (13:20):
And that's has similar actions in some class actions with the courts to do the same thing where they allow the plaintiff's counsel and the defense to first discover the class action issues. So what they're doing in the fifth is they've eliminated that very lenient test, Hey, you kind of asked for it, and you just do a couple of things and I'm gonna send out the notice. They eliminated that very lenient standard, and they kind of went to the second standard, which is the one that had been applied to the decertification and said that this is going to be our standard for that. So what, what happens in the fifth and happened in the fifth is the judges, most of the cases I've looked at basically set the case up for an initial discovery period to make a determination as to whether the people are similar situated.
J. Larry Stine (14:18):
And, and, and they still look at, you know, the, the district factual and employment settings of the individual plaintiff. So that if I have a very widely scattered workforce and plaintiffs are working in all sorts of different locations, it becomes difficult for the judge to decide that that's simply situated because I've got to have testimony with everyone. On the other hand, if I've got issues related to how they're doing lunch breaks, then a plan of a thousand people, it's clear from that setting. I've got the situation where I don't have to be concerned about the individual employees, but the overall practice, I'm gonna send out the notice. They also look at the defenses. What type of defenses do we have? And part of the problem we had the plaintiffs had in that case with 2000 is they threw everybody in. So we had multiple defenses as to whether the employees were exempt under the white collar exemptions, whether certain employees were exempted under the 13 B one and what the judge eventually saw, in which we convinced him it was a totally unmanageable case and therefore he wouldn't proceed with it. And then they look last. And it's kind of the most touchy feely is what are the sort of fairness and the procedural considerations. But the way that Betsy and I tend to analyze these cases is from a manageability point, because ultimately the judge has to decide that I can try this case and render a remedy that's manageable. Like if I've got 2000 employees and I'm gonna have to make 2000 different decisions, it ain't manageable. If I gotta make three or four, it's, they're probably gonna grant the collective. Now the sixth circuit, and
Elizabeth K. Dorminey (16:13):
By the way, excuse me, Larry, let me, let me add in there. 'cause I think you're making a really good point there about manageability and it's almost more, think about it in terms of scalability. Can the judge make one big decision that's gonna decide liability and the amount of the remedy? Or do they have to look at each individual on a case by case basis and determine whether that person worked the number of hours? That seems to be the real litmus test for the judges when they're trying to make this determination about manageability.
J. Larry Stine (16:44):
Sure. And, and if you're driving, if you're writing the briefs for the plaintiff, you, you need to focus on the solutions for the judges to manage the case. Where I find that they fail and when were on the defense side, is that they never, ever articulate how the judge can manage the case and they get hung up on the factors as opposed to the ultimate reason. And from the defense side, what we're always trying to point out and not guarantee we're doing it is, judge, there ain't any solutions to this problem. You, you're in, you know, you're just gonna end up with many trials.
Elizabeth K. Dorminey (17:28):
Well, and, and, and Larry too, you might share our, our experience with the donning and dolphin cases, which went on for, for at least a decade. And those were cases where it came down to, to microseconds of how many people were putting on and taking off different items of protective gear when they were working in plants. And eventually the, the, the, the plaintiff bars kind of took it on the chin because we, we succeeded. And, and the vast majority of the cases that we, that we defended there in, in showing that those, you know, those remedies, just that it was not, it was not gonna be something that the judge could decide on a wholesale basis and they weren't gonna do it on a retail case by case basis.
J. Larry Stine (18:14):
Right. And, and, and that's, that's the driving force behind a lot of 'em. And some of them in the, the donning and ding. Some of the interesting thing is some of the judge granted collectives, and I think we had two, granted out of 14 two, granted out of 14 one of 'em we tried and went on the other one, the collective fell apart because the, the plaintiffs individual plaintiffs all of a sudden were required start showing up. And a lot of 'em think they're gonna be absent members, and then when they find out they're gonna be active members they begin to abandon the case, which is kind of an interesting proposition. We tried, we had one set for trial with collective actions where nobody showed up for the plaintiff. The judge was not pleased.
Elizabeth K. Dorminey (19:03):
She was not <laugh>
J. Larry Stine (19:04):
No, she was, she was not. She actually sanctioned the attorneys on the other side for the case. So you gotta be careful what you asked for. But the, basically the way the fifth Circuit is set up is basically the, the courts in the Fifth Circuit will give the plaintiffs an opportunity to have discovery defendants to set up and have discovery before they make the final one. But they're, basically what's going on is the court's gonna make what used to be the decertification standard decision is the decision whether to certify now the sixth Circuit in a case called Clerk versus Al Home, home Care and training center, LLC, they do not like the words collectively did not like the words certification. And in some ways I, I, I agree with them because the reality is that there is not a certification process for the collective action that's, we use those words because it's an easy no place or, but the Sixth Circuit address that particular issue, let me, let me explain what I mean is, fundamentally what the courts do as a result is they allow the plaintiffs to send out a notice of an opportunity to join the case as an opt in plaintiff.
J. Larry Stine (20:36):
And typically in that process, when they make that decision, there's also a motion to compel of the defendants to give the plaintiffs a list of all the people in that defined group that the judge has found similar, situated, to give them all the contact information to send them the notice. And as Betsy, Betsy alluded to earlier, this is an optin. They have to affirmatively opt in to the class, and I'm using the word class because that's the words kind of been used. But they really are just joining the case as plaintiffs, once the final dec decision's been made, they're not really a class. They are, there's not a certification of a group. The decision is to send out notices and to allow the plaintiffs to opt into that case as a similarly situated. And what happens is, if the, the plaintiff has jumped the gun and had gotten individuals to opt into the lawsuit for the judge makes the final determination send out the notices, and that they are similarly situated, if the judge decides they're not similarly situated, those particular premature opt-in plaintiffs get dismissed without patience.
J. Larry Stine (22:02):
They do have leave, by the way, to refile their suits quickly. They have to file 'em quickly because they don't do 'em within a specified period of time. The statute of limitations will have gone on 'em. Now, the sixth Circuit, in addition to trying to make that language more precise, what is actually done and not use easy words that we do use, that they, they were there, but now they decided to use a different test. And they do reject the, the rule 23, the classic actions and saying that is really not what we're doing. So what they did is they took the standards for preliminary injunctions, and that is what they used. But let me, let me, let me back up just a second. What I wanna read a quote from the courts, because I've been talking about it, and perhaps right now I need to have let the sixth circuit speak about this issue about conditional certification.
J. Larry Stine (23:11):
So this is what the Sixth Circuit said. Courts have mistakenly assumed a 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 that gibon courts, those assertions are mistaken. Other employees become parties to an FLSA suit as opposed to mere recipients notice only after they opt in. And the district court determines, not conditionally, but conclusively that each of them is similar situated to the original plaintiff. And that's what I was trying to explain why they made those distinctions between the words. 'cause Sometimes words map, and the reality is they do send out a notice and it's only after the court says they're simply situated, are they permitted to proceed? And they proceed as plaintiffs, and we manage 'em as plaintiffs. So the, the question becomes for the sixth circuit, okay, what is the showing necessary for the district court to facilitate notices to other employees?
J. Larry Stine (24:31):
And the Supreme Court's referred to 'em as potential plaintiffs. And let me see what they, what they decided was that they can't make that determination without a standard. And what the standard is, is the one in which the preliminary injunction is where, and let me find my exact words for this particular issue because I want to make something, I have it correct. So the essence, they have to show a strong likelihood of prevailing in a, in a preliminary injunction of four criteria. And one of the criteria, and this is the one they kind of adopted for the test, is that they have to show a strong probability that they'll prevail on the case. And so the standard that the courts did in the sixth circuit was that the plaintiffs have to come in and make a strong, a showing of a strong likelihood that the plaintiffs are simply situated. Now remember, the ARD case basically had a hey, very lenient test, and then they sent the notices. The sixth Circuit decided that was way too easy. And if you certify these, you know, certify the notification, then you've got a massive amount of resources, time and events both for the plaintiff's attorney and for the defendant's attorney. So they decided we're gonna use a strong probability of li strong likelihood of prevailing on it. So the standard is much higher than that.
J. Larry Stine (26:19):
So SWAs then decided they need to also kinda look at those factors that are, what, what are the facts? What are the legal considerations that would be material to determine whether the group of employees is, is simply situated? So I'm going to, I don't only read quotes, but I'm gonna read two of 'em. So hang on there for here's what they, they, they say, considering early in the case whether merits questions can be answered collectively has nothing to do with endorsing the merits. In other words, it doesn't matter whether they're gonna win or lose. It depends on what we gotta address. Rather addressing these issues from the outset aids the district court in deciding whether notice is necessary. And it ensures that any notice sent is proper in scope that is sent only to potential plaintiff. For example, sometimes someone will have arbitration agreements and some will not, or those with arbitration agreements would not be potential plaintiffs in a district court case.
J. Larry Stine (27:26):
When a district court ignores that, it can side merit issues when considering the scope of the collective, it ignores assembly situated analysis and is likely to send notices to employees who are not potential plaintiffs. And that circumstance, the district court risked crossing the line from using notice as a case management tool to using notices as a claim solicitation tool, Supreme Court and Hoffman versus La Roach, flatly, flatly forbid, such line lawsuits. Now, of course, the, the plaintiff's counsel love having the, the lenient standard because it's exactly what they're doing. They're sending out as a claim solicitation tool. So I've got three, one, or two or three main plaintiffs. But if I can get the notices sent out, I got, I can force the defendant to gimme the list of all my employees and I get to send out notices. And when I get opt-ins, I now have been able to use the notice as a claim solicitation tool to bring all those new potential plaintiffs to me. And that's a line too far. Betsy, what do you gotta say about those?
Elizabeth K. Dorminey (28:43):
Well, I do think that's been a, a, a real practical consideration because, you know, somebody gets a notice or sees one in the paper or gets one in the mail saying, you know, free money, come get it. That, you know, that's, that's, that's gonna be an incentive. And it does, it does work out to being kind of a, a claim solicitation tool, which is, which is, you know, not what the Supreme Court has said that the FLSA is supposed to be. I would point out too though, that that, you know, people remain eligible to join these cases if they want to. And plaintiffs may develop other routes to trying to find people. This is, you know, in this modern day and age of, of internet communication, which is so much quicker and easier than putting together letters and mailing them out to people and finding their mailing address and hoping that they'll read the letter when they get it.
Elizabeth K. Dorminey (29:37):
You know, it, it, it, the, the dynamics for communication have changed. I, I do think it's interesting that the, the, the Sixth Circuits approach is distinct from that which the Fifth Circuit adopted, but I think both are very important because they really show that the judges are trying to put the cart back behind the horse where it belongs instead of putting the cart before the horse. And, you know, having all of this litigation go on before you really decide whether you've got an actual bonafide collect, you know, multiple plaintiff FLSA claim. I think it will be interesting to see how it gets generalized because although, you know, many courts of appeals have adopted Lazar and made it their own, it's still just a district court decision and a tool for managing these cases. And I think that courts in other circuits may well be amenable to revisiting this question going forward. And you know, people are always gonna be able to give it a whirl and go to a district court and eventually an another court of appeals. I could see it coming before the 11th and saying, you know, look, your honors, let's think about this again, ARDI's maybe not the only way to do these things, and there might be a more efficient way because it takes courts time too, and they, they really don't like to spend time spinning their own wheels.
J. Larry Stine (31:10):
Well, Betsy, so what, what I've found, when I've looked at some of the circuit decisions like the 11th circuit and the fourth circuit, when we go up, they have never really made a decision as to what is, how are we going to do it. What they have tended to do in these circuits is, Hey, the case has come up and they kind of go, yeah, that looks, that looks good. We, we we're okay with it. But they really never say, Hey, we're gonna adopt this as this is our test. We're going to formally adopt. Sorry. They they just kind of let the district courts kind of bounce around. And as long as it kinda looks right, they seem to affirm them. But what I'm seeing is the courts are beginning to recognize what you just said, that it is such an inefficient way and they're putting the cart in front of the horse that maybe they ought to rethink this. And I think that's the reason we've seen the fifth and the sixth. I, I do know that when we get the collective actions in another circuit, that we're certainly gonna be arguing that the LASORTA test is just an inefficient, terrible way to do it. And they need to take care and look at the fifth circuit's decision and the sixth circuit decision. Just from a practical point of view, we've, Betsy and I have worked on, I don't know if I can count all the collective actions we've worked on Betsy, but we've worked on,
Elizabeth K. Dorminey (32:35):
Well, it's at at least 15 <laugh> that I can think of. You
J. Larry Stine (32:39):
Know, that's just the donning and doey.
Elizabeth K. Dorminey (32:41):
Oh, well, that's true. That's right. Oh gosh. Well, no, I don't know <laugh>. Yeah,
J. Larry Stine (32:45):
No, we, we worked on much of hold on and part parttime to problems. When we pull up the notices, sometimes I'm sitting here trying to figure out where they got it because we didn't know, we didn't know we get opt-in forms from individuals. We never, you sent the information to the plaintiffs.
Elizabeth K. Dorminey (33:08):
Yeah. They find out that these people never worked for them at all, <laugh>.
J. Larry Stine (33:11):
Yeah, no, we found some that we, we literally have got opt-in plaintiffs, and we've gone back to our client's employment records and go, we can't even find a record of the existence of this person. Or I, we, some of 'em we looked at as I remember one where the P counsel wasn't doing any screening. They were just, they were getting the opt-in form and they were filing it without even looking at the information. And some of 'em we required to give information and they were filing opt-in plaintiffs that had last been employed 10 years earlier. Statute limitations, either two or three tens a whole lot, but they were actually filing notices. And then we get somewhere, I sw what happens is we send the notice to a household and then all of a sudden from the household, we're getting multiple opt-ins. I think they photocopy 'em for every member in the household, even though a lot of 'em didn't work.
J. Larry Stine (34:09):
So the process is a very, an artful kind of half put together process. And what happens when they start doing that, we as the defense counsel start really having to bear down on each individual notice and the amount of resources that we spend just keeping up the, who's coming in, who, who was actually, what period of time did they work? What position did they work? Because all of that is something we, we, we work on. And in the certification process where we do it, we raise all those issues in the decertification. And I still think that if we do further the work in these other, the cases, we can still come back to the court and say, Hey, we're moving to dismiss the following opt-ins, even after the court has found 'em to be somewhat situated because those individuals are not. So I know we work on, we were talking about the, talking about the hybrid actions, but maybe we got a few minutes, Betsy, we can talk about the, the hybrid actions that we've seen in the Rule 23 and the collective actions.
Elizabeth K. Dorminey (35:21):
Well, yes, and those, those are, those are kind of a bear because usually there's a, a, as you were mentioning right at the very beginning, some states have their own miniature FLSA laws, and certainly, and this is something that every employer needs to be aware of and, and, and vigilant about. There are a lot of local and state and even municipal minimum wage laws that kick into effect at the beginning of this year. And and, and moving forward that the you know, it's kind of a moving target because unless you're paying attention, you may, you may run afoul of one of these local laws. In general, the state FLSA type laws are allow a case to proceed as a class action, which means that one person can represent a whole pool of people. And then that, you know, we, we argued unsuccessfully sometimes and unsuccessfully at others that the two kinds of cases where you had opt-ins on the one hand for the federal claims and representative class, true class action for the state law claims were, were kind of inherently unmanageable.
Elizabeth K. Dorminey (36:39):
Some courts bought that, some, some courts, some courts didn't. But it, it does and, you know, and it, it's exposure to liability. And of course, and on a practical level, any employer who is faced with one of these cases has to make a pretty pragmatic decision pretty early on of, of whether they're going to settle one of these cases or if they're gonna fight it all the way through to summary judgment or even even trial if that ends up being unsuccessful. So, you know, there's a, there's a lot riding on these cases. It's can be harder to settle them when you have both a class and a collective action going forward. But I think the plaintiff's bar's enthusiasm for these cases may have, may have have dimmed a bit because we have not seen quite as many of them going forward. Wage cases employment related cases make up a undue proportion of the caseload for the federal courts now, and they're frankly tired of it. There are plaintiffs who, who try to just bring state court actions because they, they do know that it's going to be easier to make their proof and then they can just get a big pot of money and try to allocate it after the fact. But the, the manageability issues are, are, are, are not to be underestimated. Well, well, when you have a hybrid action,
J. Larry Stine (38:16):
Don't, don't we have difficulty selling these cases before the decision is because what happens if the plaintiffs are bringing either a col you know, a collective action to use the easy term or a class action, typically there's settlement proposals in the early stages is, Hey, we're representing the tive glass and we want you to agree to all the glass and their numbers are astronomical and unrealistic typically. So a lot of 'em, we can't get the case settled at the early stages because they wanna have, they're assuming they're gonna win the collective and the glass actions. Now, the interesting thing about the, the, the hybrid actions is in the class actions, what we, as the defendants try to do is do what the fifth circuit's actually done in the smalls case is we try to set up a, a a bifurcated period of discovery to do the class action so that we can limit the discovery to those particular issues and get the court to decide on the class action and the nature of the class action.
J. Larry Stine (39:21):
So that we can, once the court decides what we've got, then settlement becomes a little bit easier. At least we know that we either got a class with a bunch of people what the potential liability is, or we know we don't have it, and now we're only dealing with, you know, the named plaintiffs of the case and it's much easier to settle at that time. So oftentimes in the hybrid actions, I mean, to some degree in the collective actions, the the deciding factor is not the summary of judgment, but is the decision by the courts that they're simply situated on the failure Standards Act or that they've got a viable class action and issue? It not every court has allowed us to do the discovery of the class actions before we do the merits. We've tried that in some cases and they go, no, you're gonna do both merits in class actions at the same time, which runs up the expense for the defense counsel, but still puts 'em in a difficult position because it's hard to settle on the glass when you're still having to decide the glass. So the hybrid actions cause a real problem for the, for the companies and trying to get the case resolved, even if they want resolution, it's difficult to do it without just conceding that the class is going to be put forth. And there's very seldom situation where I find the classes worth agreeing to from the employee's point of view. So we've got that difficult
Elizabeth K. Dorminey (40:47):
Question. Well, and, and two, when we're arguing about these things, classes can be, can be narrowed down. Early on I think there was a bigger push on the plaintiff's bar to try to have multi-state actions where they would try to conglomerate claims for a, you know, a, a large employer of even a franchise operator across state lines. And in some, in some states, I think there's been, you know, or at least, and even in the federal legislature, there's, there's was some sympathy for those or, or support for those kinds of cases. But I think by and large, Larry, would you agree that they've, you know, they've, they've backed off a bit on that because not every place is managed the same. There was the big Walmart case that came to the Supreme Court where they were trying to prove, you know, they discriminated against wisdom women everywhere the Walmart had a store, right? And the Supreme Court basically said, no, you, you just, you just don't, you know, you don't, you don't, you, you can't make those assumptions when you have thousands of different employees and, and thousands of stores
J. Larry Stine (41:59):
Right there, there. Now there is a split in the circuit that I believe, forgive me if I don't get this right, but I believe the second circuit in the FLSA case limited the group in the collective action to the state and excluded everybody else from the state and some of the other circuit courts that said, no, we're not gonna do it that way. We're gonna allow the certification to exceed the state. And I think the second circuit part is because it has the New York HR law, which is far, you got a lot more rights under it than the FLSA and it goes from the New York residents to other residents causes a real problem in how you manage the case. But the Second Circuit, pretty circuit a second. It says, we're not gonna let you go outside and go to Pennsylvania and Maine and California.
J. Larry Stine (42:49):
You, you're gonna have to do the collectives Now that, that, if that happens in you're a multi-state organization that was very hopeful for you to limit it in a recent case that we handled and to settle relatively quickly, we were able to assert that in front of the mediator in this case, and the mediator said, yeah, we're right. And the plaintiff's counsel then reduced the claim from multi-state to one State Tennessee, and it became a very manageable number that we could settle the case with. And so these decisions have a practical implication on you. If, if it is limited to the state, it substantially reduces liability in, in multi-state corporations and be a very helpful factor in making those arguments against the the class collective actions
Elizabeth K. Dorminey (43:43):
Tell you, let's talk about arbitration just a little bit, Larry, because that has been a big implement for employers to limit their exposure to class actions and the Supreme Court's pretty much back backed up support for arbitration just as a general principle. And that that helps a lot when you hire a new employee, if you have in the employment agreement or elsewhere an agreement that they will arbitrate whatever grievances they may have against the employer rather than go to court. And if that's a an element of the contract, if you will, between the employer and the employee, most of those are general, are drafted in such a way that it prohibits an employee who assigned such an arbitration agreement from engaging in any kind of a class or collective action. And that can be a, a, a good tool for limiting exposure. On the other hand, it can boomerang because there was one case I think where there was an arbitration agreement like that and the plaintiff's lawyer, which I suppose had more resources than most said fine and proceeded to file hundreds of individual suits against that employer. Now, I only know of one example like that. Maybe there's more. But, but on the whole an arbitration agreement can be one way to limit your exposure to collective or class type actions.
J. Larry Stine (45:20):
Yeah. You, you remember Bessy that it, it was a few years ago, the LRB took the position that having them waive their rights to have collective and class actions under arbitration was a violation of National Labor Relations Act. And that case went up and the Supreme Court said, no, then RV was wrong. You do have a right to have individuals waive the right to class in collective actions.
Elizabeth K. Dorminey (45:51):
And that does the NLRB recognize the authority of the Supreme Court? 'cause There's times I've wondered whether they did or not. Oh,
J. Larry Stine (45:57):
I, I, I doubt it seriously severely, I it was sometimes the federal government, I I've had an EEOC attorney one time tell me that the decision that, that the EEOC did not agree with the Supreme Court. And I'm thinking to myself, well that's an interesting position that I, I want you to argue in front of the district judge 'cause I don't think it's gonna go very far. But no, basically they're, they're still fighting over the arbitrations on things like transportation, which is a very fine, but the issue about waiving their class and collective actions and an arbitration, it's been sustained and it is a good tool for you to block those massive lawsuits and deal with 'em on an individual by individual, much easier to handle a case with an individual than it is with a collective. We recently had one out of Raleigh, North Carolina, in which they brought a collective under the Failure Standards Act and a class under the North Carolina Wage HR Act.
J. Larry Stine (47:03):
And we were able to get the federal judge to dismiss the case because the client had had an arbitration provision and a waiver of class and collective in the arbitration agreement. And the judge dismissed the case and sent the case to arbitration. That alone would save the client, you know, potential liability in terms of millions of dollars. So those arbitration agreements are something you should seriously consider as Betsy says. The downside is that if you're having an arbitration agreement, you as the employer, are going to be paying an arbitrator at their hourly rate to do things that a federal judge will do at no cost student. So the arbitration fees can be greater, but the saving on the potential liability if it's a class or collective, is unmeasurable. And that's the balance for individual acts. The savings are not as high. However, arbitrators tend not to render very high damages. They don't tend to get up on emotional damages and atory and punitives like the juries will. And so you can use them even if you lose to modify the damages.
Elizabeth K. Dorminey (48:19):
But they also like to cut the baby in half, Larry. And you know that we've seen that before.
J. Larry Stine (48:24):
Yeah. I've seen a lot of babies split in half in arbitration because one of the problems with arbitration, and it's a realistic one, is arbitrators like to get picked to cases 'cause they get paid to do it and they don't want to come across too harsh on either side. And so there is a tendency to kind of split the baby in half between arbitrators. 'cause They don't want to have a, somebody get really mad at 'em and write adverse impacts and impact their ability to arbitrate more cases. That's just a practical aspect of arbitrations that you have sometimes. I know it's been a little bit more technical than most, but we greatly appreciate y'all taking the time to listen to us and I hope you've gotten a lot out of it.
Elizabeth K. Dorminey (49:08):
And if you think of something at later on that you wanna ask about, drop us a line. We're always happy to hear from you. Yeah,
J. Larry Stine (49:14):
If you got a question and we haven't had anything, let us know. Send us an email me at js@wimlaw.com. Betsy at ekd at WIM Law. We do generate articles when we do this, and if you're interested in getting the, the article, just drop us a line. Same. Can you send us the article and we'll be glad to do it. Thanks for for doing this with me as always.
Elizabeth K. Dorminey (49:39):
Well, my pleasure and thank you. And thanks to everybody who listened in.
J. Larry Stine (49:44):
Thank you so much. And this concludes the seminar.
Elizabeth K. Dorminey (49:48):
All right. Bye everybody.
J. Larry Stine (49:49):
Bye everybody.
