Enter to open, tab to navigate, enter to select
Rule 23 Class Action Provisions Apply to FLSA Collective Action Certification Analysis: Seventh Circuit
Practical Law Legal Update 0-524-0919 (Approx. 4 pages)
Rule 23 Class Action Provisions Apply to FLSA Collective Action Certification Analysis: Seventh Circuit
by PLC Labor & Employment
| Published on 11 Feb 2013 • USA (National/Federal) |
In Espenscheid v. DirectSat USA, LLC, the US Court of Appeals for the Seventh Circuit upheld a district court opinion decertifying a proposed class of plaintiffs claiming they were not paid for work performed and were denied overtime pay in violation of the Fair Labor Standards Act (FLSA). In its decision, the court ruled that the same certification analysis applies to collective actions under the FLSA as it does to class actions under Rule 23 of the Federal Rules of Civil Procedure.
Key Litigated Issues
In Espenscheid v. DirectSat USA, LLC, the key litigated issue was whether the district court correctly decertified a class of plaintiffs in their federal FLSA and parallel state law claims that they were improperly denied overtime pay and were not compensated for work performed.
Background
A purported class of 2,341 technicians employed by DirectSat to install and repair home satellite dishes brought suit as both a collective action under the FLSA and class actions under state law, claiming they were improperly denied overtime pay and were not compensated for all work performed. The technicians were paid on a piece-rate basis, receiving certain amounts per job completed, rather than on a fixed hourly wage, but were still covered by the FLSA's federal minimum wage and overtime pay requirements.
The district judge initially certified three subclasses of plaintiffs for purposes of determining liability:
- Those who were denied overtime because they recorded a lunch break they did not take or otherwise underreported hours worked between their first and last jobs of the day.
- Those who were denied overtime because they were not compensated for work performed before their first job of the day or after their last job of the day.
- Those whose regular and overtime wages for nonproductive work were calculated improperly.
However, after it became apparent that the plaintiffs' trial plan was infeasible, the district judge decertified the class. The plaintiffs settled, but the settlement reserved the plaintiffs' right to appeal the decertification, which they did.
Outcome
On February 4, 2013, the US Court of Appeals for the Seventh Circuit issued an opinion upholding the district court's decertification order, finding a class action was not appropriate and that the plaintiffs' proposed litigation plan was not feasible.
The Seventh Circuit first ruled that the same certification analysis applies to FLSA collective actions as to class actions under Rule 23(b)(3) of the Federal Rules of Civil Procedure. Although in a collective action class members must opt in to be bound by the judgment and in a class action members must affirmatively opt out not to be bound, the court found there was no good reason to have different standards for the certification of the two types of action.
In this case, certification of both the FLSA collective action and the Rule 23(b)(3) class actions was not appropriate since determining the class members' damages would require 2,341 separate evidentiary hearings, one for each plaintiff in the purported class. Specifically:
- The technicians did not work regular hours with regular lunch breaks, allowing mechanical computation of damages. Rather, since they were paid on a piece-rate system, their hours necessarily varied: some may have worked more than 40 hours per week and others less than 40 hours per week, leading to different hourly wages for the same or similar work depending on how quickly or slowly a technician worked.
- The plaintiffs' proposed method of resolving this variance, by presenting testimony at trial from 42 representative class members, was insufficient, as there was no indication of how:
- these representatives were chosen or why they were representative of the class;
- calculating their damages would adequately calculate the rest of the class's damages, even if the number of hours the 42 class representatives worked without pay was equal to the average number of hours of the entire class; or
- extrapolating the experience of the 42 class representatives to that of the 2,341 members of the class would require any less work to determine damages overall.
- The technicians had no records of the amount of time worked but not reported on their time sheets, and the evidence of a small, unrepresentative sample of technicians could not support an inference about the work time of all class members. In addition, some of those technicians may have purposefully underreported their time not because DirectSat pressured them to do so, but because they wanted to impress the company with their efficiency, or avoid being laid off.
The Seventh Circuit noted that instead of pursuing a class action, the plaintiffs could have complained to the DOL, which enforces the FLSA, to obtain the same monetary relief for the class members as available in a class action.
Practical Implications
The Seventh Circuit's decision in this case provides guidance on how courts in that circuit will evaluate certification in collective actions. Employers in the Seventh Circuit should be aware that courts will examine proposed collective actions under the FLSA as if they are class actions under Rule 23, and that difficulty in determining proposed class members' damages may prevent certification of their collective actions.