Employment Law Daily Opt-in plaintiffs could appeal decertification order, but their FLSA collective overtime claims failed because they were not similarly situated
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Monday, September 17, 2018

Opt-in plaintiffs could appeal decertification order, but their FLSA collective overtime claims failed because they were not similarly situated

By Joy P. Waltemath, J.D.

In a sweeping opinion examining FLSA collective actions, specifically in the context of decertification, the Ninth Circuit held that opt-in police officer plaintiffs could appeal a district court’s decertification and dismissal of an FLSA overtime collective action against the Los Angeles Police Department, even though the original plaintiffs in the two decertified actions had reached a settlement with the city and the district court had entered a final judgment. The opt-in police officers were actual parties to the collective action, and the decertification and dismissal disposed of their statutory right to proceed collectively, the appeals court held, disagreeing directly with the Third Circuit’s approach in similar litigation. However, the Ninth Circuit agreed that the collective actions were properly decertified because the officers had not shown they were similarly situated. It adopted a “similarly situated” standard requiring that plaintiffs show they “share a similar issue of law or fact material to the disposition of the FLSA claims.” Applying a summary judgment standard (as the decertification motion was post-discovery), the Ninth Circuit found that the officers had not created a triable question of fact regarding the existence of a department-wide policy or practice—e.g., that the LAPD had a pervasive and unwritten policy discouraging the reporting of overtime, particularly overtime that was less than one hour (Campbell v. City of Los Angeles, September 13, 2018, Berzon, M.).

City’s motion to decertify collective actions. The appeal concerned the decertification of a pair of related FLSA collective actions. Between 2004 and 2009, roughly 2,500 officers of the LAPD opted into two collective actions alleging a pervasive, unwritten policy discouraging the reporting of overtime—specifically, that overtime in amounts of less than one hour was not to be reported. After notice to potential opt-ins and several years of discovery, the city moved to decertify the actions because it contended the officers within each were not similarly situated. It argued that if any officers were denied pay for their earned overtime, it was due to unrelated instances of worksite- and supervisor-specific misconduct, rather than a single, department-wide policy or practice. Submitting an analysis of the overtime that was reported, the city said that about 5 percent of the overtime reports between 2001 and 2014 (330,000 out of 6.6 million) were for overtime of less than one hour. Moreover, the opt-in officers worked in seven different ranks within each of the LAPD’s 31 divisions, and had “hundreds of different supervisors.”

Original plaintiffs settle; opt-in plaintiffs appeal. Agreeing with the city, the district court granted the motion for decertification and dismissed the officers without prejudice to refiling their FLSA claims individually. At this point, the original plaintiffs in the two decertified actions then settled with the city on their own claims, and the district court entered final judgment. At this point, although they were no longer plaintiffs, officers who had opted in filed timely appeals from final judgment, challenging their decertification and dismissal.

The Ninth Circuit’s 51-page opinion goes into substantial detail about the differences between Rule 23 class actions and FLSA collective actions, what decertification means and when it can happen, whether opt-in plaintiffs can appeal a decertification order, and what “similarly situated” means.

Can opt-ins appeal decertification order? The first issue, and a question of first impression for the circuit, was whether the opt-in officers could appeal a decertification order when they were dismissed from the collective action before final judgment and without prejudice to their individual FLSA claims. Yes, they can, the Ninth Circuit held, finding no merit to the city’s objections that the opt-in plaintiffs were not “parties,” that the decertification was interlocutory, and that the dismissal was without prejudice.

Opt-ins are parties. Because opt-in plaintiffs are parties to the collective action, an order of decertification and dismissal disposes of their statutory right to proceed collectively. The FLSA leaves no doubt that “every plaintiff who opts in to a collective action has party status.” Proceeding as a Rule 23 class action is conditioned on court approval and results in a less active role in the litigation for members of the class than if litigating individually. But a collective action is just the opposite, said the court, finding it more accurately described as “a kind of mass action, in which aggrieved workers act as a collective of individual plaintiffs with individual cases—capitalizing on efficiencies of scale, but without necessarily permitting a specific, named representative to control the litigation, except as the workers may separately so agree.” As such, dismissal of the opt-in plaintiffs before the entry of final judgment (decertification) had no impact on their party status for purposes of appeal. They had standing to appeal and could do so after the interlocutory decertification order (which was adverse to them) merged with final judgment.

Statutory right to proceed as collective. The Ninth Circuit reasoned that the city had confused finality, which is a condition of appealability, with an adverse disposition on the merits, which is not. As to appellate standing, the opt-in officers were parties to the action at the time they opted in and parties to the action at the time they were dismissed. While the dismissal was without prejudice to the merits of their individual FLSA claims, it removed them from the action they chose to join and disposed of their statutory right to proceed in a collective. The dismissal order then merged into the final judgment; nothing more was needed for appellate jurisdiction or for standing.

Circuit split. Although the Third Circuit confronted similar issues in Halle v. West Penn Allegheny Health System and reached a different conclusion, the Ninth Circuit disagreed, finding that the Third Circuit’s approach rests on a flawed understanding of the scope of a final judgment. It also pointed out that the Eleventh Circuit in Mickles v. Country Club, Inc. dba Goldrush Showbar took an approach similar to its own. And it was not persuaded by the city’s alternative argument that the terms of the officers’ opt-in forms prevent them from appealing, because the forms entrusted all “certification” questions to the original plaintiff. “To the extent there was a delegation here, it was not a delegation that survived the decertification,” said the appeals court.

Evaluating a motion for decertification. Another matter of first impression in the circuit was how to evaluate a motion for decertification—and whether the district court was correct in considering decertification when it did, and on what record. After discussing the issue in some detail, the Ninth Circuit remarked that the two-step approach (preliminary or conditional certification first, then notice and relevant discovery, and finally a motion for decertification) has been endorsed by every circuit that has considered it. The “two-step process, culminating in a decertification motion on or after the close of relevant discovery, has the advantage of ensuring early notice of plausible collective actions, then eliminating those whose promise is not borne out by the record,” reasoned the appeals court.

Here, notice was provided to putative collective action members upon preliminary certification. Discovery was extensive, and the relevant record was complete at the time of the district court’s ruling on the decertification motion. Accordingly, the court found no abuse of discretion in the district court’s considering the validity of the collective action on a post-discovery motion for decertification.

Similarly situated. Finally the appeals court turned to whether the collective actions were properly decertified and the opt-in officers properly dismissed for failure to satisfy the “similarly situated” requirement. Although agreeing that the officers were not similarly situated, and affirming the decertification and dismissal, the Ninth Circuit first found that the district court had erred in its interpretation of the “similarly situated” requirement and in the standard it applied in evaluating decertification. There is no established definition of the FLSA’s “similarly situated” requirement, nor is there an established test for enforcing it. After discussing the minority approach (treating an FLSA collective similarly to a Rule 23(b)(3) class, and requiring some but not all aspects of a numerosity, commonality, typicality, adequacy, predominance, and superiority analysis), the court found it improper, citing the FLSA’s lower bar, among other things.

Focus on similarities. As to the majority approach, which was followed by the district court here, the court descried it as a “flexible inquiry into the factual differences between the party plaintiffs and the desirability of collective treatment” and one that often focuses on “potential factual or legal dissimilarity.” The appeals court stressed instead that party plaintiffs must be alike with regard to some material aspect of their case, and if the party plaintiffs’ factual or legal similarities are material to the resolution of their case, dissimilarities in other respects should not defeat collective treatment. As a result, the appeals court would not adopt the parties’ broad reliance on Wal-Mart Stores, Inc. v. Dukes’ use of the commonality requirement of Rule 23 because it risked importing into the FLSA, contrary to its terms, the “rigorous analysis” applied under Rule 23 to purely representative litigation. The appeals court also found fault with the “fairness and procedural considerations” prong of the majority approach.

Differences not necessarily disqualifying. The ad hoc test used by the district court, with its focus on differences rather than similarities among the party plaintiffs, improperly treated difference as disqualifying, rather than one that treats the requisite kind of similarity as the basis for allowing partially distinct cases to proceed together. Rejecting both approaches to the FLSA’s “similarly situated” requirement, the Ninth Circuit ruled that party plaintiffs are similarly situated, and may proceed in a collective, to the extent they share a similar issue of law or fact material to the disposition of their FLSA claims.

Where lower court went wrong. Applying the summary judgment standard, the appeals court then found the district court’s approach to decertification legally incorrect for two reasons. First, it had applied an overly demanding test of the FLSA’s “similarly situated” requirement, and second, it weighed evidence regarding the existence of a department-wide policy.

But not similarly situated. The key problem for the officers in providing evidence of a department-wide, unwritten overtime policy was that their declarations referenced immediate supervisors at discrete worksites, with no evidence of a uniform practice from which one might infer direction from a higher level, but instead, variable practices variably applied. There was no evidence of any directives, incentives, conversations, emails, or actions (like denials of promotions) by department leadership that could have communicated to local supervisors, implicitly or otherwise, a uniform policy against reporting small amounts of overtime. The Ninth Circuit concluded that the officers had failed, as a matter of law, to create a triable question of fact regarding the existence of a department-wide policy or practice, making the officers not “similarly situated” within the meaning of the FLSA.

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