7th Circuit Raises Bar for FLSA Collective Actions

Author: Michael Cardman, Brightmine Legal Editor

Plaintiffs' attorneys in Illinois, Indiana and Wisconsin will likely think twice before attempting to mount collective actions under the Fair Labor Standards Act (FLSA) in the wake of a new ruling from the 7th Circuit Court of Appeals.

In a strongly worded opinion issued on February 4, the 7th Circuit said that employees cannot sue for unpaid overtime as a group unless they can propose a feasible way to calculate damages. Espenscheid v. Directsat United States, 2013 U.S. App. LEXIS 2409 (7th Cir. 2013).

There were likely to be significant variances in how much overtime each of the 2,341 plaintiffs in the Espenscheid case were owed because they were paid on a piece rate basis, meaning that many of them may have worked fewer than 40 hours in a week because of their effort and efficiency, and that the regular rate of pay would have differed for each plaintiff depending on how long it took him or her to complete a job.

As a result, calculating damages would have required 2,341 separate evidentiary hearings, which would have "swamped" the district court.

The plaintiffs had proposed getting around this problem by presenting the testimony of 42 "representative" class members, from whom the damages of the group could have been inferred. But the 7th Circuit rejected that approach because the plaintiffs' attorney was "unable to explain to us at the oral argument though pressed repeatedly, how these 'representatives' were chosen."

The plaintiffs "continue on appeal to labor under the misapprehension that testimony by 42 unrepresentative 'representative' witnesses, supplemented by other kinds of evidence that they have been unable to specify, would enable a rational determination of each class member's damages," the ruling states. "They must think that like most class action suits this one would not be tried--that if we ordered a class or classes certified, [the defendant, DirectSat] would settle. That may be a realistic conjecture, but class counsel cannot be permitted to force settlement by refusing to agree to a reasonable method of trial should settlement negotiations fail. Essentially they asked the district judge to embark on a shapeless, freewheeling trial that would combine liability and damages and would be virtually evidence-free so far as damages were concerned."

An employer operating in the 7th Circuit can take some comfort from the Espenscheid ruling, in that employees will need to establish a feasible way of precisely and accurately calculating damages to mount a collective action. Nevertheless, the ruling falls far short of precluding all collective actions, especially as it appears that the plaintiffs' attorneys failed to respond to the courts' concerns. The ruling also notes that employees can complain to the U.S. Department of Labor, which can investigate their claims and bring a lawsuit of its own.