On January 12, 2020, the Fifth Circuit Court of Appeals handed down a decision that will likely make it more difficult for Texas workers to make minimum wage, overtime, and other claims under the Fair Labor Standards Act (FLSA). The case, known as Swales v. KLLM Transport Services, is so recent that its impact has yet to be fully felt in upcoming lawsuits. One thing is clear, though: this is going to take some strategic legal thinking for workers who prevail better in court when they can join in FLSA collective action lawsuits. For those seeking the protection of wage and hour laws, good legal help is more important than ever before.

Texas Wage and Hour Attorneys at Kilgore & Kilgore Know How to Try FLSA Collective Action Lawsuits

If you have questions about your wages, hours, overtime compensation, tips, or whether you have been incorrectly classified as an independent contractor instead of an employee, reach out to the employment lawyers at Kilgore & Kilgore. Click on this link to find out about our Wage and Hour Law Practice. If you think your employer is not paying you everything you are owed, contact us using this link Contact Kilgore Law to get the conversation started. We offer case evaluations at no cost.

What Happened in a Recent Lawsuit that Went to Appeal, and Why it Matters to Workers

Between 2015 and 2017, Harry Swales drove a refrigerated truck for KLLM Transport. He, like the other drivers who joined in the lawsuit, worked as an independent contractor for the company. The drivers were paid by the number of miles driven. The drivers’ claim is that KLLM controlled their work to such an extent that they should have been classified as employees and paid at least the federal minimum wage of $7.25 per hour.

The federal statute known as the Fair Labor Standards Act (FLSA) protects employees, but not independent contractors, by establishing a minimum hourly wage, maximum work hours, and overtime compensation for work beyond 40 hours per week. It also permits similarly situated employees to form a group litigation, described in the law as a “collective action.” This is roughly analogous to a class action lawsuit, but not quite the same.

FLSA collective actions often involve violations such as:

• misclassifying employees as managers or other employees not protected by law;
• making improper deductions from employee salaries;
• failing to pay employees as required from a “tip pool”;
• requiring employees to work “off the clock”; and
• miscalculating overtime.

The ability to sue in collective actions is hugely important because most of these claims are relatively small – too small, many workers think, to be worth pursuing on their own. If workers could not join a collective action, these FLSA violations would become a wrong without a remedy.

The Fifth Circuit’s decision in Swales is not about whether the drivers were employees or independent contractors. That has yet to be decided. It is about how courts in Texas and throughout the Fifth Circuit should decide who can join in a collective action lawsuit under the FLSA as members of a court certified class of plaintiffs. The new process designed by the Court may make it more difficult and expensive for all similarly situated workers to join collective action lawsuits under the federal wage and hour law.

Is this a Wage and Hour Class Action Lawsuit?

It is similar, but with two important differences. First, unlike the Federal Rules of Civil Procedure, which provide quite a bit of guidance on who can join in a class action lawsuit, the FLSA is silent about certain important issues, such as what the term “similarly situated” means. Courts have had to devise their own rules, which has led to some differences in interpretation.

Second, to participate in a collective action under the FLSA, individuals must affirmatively choose to participate, or “opt-in.” With class action lawsuits, individuals must affirmatively choose to “opt-out” if they do not want to participate.

New Rules for Collective Actions in Wage and Hour Lawsuits

Since 1987 most federal district courts, including those in Texas, have applied a two-step process to determine who is “similarly situated” and may be potentially included in the class of plaintiffs. This process was first established in a lawsuit known as Lusardi v. Xerox Corporation.

The first step involves a conditional certification or notice stage determination where the court decides whether the proposed members of a class of employees are similar enough to receive notice of and the right to opt-in to the pending action. This “first cut” is often based on initial pleadings. If the plaintiffs meet this burden, the court conditionally certifies the collective action, authorizes counsel for the representative plaintiff to send notice of the case inviting potential members to participate in the lawsuit, and permits the parties to proceed with further fact-finding. Step one casts a wide net to locate all possible workers whose circumstances may be akin to that of the initial plaintiffs.

As the second step, the defendant employer will likely object to the inclusion of some persons who have opted in. The court then applies a stricter standard to decide whether the members in question are, in fact, similar enough to proceed to trial as a group. The “second cut” reduces the size of the potential class previously identified.

Swales does away with this two-step process in the Fifth Circuit. It requires courts to take a hard look at whether workers are similarly situated in the first place. This initial review:

• identifies what facts and legal considerations will be material to determining whether a group of employees that is similarly situated; and
• authorizes preliminary discovery necessary to make that determination, which will vary according to the facts on hand.

Only those in the resulting group can be sent an invitation to opt-in to the lawsuit. The Swales process reduces the size of the class from the beginning, rather than waiting until the second step.

Good Wage and Hour Legal Help Will Benefit the Collective Action and Avoid Potential Pitfalls

The new process for certifying who is eligible to participate in an FLSA collective action clearly takes some strategic thinking. Following are only a few of the potential pitfalls of the new process:

• It seems designed to produce a smaller class of employees at the outset. There is simply a greater risk of missing a group of similarly situated employees by notifying too few.
• There is a greater risk that potential plaintiffs will see their recoveries limited or may be barred entirely by the statute of limitation. The statute of limitation for FLSA collection actions is two or three years from the date the violation. The time continues to run until an individual opts into the lawsuit. That could be delayed if the initial process of identifying facts and legal considerations becomes protracted.
• The Swales decision establishes a new process that shifts the costs of initial discovery from the defendant employer to the presumably shallower-pocketed worker-plaintiffs because of the stage of the process in which it occurs.
• The novel process introduces a new level of uncertainty. With different federal courts interpreting and applying the same federal law differently, challenges are a near certainty. Will other federal Circuits adopt the Swales process? Is a Supreme Court challenge around the corner?

As FLSA collective actions are brought in the Fifth Circuit, other concerns will undoubtedly emerge. Now, more than ever, workers need the help of employment lawyers who have deep experience with wage and hour claims, including overtime and misclassification disputes.

Reach out to our Wage and Hour Lawyers for Legal Help

Our Texas employment lawyers have a depth of experience with wage and hour, overtime compensation, employee rights, tip, and other wage claims. We are well prepared to handle the new changes created by the Swales case to help our clients. Use this link to get started Contact Us. We offer a free evaluation of the facts of your case.