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Those familiar with FLSA and ADEA collective action litigation are well familiar with the judicially created two-step process used by most courts.&nbsp; Under the first step, misnamed &ldquo;conditional certification,&rdquo; the court first applies a lenient standard to determine if the class members are &ldquo;similarly situated.&rdquo;&nbsp; If that standard is met, the court authorizes notice to the class and potential members are permitted to opt in.&nbsp; Following a period of opt-in and additional discovery, the court will entertain a motion to decertify the class, at which time it will apply a higher standard.&nbsp; Many cases that were initially found to meet the lower, first-stage standard fail the second-stage standard.&nbsp; While this process has become common, many aspects involve unsettled questions of law.&nbsp; First, there is the whole question of the misnomers used throughout the two steps, a problem this blog and several courts have notice before.&nbsp; There have also been questions relating to the burden of proof to be applied at the second step and, in the background, what it means for the district court to have &ldquo;discretion&rdquo; to decertify at the second stage. A recent decision from the Third Circuit tries to address several of these issues and in some respects is now the only court of appeals to have done so.&nbsp; In <a href="https://employmentclassactionreport.bakerhostetlerblogs.com/wp-content/uploads/sites/8/2012/08/Zavala-v.-Wal-Mart-Stores-Inc.pdf">Zavala v. Wal Mart Stores Inc.pdf</a>&nbsp;Case No.&nbsp; 11-2381 (3d Cir. Aug. 9, 2012), the plaintiffs were a group of illegal immigrants from Eastern Europe and elsewhere who had worked as cleaning staff employed by various contractors working at Wal-Mart stores across the United States.&nbsp; They brought suit in 2003 claiming violations of the FLSA as well as claims under RICO (for the use of illegal immigrants) and for false imprisonment (contending that in some cases workers were forced to work in locked stores).&nbsp; The district court conditionally certified the class, but, following years of discovery, decertified it and granted summary judgment as to RICO and false imprisonment claims.&nbsp; The remaining individual FLSA claims were resolved on an individual basis, and the plaintiffs appealed. In a thoughtful opinion, the Third Circuit affirmed.&nbsp; As to the FLSA claims, the court also noted the lack of authority on several key procedural issues, and proceeded to address those issues.&nbsp; While the opinion is largely a &ldquo;lawyer&rsquo;s case,&rdquo; it is likely to influence the handling of FLSA collective actions well into the future.&nbsp; Among other holdings, the court found: <ol> <li>A district court may appropriately apply the two-step process.&nbsp; However, the terms &ldquo;conditional certification&rdquo; and &ldquo;decertification&rdquo; are misnomers in this context because nothing is being &ldquo;certified&rdquo; at the first step.</li> <li>At the second stage of the process, the plaintiff still has the burden of proof to establish that the class members are &ldquo;similarly situated&rdquo; and must meet that burden to a preponderance of the evidence. </li> <li>To determine whether the class members are similarly situated as the statute requires, courts should apply an&nbsp; &ldquo;ad-hoc approach, which considers all the relevant factors and make[] a factual determination on a case-by-case basis.&rdquo;</li> <li>In this context, the district court&rsquo;s findings of fact should be reviewed for clear error, but its &ldquo;discretion&rdquo; is limited.&nbsp; If the court finds that the class members are similarly situated, it must certify the class and, presumably, if the court does not make such a finding the class cannot be certified.</li> </ol> The Third Circuit upheld the district court&rsquo;s holding that the class members were not similarly situated.&nbsp; They worked at man different stores in dozens of states and the defenses as to the different groups of plaintiffs varied.&nbsp; Although there were certain common elements among the plaintiffs, the differences were such that the district court did not err in refusing to find them to be similarly situated. The bottom line:&nbsp; The Third Circuit has now established comprehensive standards to be applied when determining whether to decertify an FLSA or ADEA collective action.

Third Circuit Sets Forth Standards for Collective Actions and Affirms Decertification of Class