Seyfarth Synopsis: As detailed in our 2020 Workplace Class Action Litigation Report, 2019 was an interesting year for employers in terms of class certification rulings. Plaintiffs achieved the highest numbers of initial conditional certification rulings of wage & hour collective actions in the last decade, and likewise increased their success rates in ERISA and employment discrimination class actions
Anecdotally, surveys of corporate counsel confirm that complex workplace litigation – and especially class actions and multi-plaintiff lawsuits – remains one of the chief exposures driving corporate legal budgetary expenditures, as well as the type of legal dispute that causes the most concern for companies.
The prime component in that array of risks is indisputably complex wage & hour litigation.
The circuit-by-circuit analysis of 303 class certification decisions in all varieties of workplace class action litigation is detailed in the following map:
Wage & Hour Certification Trends
Plaintiffs achieved robust numbers of initial conditional certification rulings of wage & hour collective actions in 2019, while employers secured less defeats of conditional certification motions and decertification of § 216(b) collective actions. The percentage of successful motions for decertification brought by employers saw a slight increase in 2019 to 58%. This compared to 52% in 2018, an increase of 6%. At the same time, this was 5% less than the figure of 63% in 2017.
Most significantly, for the fourth year in a row, wage & hour filings in federal courts decreased; moreover, the number of filings in 2019 were at the lowest level in the past decade. That being said, the volume of FLSA lawsuit filings for the preceding four years – during 2015, 2016, 2017, and 2018 – were at the highest levels in the last several decades. Many of these cases remain in the pipeline within federal courts, and the result is a burgeoning case load of wage & hour issues.
To be sure, an increase in FLSA filings over the past several years has caused the issuance of more FLSA certification rulings than in any other substantive area of complex employment litigation – 271 certification rulings in 2019, as compared to 273 certification rulings in 2018, 257 certification rulings in 2017, 224 certification rulings in 2016, and 175 certification rulings in 2015.
The analysis of these rulings – discussed in Chapter V of this Report – shows that a high predominance of cases are brought against employers in “plaintiff-friendly” jurisdictions such as the judicial districts within the Second and Ninth Circuits. For the first time in a decade, however, rulings were equally voluminous out of the Fifth and Sixth Circuits, which also tended to favor workers over employers in conditional certification rulings.
This trend is shown in the following map:
The statistical underpinnings of this circuit-by-circuit analysis of FLSA certification rulings is telling in several respects.
First, it substantiates that the district courts within the Second, Fifth, Sixth and Ninth Circuits are the epi-centers of wage & hour class actions and collective actions. More cases were prosecuted and conditionally certified – 36 certification orders in the Sixth Circuit, 36 certification orders in the Second Circuit, 31 certification orders in the Ninth Circuit, and 31 certification orders in the Fifth Circuit – in the district courts in those circuits than in any other areas of the country. For the first time in recent memory, the Sixth Circuit – which encompasses the states of Kentucky, Michigan, Ohio, and Tennessee – had as many or more certifications than either the Second or Ninth Circuits.
Second, as the burdens of proof reflect under 29 U.S.C. § 216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (199 of 245 rulings, or approximately 81%) in 2019, which was even higher than the 2018 numbers (196 of 248 rulings, or approximately 79%, which was the highest percentage of plaintiff wins ever recorded in the last decade). Furthermore, in terms of “second stage” decertification motions, employers prevailed in roughly 58% of those rulings (15 of 26 rulings).
Overall, these statistics show robust numbers for the plaintiffs’ bar. The “first stage” conditional certification statistics for plaintiffs at 81% in 2019 were even more favorable to workers than in 2018, when plaintiffs won 79% of “first stage” conditional certification motions (and relative to 2017, when plaintiffs won 73% of “first stage” conditional certification motions). However, employers fared better in 2019 on “second stage” decertification motions. Employers won decertification motions at a rate of 58%, which was up from 52% 2018 (although down from 63% in 2017).
The following chart illustrates this trend for 2019:
Third, this reflects that there has been an on-going migration of skilled plaintiffs’ class action lawyers into the wage & hour litigation space for close to a decade. Experienced and able plaintiffs’ class action counsel typically secure better results. Further, securing initial “first stage” conditional certification – and foisting settlement pressure on an employer – can be done quickly (almost right after the case is filed), with a minimal monetary investment in the case (e.g., no expert is needed, unlike when certification is sought in an employment discrimination class action or an ERISA class action), and without having to conduct significant discovery in accordance with the case law that has developed under 29 U.S.C. § 216(b).
As a result, to the extent litigation of class actions and collective actions by plaintiffs’ lawyers is viewed as an investment of time and money, prosecution of wage & hour lawsuits is a relatively low cost investment, without significant barriers to entry, and with the prospect of immediate returns as compared to other types of workplace class action litigation.
Hence, as compared to ERISA and employment discrimination class actions, FLSA litigation is less difficult or protracted for the plaintiffs’ bar, and more cost-effective and predictable. In terms of their “rate of return,” the plaintiffs’ bar can convert their case filings more readily into certification orders, and create the conditions for opportunistic settlements over shorter periods of time.
The certification statistics for 2019 confirm these factors.
The great unknown for workplace class action litigation is the impact of the Epic Systems ruling, and whether it reduces class action activity in the judicial system and depresses settlement values of workplace lawsuits. At least insofar as 2019 is concerned, the fact that there were less conditional certification rulings suggests that a percentage of lawsuits were exited from the court systems either voluntarily or via motions to compel arbitration before courts ever passed on motions for conditional certification. Likewise, employers achieved many key victories in precluding class and collective actions from being litigated in federal courts (and conversely, successfully compelling such disputes to be litigated on a single plaintiff, bi-lateral basis in arbitration).
At the same time, a future Congress may effectuate a legislative response to abrogate or limit the impact of workplace arbitration agreements with class action waivers, but that will be dependent upon ideological and political dynamics based on future elections.
As a result, Epic Systems may well impact case filing numbers in the near term.
Employment Discrimination & ERISA Certification Trends
Against the backdrop of wage & hour litigation, the ruling in Wal-Mart also fueled more critical thinking and crafting of case theories in employment discrimination and ERISA class action filings in 2019.
The Supreme Court’s Rule 23 decisions have had the effect of forcing the plaintiffs’ bar to “re-boot” the architecture of their class action theories.
At least one result was the decision three years ago in Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016), in which the Supreme Court accepted the plaintiffs’ arguments that, in effect, appeared to soften the requirements previously imposed in Wal-Mart for maintaining and proving class claims, at least in wage & hour litigation.
Hence, it is clear that the playbook on Rule 23 strategies is undergoing a continuous process of evolution.
Filings of “smaller” employment discrimination class actions have increased due to a strategy whereby state or regional-type classes are asserted more often than the type of nationwide mega-cases that Wal-Mart discouraged. Plaintiffs’ counsel are more selective, strategic, and savvy relative to calibrating the focus of their cases and aligning the size of the proposed class to the limits of Rule 23 certification theories.
In essence, at least in the employment discrimination area, the plaintiffs’ litigation playbook is more akin to a strategy of “aim small to secure certification, and if unsuccessful, then miss small.”
In turn, the plaintiffs’ bar did considerably better in 2019 in employment discrimination class actions, as success on certification motions in 2019 was more than double over the year before. In 2019, 7 of 11 motions were granted and 4 of 11 motions were denied. This was a significant uptick as compared to 2018 when only 3 of 11 motions were granted for plaintiffs and 8 of 11 motions were denied. Instead, the past year was more closely comparable to 2017, when 7 of 11 motions were granted and 4 of 11 motions were denied.
The initial certification rate of 64% was one of the highest on record over the last decade for employment discrimination class actions. That being said, in the 4 decertification motions brought in this substantive area, employers won 100% of those motions.
The following map demonstrates the array of certification rulings in Title VII and ADEA discrimination cases:
In terms of the ERISA class action litigation scene in 2019, the focus continued to rest on precedents of the U.S. Supreme Court as it shaped and refined the scope of potential liability and defenses in ERISA class actions.
The Wal-Mart decision also has changed the ERISA certification playing field by giving employers more grounds to oppose class certification.
The decisions in 2019 show that class certification motions have the best chance of denial in the context of ERISA welfare plans, and ERISA defined contribution pension plans, where individualized notions of liability and damages are prevalent.
While plaintiffs were more successful than employers in litigating certification motions in ERISA class actions, their success rate was on par with previous years. In 2019, plaintiffs won 11 of 17 certification rulings, a success rate of 65%. By comparison, in 2018 plaintiffs won 11 of 17 certification rulings for a nearly identical success rate; in contrast, in 2017, plaintiffs won 17 of 22 certification motions, with a success rate of 77%.
A map illustrating these trends is shown below:
So what conclusions overall can be drawn on class certification trends in 2019?
In the areas of wage & hour, employment discrimination, and ERISA claims, the plaintiffs’ bar is converting their case filings into certification of classes at a high rate. To the extent class certification aids the plaintiffs’ bar in monetizing their lawsuit filings and converting them into class action settlements, the conversion rate is robust.
Whereas class certification for employment discrimination cases (7 motions granted and 4 motions denied in 2019) and in ERISA cases (11 motions granted and 6 motions denied in 2019) showed an approximate 64% to 65% success rate for plaintiffs, the plaintiffs’ success rate factor in wage & hour litigation (with 199 conditional certification motions granted and 46 motions denied) is pronounced.
The following bar graph details the win/loss percentages in each of these substantive areas:
– a success rate of 64% for certification of employment discrimination class actions (both Title VII and age discrimination cases);
– a success rate of 65% for certification of ERISA class actions; and,
– a success rate of 81% for conditional certification of wage & hour collective actions.
Obviously, the most certification activity in workplace class action litigation is in the wage & hour space.
The trend over the last three years in the wage & hour space reflects a steady success rate that ranged from a low of 70% to a high of 81% (with 2019 representing the highest success rate ever) for the plaintiffs’ bar, which is tilted toward plaintiff-friendly “magnet” jurisdictions where the case law favors workers and presents challenges to employers seeking to block certification.
The key statistic and bright spot in 2019 for employers was an increase in the odds of successful decertification of wage & hour cases to 58%, as compared to 52% in 2018 (and comparatively, of 63% in 2017).
Comparatively, the trend over the past five years for certification orders is illustrated in the following chart:
While each case is different and no two class actions or collective actions are identical, these statistics paint the all-too familiar picture that employers have experienced over the last several years. Plaintiffs have done exceedingly well in certification proceedings.
The new wrinkle to influence these factors in 2019 was the Supreme Court’s ruling in 2018 in Epic Systems. Overall case filing numbers were down. This reflects that lawsuits moved out of the court system and into arbitration at greater rates than ever before. The bottom line is that the most effective tool to defeating class action litigation is to avoid lawsuits altogether (where plaintiffs’ lawyers voluntarily agree to proceed to arbitration) or to win a motion to compel arbitration before a certification motion is ever litigated.
Lessons From 2019
There are multiple lessons to be drawn from these trends in 2019.
First, while the Wal-Mart ruling undoubtedly heightened commonality standards under Rule 23(a)(2) starting in 2011, and the Comcast decision tightened the predominance factors at least for damages under Rule 23(b) in 2013, the plaintiffs’ bar has crafted theories and “work arounds” to maintain or increase their chances of successfully securing certification orders in ERISA, wage & hour, and employment discrimination lawsuits. In 2019, their certification conversion rate for ERISA and employment discrimination cases was 65% and 64% respectively, while wage & hour cases showed an 81% conversion rate. This was the highest conversion rate ever for FLSA and employment discrimination cases.
Second, the defense-minded decisions in Wal-Mart and Comcast have not taken hold in any significant respect in the context of FLSA certification decisions for wage & hour cases. Efforts by the defense bar to use the commonality standards from Wal-Mart and the predominance analysis from Comcast have not impacted the ability of the plaintiffs’ bar to secure first-stage conditional certification orders under 29 U.S.C. § 216(b). If anything, the ruling three years ago in Tyson Foods has made certification prospects even easier for plaintiffs in the wage & hour space, insofar as conditional certification motions are concerned. The conversion rate of successful certification motions hit an all-time high of 81% in 2019, which further confirms this evolution of the case law in this space.
Third, while monetary relief in a Rule 23(b)(2) context is severely limited, certification is the “holy grail” in class action litigation, and certification of any type of class – even a non-monetary injunctive relief class claim – often drives settlement decisions. This is especially true for employment discrimination and ERISA class actions, as plaintiffs’ lawyers can recover awards of attorneys’ fees under fee-shifting statutes in an employment litigation context. In this respect, the plaintiffs’ bar is nothing if not ingenuous, and targeted certification theories (e.g., issue certification on a limited discrete aspect of a case) are the new norm in federal and state courthouses.
Fourth, during the certification stage, courts are more willing than ever before to assess facts that overlap with both certification and merits issues, and to apply a more practical assessment of the Rule 23(b) requirement of predominance, which focuses on the utility and superiority of a preclusive class-wide trial of common issues. Courts are also more willing to apply a heightened degree of scrutiny to expert opinions offered to establish proof of the Rule 23 requirements.
Finally, employers now have an effective weapon to short-circuit the decision points for class action exposure through use of mandatory workplace arbitration agreements. Based on the Epic Systems ruling, a class waiver in an arbitration agreement is now an effective first-line defense to class-based litigation. Throughout 2019, employers used arbitration defenses to fracture class actions and convert them into individual, bi-lateral arbitration proceedings.
In sum, notwithstanding these shifts in proof standards and the contours of judicial decision-making, the likelihood of class certification rulings favoring plaintiffs are not only “alive and well” in the post-Wal-Mart and post-Comcast era, but also thriving.
The battle ground is likely to shift in the coming years, as employers may create a bulwark against such class-based claims based on the Epic Systems ruling.