For Whom the Filing Tolls - Beware of Hidden Traps
Time Limitations and Court Supervision in
in Class Actions Under the FLSA and the ADEA
The Underlying Statutes
Generally an attorney is justified in believing that any statutory time limitation on the filing of an action is tolled when the complaint is filed with the Clerk of Court. This belief may not be justified where the complaint is filed pursuant to the Fair Labor Standards Act (the "FLSA") or the Age Discrimination in Employment Act (ADEA). If the complaint contains an allegation that the suit is being brought on behalf of individuals in addition to the named plaintiffs, events subsequent to the filing of the complaint potentially can prevent the tolling of the limitations. Additionally the limitation period may still be running for those "unnamed" other individuals.
The FLSA permits an action to collect unpaid minimum wages and overtime compensation
to be filed "...by any one or more employees for and in behalf of himself or themselves and other employees similarly situated." The statute allows that an action "...may be commenced within two years after the cause of action accrued ... except that a cause of action arising out of a wilful violation may be commenced within three years after the cause of action accrued." It follows that when violations have been occurring for two or more years, a day of recovery may be lost for each day that passes without an action being filed.
Under the ADEA an individual has 300 days from the date of an alleged act of discrimination to file an administrative charge with the EEOC in a state that has a law with prohibitions and enforcement proceedings similar to those provided by the ADEA. Such a state is known as a "deferral state." In a deferral state a suit may not be filed until sixty days after proceedings have been commenced under state law. In a non-deferral state a complainant must file an administrative charge with the EEOC within 180 days of an alleged occurrence. In either type of jurisdiction suit may not be filed until at least 60 days after the filing of an administrative charge with the EEOC. The 1991 Civil Rights Act amendment to the ADEA requires that a civil action must be commenced by a charging party within 90 days of receiving notice from the EEOC that it has terminated proceedings.
Section 216(b) of the FLSA allows an action to be brought by an employee on behalf of "... other employees similarly situated," but it limits who may be bound or benefitted by a representative action. The FLSA provides that "No employee shall be a party plaintiff to any such action [on behalf of "other employees similarly situated"] unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought." The ADEA adopts this section specifying that it is to "...be enforced in accordance with the powers, remedies and procedures provided in Section[ ] 216...of this title..."
The language of section 216 has been held to provide the exclusive means of filing a representative action under the FLSA and the ADEA. No potential plaintiff may either recover under or be bound by a representative action unless that individuals "opts in" by filing a consent. "Opt out" class actions under Rule 23 of the Federal Rules of Civil Procedure are not permitted. The Fifth Circuit so ruled in an ADEA case, LaChapelle v. Owens-Illinois, Inc., (5th Cir. 1975), finding that "Rule 23(c) provides for 'opt out' class actions. FLSA 16(b) allows as class members only those who 'opt in.' These two types of class actions are mutually irreconcilable." The Federal Appellate Court for the Eighth Circuit, in Schmidt v. Fuller Brush Company, followed the reasoning of LaChapelle. It issued a writ of mandamus against district court Judge Miles Lord who had allowed an FLSA action to proceed under Rule 23. The Ninth Circuit also held that FLSA class actions may not be brought under Rule 23 in Partlow v. Jewish Orphans Home of Southern California, Inc.
When Does the Clock Stop Running
There is no disputing that when an individual action is filed the action is deemed to have been commenced with the filing of the complaint. When a "collective or class" FLSA or ADEA action is filed, however, the named plaintiff or plaintiffs as well as those who opt in must file consents, whether at the same time as the complaint is filed or later.
A determinative question that may arise is when is an action a "collective or class" action within the meaning of section 16 of the FLSA? In Gray v. Swanee-McDonald, Inc. the Federal Appellate Court for the Ninth Circuit held that an FLSA action does not fulfill that definition merely because it is a multi-party action. The court found that in order for a suit to be a class action the complaint must allege that it is brought on behalf of unnamed individuals. It reasoned that no individual could be bound by the action but the named parties. The court observed that:
The act does not define the unusual expression "collective action." But the legislative history dictates that Congress intended the term to apply only to a representative action. The Conference Report states that a "Collective action [is] an action brought by an employee or employees for or in behalf of himself or themselves and other employees similarly situated..."...The intent was to limit the res judicata effect of an action under this Act to those who chose to be involved in it. This action was not brought for the benefit of unnamed plaintiffs, or in the name of any plaintiff who was suing in a representative capacity. Each plaintiff sued for himself. No res judicata effect could attach to anyone other than the named parties. The joinder of several plaintiffs in a single action does not convert their individual suits into a "collective or class" action. (Citations omitted, emphasis supplied)
Like reasoning was applied by the Sixth Circuit in a multiple plaintiff ADEA case, Morelock v. the NCR Corporation. The defendant argued that the suit was time barred as the named plaintiffs had not filed consents. The court held that the filing of consents was not necessary as the action consisted of individual suits. The plaintiffs did not purport to represent any unnamed individuals.
Unnamed individuals may not join an FLSA action by filing a consent unless the complaint contains an allegation that it is being brought in a representative capacity. Where the action is not in a representative capacity the limitations for those who later join is not tolled until their complaints are filed. Atkins v. General Motors Corporation.
Under the reasoning of the Sixth and Ninth Circuits, the complaint, at the very least, must allege that the action is being brought in a representative capacity for individuals other than the named plaintiffs before it is subject to the requirement that the named plaintiffs must file consents. The next question is does the mere allegation that the action is being brought in a representative capacity makes it a collective or class action? The courts are not in agreement on this issue.
The Hidden Trap
In Allen v. Atlantic Richfield Co., an FLSA action, the Fifth Circuit held that neither the facts that class allegations are made in the complaint or that numerous plaintiffs join in the suit make the action a class suit.
Although in their complaints plaintiffs stated that they sought to represent "other similarly situated Atlantic Richfield employees," the action never evolved into a collective or class action since no unnamed plaintiff ever came forward and filed a written consent to the suit, asking to be made a party plaintiff. The only parties to the suit were named plaintiffs represented by the lawyer who signed the complaint.
Thus under the reasoning of the Fifth Circuit an FLSA case does not become a class action until the first consent is filed. It follows that a timely filed suit in which individual plaintiffs allege they are suing on behalf of others is not a class action when no one has filed a consent . However if several months down the road others file consents, the action turns into a class action. If the original plaintiffs had not filed consents when they filed their complaints, the limitations may still be running on their actions until they subsequently file consents. It follows by this reasoning that retroactively, after a timely suit has been filed, a subsequent act by one opting into the alleged class can result in making the limitation period run ex post facto. In other words a suit that was timely when it was filed may become in whole or in part untimely.
The carefully analyzed opinion of the Federal District Court for the District of Nevada in Bonilla v. Las Vegas Cigar Company takes a different view. In this FLSA action the court ruled in accordance with what it believed the Ninth Circuit would find in such a case. In Bonilla the court held that an allegation in a complaint that the suit is being brought on behalf of parties not named in the complaint makes the suit a representative action ab initio. "The mere fact that no unnamed plaintiff chose to exercise this option [to opt in] is irrelevant to the determination of whether the plaintiffs filed a collective action." Under this line of reasoning, after the complaint is filed the clock keeps running on the claim of any named plaintiff for whom a consent is not filed with the complaint. This does not change whether others do or do not later opt in. The commencement of an FLSA representative action requires both the filing of a complaint and the filing of a consent. A class action is not considered to have commenced on behalf of a named plaintiff or any other individual until both of these events take place.
The court astutely observed in Bonilla that under the contrary reasoning of Allen v. Atlantic Richfield Co., supra, where representative plaintiffs make class allegations:
...but do not file consents, they are at the mercy of any unnamed plaintiff opting into the suit. Once another plaintiff opts in, the named plaintiffs would have to file their consents, and the statute of limitations would be tolled from the date the consents are filed, not from the date of the complaint. Thus, whether the lawsuit is determined to be a collective action would be based not on the individuals already parties to the lawsuit but instead upon potential parties, a result not intended by the statute.
Who May Opt In?
The ADEA
The ADEA makes the filing of an administrative charge with the EEOC a prerequisite to maintaining a suit. Under certain circumstances an individual who has not filed a timely ADEA administrative charge with the EEOC may "piggyback" onto a class action filed by one who has filed a timely complaint. Grayson v. K Mart Corporation. In Grayson the court, citing Calloway v. Partners National Health Plan held that a plaintiff may piggyback where "(1) the relied on charge [to which he is piggybacking] is not invalid, and (2) the individual claims of the filing and the non-filing plaintiff [the named filing plaintiff and the piggybacking plaintiff] arise out of similar discriminatory treatment in the same time frame."
Section 216(b), as incorporated into the ADEA, requires that those opting in must be "similarly situated." Similarly situated" for purposes of 29 U.S.C. § 216(b) is not as rigid as the requirements of rule 23 for commonality. In Grayson the court quoted with approval Flavel v. Svedala Industries, Inc., 875 F. Supp. 550, 553 (E.D. Wis. 1994) "The 'similarly situated' requirement ...is considerably less stringent than the requirement of [Rule 23(b)(3)] that common questions 'predominate' or presumably the Rule 20(a) requirement that claims 'arise out of the same action or occurrence.'" The court further found at 79 F.3d 1096 that "[P]laintffs need show only that their positions are similar, not identical, to the positions held by the putative class members." (quoting Sperling v. Hoffman-LaRoche, Inc. 118 F.R.D. 392, 407 (D.N.J. 1988). It is worth noting that in Grayson the complainants were all K Mart store managers, which at least on the surface appears to give them a reasonable claim to being similarly situated.
The holding in Grayson, notwithstanding, courts will not in every case find claimants to be similarly situated. This is illustrated in Mooney v. Aramco Services Co., an ADEA case in which 154 individuals, including the original plaintiffs, who lost their employment opted in. The appellate court upheld the trial court's decertification of the class, quoting with approval the lower court's reasoning:
An analysis of the pertinent facts in the case at bar reveals the would-be members of the ADEA representative class were subject to vastly disparate employment situations. First ...Plaintiff's were employed by at least 93 different Aramco departments scattered over 11 separate locations in Saudi Arabia. Virtually every plaintiff worked in a different division of the company and held a distinct job title requiring different job skills. Moreover, Plaintiffs differ significantly in employment characteristics such as job tenure (varying from 1 to 34 years), employment history, salary grade, qualifications and education. Plaintiffs were of vastly different ages when hired, and varied in age at termination from 40 to 68...Plaintiffs were discharged from their employment in several different years upon the recommendations of different decision making supervisors for a variety of reasons.
The requirement for class members to be similarly situated in some cases can be met by a showing that they have been adversely affected by a pattern and practice of discrimination. In such a case individual plaintiffs may be found to be similarly situated even where there are individualized circumstances and defenses surrounding the conditions of their employment. Individual claims of age discrimination having no common nexus, however, will not be suitable for establishing a pattern and practice.
When Does the Clock Stop?
When an ADEA action is on behalf of a class the courts are split on whether it is considered to have been commenced by or on behalf of any individual on the date on which that individual's consent is filed or whether the filing of the consent of the opt in party relates back to the filing of the original complaint. In addressing this issue the courts have looked at section 7 of the Portal to Portal Act which is not specifically adopted by the ADEA. As mentioned previously that section requires the filing of both a class complaint and a consent for each person on whose behalf it is being filed before an action is deemed to be commenced on behalf of any such individual.
The fact that this provision is not expressly incorporated into the ADEA did not deter the court from considering its language in Grayson v. K Mart Corporation, supra. The court held that the statute of limitations is not tolled for opt in parties until their consents are filed. It reasoned that "The legislative history of both § 2l6(b) and the ADEA show that Congress meant for ADEA actions to be governed by the tolling principal of § 256 of the FLSA." The court concurred with a like ruling in O'Connell v. Champion Int'l Corp. 812 F2d 393 (8th Cir. 1987) while rejecting the contrary holding in Sperling v. Hoffman-LaRoche.
Sperling held that the filing of the original representative complaint tolls the statute of limitations for ADEA opt-in plaintiffs. The Sperling court allowed individuals whose claims were otherwise time barred to opt in to a timely filed representative ADEA action. The Third Circuit held that:
...a representative action brought under the ADEA is commenced on behalf of all consenting class members when the original representative complaint is filed. ... When filed within the statute of limitations, the original complaint, as long as it show on its face its representative nature, tolls the running of the statute of limitations." (internal citations omitted).
In Sperling the court noted that the ADEA incorporated portions of both the FLSA and Title VII of the 1964 Civil Rights Act. Title VII class actions are brought under Rule 23. The court reasoned that by not specifically incorporating Section 7 of the Portal to Portal Act into the ADEA Congress intended for the same tolling rule to apply in ADEA actions as applies to those in class action brought under Rule 23. The court applied the holding in American Pipe & Construction Co. v. Utah in which the Supreme Court ruled that the timely filing of a Rule 23 class complaint tolled the limitations for all members of the class.
In Hipp v. Liberty National Life Insurance Co. the court limited those who can opt into an ADEA case. The court considered the requirement, as set forth in Grayson, supra, that one who opts into an ADEA action must have a claim in the "same time frame" as the party who has filed a timely charge. The court held that no one was eligible to opt in who could not have filed a timely administrative charge on the date that the charge of the representative plaintiff was filed. This reasoning prevents the revival of otherwise time-barred claims. Thus the combined holdings in Grayson and Hipp present two procedural prerequisites to opting into an ADEA class action. The time for filing suit must not have expired when the consent is filed (except in the Third Circuit where Sperling is the law) and the individual opting in must have been able to file a timely charge on the date that the charge of the representative party was filed.
In Hipp the court also considered the "forward scope" of a permissible opt in claim. It held that an individual may not opt in if the alleged discriminatory occurrence occurred after the date on which the charge of the representative party was filed. In such a case the complained of occurrence would not yet have taken place when the representative party's charge was filed. Therefore the party would not have had a viable claim on the date the representative party's charge was filed. Accordingly that individual may not opt in.
The FLSA
Unlike the ADEA, it is not necessary to file an administrative agency charge as a prerequisite to maintaining an FLSA action. An aggrieved individual may proceed directly to suit. The effect of section 7 of the Portal to Portal Act is that in a class action the time is not tolled for any individual until that person's consent is filed. Therefore in an FLSA case, even under the Third Circuit Sperling holding, the later filing of an opt in consent will not relate back to the date of the filing of the original action. The recovery by one who opts into an FLSA action is limited to minimum wage or overtime compensation for the period within two years prior to the filing of the consent, or three years for willful violations.
The requirement that those who opt into an FLSA action be similarly situated is a potential obstacle. The reasoning in Grayson v. K Mart Corporation, supra, allows a wider variety of claims to be classified as similarly situated than would be in a Rule 23 case. Particularly well suited to combining in the same action are cases where several people in the same job classification are claiming overtime and the defense is that the particular job is exempt. A class action in which employees claim that they were improperly denied compensation for on-call time during which they were required to sleep on the employer's premises might also suitable. A case where a group of employees claim that they were denied pay for time spent in the same or similar training could also be appropriate. Other examples might include claims that an employer has a practice of telling employees not to record all hours worked. Employees who claim that they were compelled to perform more work in a non-overtime week than was possible on pain of losing their employment if they could not complete their assignments in 40 hours are also likely to be similarly situated. All of which should give an employer a mighty incentive to enforce strict compliance with the FLSA.
Case Management by the Court of ADEA and FLSA Cases
Once a suitable representative plaintiff has appeared and potential types of class member have been considered, counsel for both sides are faced with preliminary questions. Plaintiff's counsel will want to identify and notify individual potential opt-ins. Defense counsel may want to raise questions as to the timeliness of the claims of some members of the class and whether all who are identified are "similarly situated."
Rule 23 provides considerable guidance to the court in handling questions that are endemic to class actions such as determining the propriety of a class and giving notice to class members. On the other hand Section 216 of the FLSA is entirely lacking in guidance to the courts in dealing with these situations. Courts have had to struggle with these question on their own. The Supreme Court partially illuminated the way for the district courts in Hoffman-LaRoche, Inc. v. Sperling. The Court held that in and ADEA action (and presumably an FLSA action) a district court may compel discovery of the names of potential class members. Additionally, resolving a split among the circuits, the Court found that a district court may participate in the notice process. The Court recognized that trial court participation in the management of the case was advisable to facilitate the progress of the proceeding. It reasoned that:
...Questions of notice, proper discovery, and the validity of consents were intertwined.
Court authorization of notice serves the legitimate goal of avoiding a multiplicity of duplicative suits and setting cutoff dates to expedited disposition of this action. In this case, the trial court, as part of its order, set a cutoff date for filing of consents, as it was bound to do, if the action was to proceed in diligent fashion. By approving the form of notice sent, the trial court could be assured that its cutoff date was reasonable, rather than having to set a cutoff date based on a series of unauthorized communications or even gossip that might have been misleading.
The Court emphasized that "Court intervention in the notice process for case management purposes is distinguishable in form and function from the solicitation of claims." It further admonished that the trial court must carefully maintain neutrality and "...take care to avoid even the appearance of judicial endorsement of the merits of the action."
In Mooney v. Aramco, supra, the court dealt with the manner of proceeding in making class determinations. In doing so it adopted the procedure used by the trial court in Lusardi v. Xerox Corp.:
Under Lusardi the trial court approaches the 'similarly situated' inquiry via a two-step analysis. The first determination is made at the so-called 'notice stage.' At the notice stage, the district court makes a decision - - usually based only on the pleadings and any affidavits which have been submitted - - whether notice of the action should be given to potential class members.
Because the court has minimal evidence, this determination is made using a fairly liberal standard and typically results in a 'conditional certification' of a representative class. If the district court 'conditionally certifies' the class, putative members are given notice and the opportunity to 'opt-in.' The action proceeds as a representative action throughout discovery.
The second determination is typically precipitated by a motion for 'decertification' by the defendant usually filed after discovery is largely complete and the matter is ready for trial. At this stage, the court has much more information on which to base its decision, and makes a factual determination on the similarly situated question. If the claimants are similarly situated, the district court allows the action to proceed to trial. If the claimants are not similarly situated, the district court decertifies the class, and the opt-in plaintiffs are dismissed without prejudice. The class representatives - i.e. the original plaintiffs - proceed to trial on their original claims. (footnotes omitted)
In Hipp v. Liberty National Life Insurance Co., supra, the Eleventh Circuit, deferring to the discretion of the trial court, held that the lower court did not err in failing to use the two tiered approach described in Mooney. The Hipp court did observe, however, that the two tiered approach is an effective tool to manage class actions. It suggested the adoption of this procedure by the district courts in the circuit for future cases.
Concluding Thoughts - The Lessons Learned
It is obvious that plaintiff's counsel who makes class allegations should cover themselves at the outset of the case by filing consents of the named plaintiffs with the complaint. If there is any thought that the action will be suitable for a class action, allegations should be made that it is a representative action in the original complaint. Subsequent amendment of the complaint to include class allegations may result in untimeliness of all or a portion of the named plaintiff's claim if consents have not been filed by the named plaintiffs. Plaintiff's counsel should look at the circumstances of those to be included in the class to determine if they are in fact similarly situated. Consideration should also be given to whether their claims arose in the appropriate time frame. If plaintiff's counsel fails in this respect, defense counsel most likely will not. Plaintiff's counsel may discover names of potential class members and move for court approved notice to them. Defense counsel should consider asking for court review of the potential class at an early stage of the proceeding. Defense counsel should not, however, fail to ask the court to take a second look later in the action and move for decertification where appropriate.
07/11/01
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