A Lesson in What Strip Clubs Can Teach You About the FLSA

strip clubEarlier this month, four former dancers filed a wage and hour collective action against the owners of Cheetahs Gentlemen's Club & Restaurant, an adult entertainment night club in New York. Rodriguez, et al. v. Three Amigos SJL Inc., et al., Case No. 1:15-cv-00823-UA (S.D. N.Y. Feb. 4, 2015). Cheetahs (an unfortunate name for an employer alleged to have cheated its employees out of their respective earnings), is the latest in a long line of employers to have been hit with one of these lawsuits. In fact, just last week, a federal jury in Maryland awarded nearly $197,000 in compensatory damages to six exotic dancers who claimed they were underpaid as a result of being improperly classified as independent contractors. McFeeley v. Jackson Street Entertainment LLC, et al., Case No. 8:12-cv-01019 (D. Md.).

The Fair Labor Standards Act (FLSA) was enacted in 1938 to establish minimum wage, overtime pay eligibility, record keeping and child labor standards. Despite the fact that the FLSA was enacted nearly eighty years ago, FLSA wage and hour lawsuits are one of the fastest growing areas of litigation. In light of their growing popularity, here's three things you should know about FLSA wage and hour lawsuits.

1.     It's a Collective Action – Not a Class Action.

A lawsuit brought under the FLSA may be brought as a collective action under section 216(b). 29 U.S.C. §216(b). Collective actions are different than class actions. Collective actions involve a phased "certification" process. Unlike the "rigorous analysis" standard applied to Rule 23 class actions, a court may conditionally certify a class under the more lenient "similarly situated" standard. 29 U.S.C. §216(b). The statute does not define similarly situated or prescribe a certification process. Most courts, however, employ a two-phase process.

The first phase is often referred to as the notice or conditional certification phase. The standard here is low. If plaintiffs can make a threshold showing that they are similarly situated via declarations or minimal discovery, then the court will usually order that the class be conditionally certified. Often, a showing that the plaintiffs are subject to the same policy or practice, or engage in similar duties for comparable pay, is enough. Once the class is conditionally certified, notice is given to putative class members.

The second phase occurs after the close of discovery and, usually, upon the filing of a motion to decertify by the defendant. The court's analysis at this stage is more stringent, though still not as "rigorous" as what occurs when a court evaluates a defendant's opposition to a Rule 23 motion for class certification. In a collective action under the FLSA, courts consider several factors, including fairness and procedural considerations.

2.     You Have to Opt In.

Unlike Rule 23 class actions, employees must opt in to a collective action. 29 U.S.C. §216(b). Section 216(b) provides, in relevant part, "No employee shall be a party plaintiff to any such action 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." (Emphasis added.) Therefore, once a class is conditionally certified and notice is provided, employees (or former employees) must affirmatively opt into the class. Because opting in requires this affirmative action on the part of the employee, any person who opts in is considered a party plaintiff, unlike absent class members in a Rule 23 class action.

In light of the FLSA's opt in requirement, fewer plaintiffs decide to participate. To circumvent this problem, plaintiffs' lawyers often seek to certify comparable state law claims under Rule 23. These "hybrid" lawsuits pose a myriad of issues. For example, some district courts are unwilling to exercise supplemental jurisdiction over the state law claims because the state law claims predominate; or, the district court finds that the plaintiff cannot show that a class action is superior under Rule 23(b)(3). Other courts permit hybrid suits to proceed. Early motion practice can be invaluable to narrowing these hybrid cases to smaller, more manageable and (potentially) less expensive collective actions.

Recently, though, the Second Circuit may have breathed life back into these hybrid lawsuits. In Roach, et al. v. T.L. Cannon Corp., et al., Case No. 13-3070-cv and Jacob, et al. v. Duane Reade Inc., Case No.13-3209-cv, the appellate court vacated district court decisions denying class certification of state law wage and hour claims. In Roach, the Second Circuit found that the Supreme Court's decision in Comcast Corp. v. Behrend did not change the prior law of the Circuit that "individualized damages determinations alone cannot preclude certification under Rule 23(b)(3)."

3.     Liquidated Damages are Available Under the FLSA.

The FLSA provides for recovery of liquidated damages to successful wage and hour plaintiffs. 29 U.S.C. §216(b). Liquidated damages may be awarded in an amount equal to an award for lost or unpaid wages. These damages are often referred to as "double damages." In McFeeley, referenced above, the judge added nearly $70,000 in liquidated damages to the jury's award.

Employers should take notice of the popularity of these collective wage and hour actions. Proactively reviewing workforce policies and practices, including time-keeping practices applicable to non-exempt employees, is a good start. Defending collective actions, like class actions, is expensive, time consuming and potentially damaging to your company's reputation. Don't stick your head in the sand when it comes to complying with the FLSA and its state law counterparts.

About The Author

Erin Rhinehart | Faruki Partner