FLSA lawsuits seeking unpaid minimum or overtime wages typically are brought as “collective actions,” pursuant to 29 U.S.C. § 216(b). State law claims typically are brought – often in the same lawsuit – as class actions under Federal Rule of Civil Procedure 23. Despite the large number of wage and hour class and collective actions brought in New York District Courts, the Court of Appeals for the Second Circuit has never articulated the standard district courts should apply in determining whether to “conditionally” certify a collective action under the FLSA, and there are few Second Circuit decisions reviewing the grant or denial of class certification under Rule 23 in a wage and hour case. In Myers v. Hertz Corp., 2010 U.S. App. Lexis 22098 (2d Cir., October 27, 2010), the Second Circuit addressed both issues. 

First, the Court affirmed the district court’s denial of a motion for class certification under Rule 23, finding individual inquiries regarding the application of the executive exemption predominated over common issues, making class certification inappropriate. The plaintiffs were Station Managers of Hertz Corp. classified as exempt from receiving overtime under the executive exemption. Plaintiffs argued that even though they were identified as managers, their management duties formed only a small part of their overall duties, and thus they were misclassified. Addressing only the “predominance” requirement under Rule 23, the Second Circuit held the district court did not abuse its discretion in concluding that individual inquiries would predominate, noting the applicability of the exemption requires an analysis of the actual duties performed by each manager, “a complex, disputed issue” which turns on the application of detailed DOL regulations.  The Court rejected the plaintiffs’ argument that simply because the employer promulgated a policy classifying all Station Managers as exempt, this alone demonstrated that common issues predominated. “The existence of a blanket exemption policy standing alone, is not itself determinative of the ‘the main concern in the predominance inquiry: the balance between individual and common issues,’” the Court held. The Court also clarified that all factual and legal issues are to be determined when evaluating the predominance requirement necessary for class certification, including affirmative defenses relating to the applicability of an exemption. 

Second, although the Court held it did not have jurisdiction to review the district court’s denial of the Plaintiff’s motion for conditional certification under the FLSA, it nonetheless approved the two-step method for certifying collective actions that has been adopted by district courts, calling this approach, “sensible.”  Under this approach, to obtain conditional certification (step one), plaintiffs must “make a modest factual showing that they and potential opt-in plaintiffs together were victims of a common policy or plan that violated the law.” This typically occurs before substantial discovery has been completed and was described by the court as a “low standard”. At the second stage, after a fuller record, the Court then determines whether the case should continue to go forward on a class basis or whether it should be decertified. 

While dicta (because the discussion was not necessary to the determination of the case), the decision provides guidance to district courts in determining conditional certification motions, and is likely to be often cited. Employers with operations in New York, Connecticut and Vermont should monitor the impact of the Hertz decision on class and collective action wage lawsuits. The Second Circuit is a difficult forum in which to defend collective actions under the FLSA and this decision will likely not dissuade the plaintiffs’ bar from continuing to file multiple collective actions on close to a daily basis.