Seventh Circuit Issues an Important FLSA Certification Decision

On May 21, 2010, the Seventh Circuit Court of Appeals issued an important decision for overtime lawyers who represent workers in collective actions. In Alvarez v. City of Chicago, No. 09-2021 (7th Cir. May 21, 2010), Chicago paramedics alleged that their overtime pay was miscalculated as a result of approximately ten distinct payroll policies. The individual paramedics who joined the case were subjected to different combinations of the allegedly illegal policies and, for this reason, the district court decertified that FLSA class as “hopelessly heterogenous.” The Circuit Court reversed and, in doing so, made some very important observations. First, the Court emphasized the propriety of forming subclasses in FLSA collective actions. Second, the Court clarified that, in the wake of decertification, the claims of opt-ins cannot be dismissed with prejudice because the opt-ins have an unambiguous right to to file individuals lawsuits. The Court observed: “When a collective action is decertified, it reverts to one or more individual actions on behalf of the named plaintiffs.” Third, tying the first two principals together, the Court observed that, in considering decertification, the choice is not between a collective trial or no trial at all. Rather, the choice is between collective litigation or many individual lawsuits. The Court observed: “[I]f it appears plaintiffs are prepared to proceed individually or through separate classes, the district court must consider whether these other mechanisms for judicial resolution are more or less efficient than a collective action comprised if various subclaims.”

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