Seventh Circuit Raises the Bar for Collective Actions Under the FLSA and ADEA 

The U.S. Court of Appeals for the Seventh Circuit recently joined a growing number of federal appellate courts in rejecting the long-standing Lusardi approach to managing collective actions under the Fair Labor Standards Act (“FLSA”) and the Age Discrimination in Employment Act (“ADEA”). In Richards v. Eli Lilly & Co., the Court announced a new, more flexible framework for determining when notice should issue in collective actions. 

This ruling not only places the Seventh Circuit (covering Illinois, Indiana, and Wisconsin) alongside the Fifth and Sixth Circuits in rejecting Lusardi but also introduces an employer-friendly process that allows companies to be heard at the notice stage. Employers facing collective action claims in these jurisdictions now have an opportunity to challenge certification earlier in the process, significantly reducing the cost and burden of litigation. 

Understanding the Lusardi Standard 

For decades, most courts followed the two-step Lusardi v. Xerox Corp. framework to manage collective actions. 

1. Step One – Notice Stage: Plaintiffs file a motion asking the court to issue notice to potential opt-in plaintiffs. To succeed, plaintiffs need only make a “modest factual showing” that they and the potential class members were victims of a common unlawful policy or practice. If this minimal standard is met, the court sends notice to prospective plaintiffs, who then decide whether to join the lawsuit.
    
2. Step Two – Decertification Stage: After discovery and the opt-in period, the defendant can argue that the plaintiffs are not “similarly situated.” At this point, the court may decertify the collective and sever claims if significant differences exist among the plaintiffs.

This approach has long favored plaintiffs because they can secure broad notice with very little evidence, forcing employers to expend significant resources defending against potentially unwieldy collective actions. 

The Seventh Circuit’s New Approach in Richards 

In Richards, Monica Richards, a 55-year-old employee of Eli Lilly, sued the company after it promoted a younger, less experienced worker to a management position she had sought. She alleged age discrimination under the ADEA and sought to conditionally certify a collective action covering all Eli Lilly employees over 40 who had been denied promotions since February 2022. 

Following the Lusardi framework, the district court allowed notice to issue based on Richards’ “modest factual showing.” However, the court also recognized the burden this imposed on Eli Lilly and allowed an interlocutory appeal. 

On appeal, the Seventh Circuit rejected Lusardi, emphasizing that district courts must consider both sides’ evidence at the notice stage. The court held that notice should issue only when plaintiffs present some evidence suggesting a common unlawful practice and there exists a “material factual dispute” about whether the proposed class members are similarly situated. Importantly, the ruling gives employers the right to present rebuttal evidence before notice is sent. 

Key Features of the Richards Standard 

The Seventh Circuit outlined a flexible approach to collective actions that departs sharply from Lusardi: 

1. Threshold Showing Required
   Plaintiffs must provide evidence that they and the proposed class members were subject to a common unlawful policy or practice. Mere allegations are not enough.
2. Defendants Can Rebut Early
   Employers may present counter-evidence at the notice stage. Courts must consider both sides’ evidence before deciding whether to issue notice.
3. Material Dispute Test
   Courts may authorize notice only if a genuine factual dispute exists over whether the proposed collective is similarly situated.
4. Court Discretion in Managing Discovery
   If evidence is needed to resolve the similarity dispute, courts may allow limited pre-notice discovery but must supervise it carefully to prevent abuse or delay.
5. Judicial Neutrality
   Echoing Hoffman-La Roche v. Sperling, the court emphasized that judges must remain neutral and ensure that notice is accurate and not used as a tool to pressure employers into settlements.

Comparing Standards Across Circuits 

The Richards decision adds another layer to the evolving landscape of collective action certification: 

• Fifth Circuit (Swales v. KLLM Transport Services): Requires plaintiffs to prove similarity by a preponderance of the evidence before notice.
• Sixth Circuit (Clark v. A&L Homecare): Requires plaintiffs to show a “strong likelihood” that proposed members are similarly situated.
• Seventh Circuit (Richards): Requires a threshold showing of similarity and permits notice only if a material factual dispute exists.

While all three circuits reject Lusardi, each has articulated a different test. This divergence increases the chances that the U.S. Supreme Court will eventually step in to create a uniform standard. 

Implications for Employers 

The Richards decision is welcome news for employers in Illinois, Indiana, and Wisconsin. By rejecting Lusardi, the Seventh Circuit has made it harder for plaintiffs to secure broad notice with minimal evidence, reducing the likelihood of costly and burdensome collective actions. 

Employers should take several steps in light of this decision: 

• Challenge Notice Requests: When faced with a motion for notice, employers should be prepared to present evidence showing that proposed collective members are not similarly situated.
• Leverage Early Discovery: Use opportunities for limited discovery to highlight factual differences among proposed class members.
• Monitor Litigation Strategy Nationwide: Although the ruling applies only in the Seventh Circuit, employers should argue against Lusardi wherever possible, citing Richards, Swales, and Clark as persuasive authority.
• Stay Alert for Supreme Court Review: Given the conflicting approaches across circuits, the Supreme Court may intervene to resolve the split. Employers should watch closely for developments.

With Richards v. Eli Lilly & Co., the Seventh Circuit has raised the bar for plaintiffs seeking to certify collective actions under the FLSA and ADEA. By requiring a threshold showing and allowing employers to present rebuttal evidence before notice issues, the court has introduced a fairer and more balanced process. Employers in the Seventh Circuit now have stronger tools to defend against costly and disruptive collective actions. 

Collective actions under the FLSA and ADEA can impose enormous burdens on employers, especially when certification standards favor plaintiffs. The Richards decision offers employers new defenses at the earliest stages of litigation. At Hoyer Law Group, we help businesses navigate these complex challenges, protect their interests, and ensure compliance with labor and employment laws. If your organization faces a collective action or you want to understand how these new standards may affect your business, contact our team at Hoyer Law Group today.