This decision is important because it addresses the fundamental question of whether employment agreements that require individual arbitration run afoul of the ADEA and its provisions authorizing plaintiffs to sue collectively. Unlike other decisions involving the clash of arbitration agreements and 29 U.S.C. § 216(b), the Eighth Circuit’s decision in McLeod resolves the tension between, on the one hand the FAA’s mandate to enforce arbitration agreements, and on the other hand, the ADEA’s requirement in § 626(f) that a party must prove in a “court of competent jurisdiction” that the waiver of ADEA rights was “knowing and voluntary.” Because the Eighth Circuit determined that the “waiver” of rights in Section 626(f) refers only to the waiver of substantive ADEA rights and because the “right” to a jury trial and the “right” to proceed in a collective action are not “rights” under § 626(f), it held that there was no “waiver” for purposes of § 626(f).

This decision is important because it addresses the fundamental question of whether employment agreements that require individual arbitration run afoul of the ADEA and its provisions authorizing plaintiffs to sue collectively. Unlike other decisions involving the clash of arbitration agreements and 29 U.S.C. §216(b), the Eighth Circuit’s decision in McLeod resolves the tension between, on the one hand the FAA’s mandate to enforce arbitration agreements, and on the other hand, the ADEA’s requirement in § 626(f) that a party must prove in a “court of competent jurisdiction” that the waiver of ADEA rights was “knowing and voluntary.” Because the Eighth Circuit determined that the “waiver” of rights in Section 626(f) refers only to the waiver of substantive ADEA rights and because the “right” to a jury trial and the “right” to proceed in a collective action are not “rights” under § 626(f), it held that there was no “waiver” for purposes of § 626(f).

Applicable FLSA ProvisionsThe FLSA contains two applicable provisions that come into play when an employee asserts a claim for unpaid minimum or overtime wages against their employer. Under 29 U.S.C. § 216(b), the employee may bring a private lawsuit in an appropriate state or federal court, either on an individual or collective (class) basis, and may recover both actual and liquidated damages. The law states, “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”

In addition, the FLSA provides for the following:An employee may file suit to recover back wages, and an equal amount in liquidated damages, plus attorney’s fees and court costs. See 29 U.S.C. § 216(b).The Department of Labor may file suit on behalf of employees for back wages and an equal amount in liquidated damages.

In particular, federal courts issued 298 decisions on FLSA certification and decertification issues in 2021, an increase from the 286 certification rulings issued in 2020, the 267 certification rulings issued in 2019, the 273 certification rulings in 2018, and the 257 certification rulings in 2017.Of these rulings, 279 addressed first-stage motions for conditional certification of wage & hour collective actions under 29 U.S.C.§216(b), whereas 19 addressed second-stage motions for decertification. Plaintiffs historically have secured a higher rate of success on the former, while employers have secured a higher rate of success on the latter.

Looking Ahead: Following Swales, district courts in the Fifth Circuit likely will take on a stricter gatekeeping role before certifying collective actions, and litigants outside the Fifth Circuit should consider the persuasiveness of Swales when developing strategy for the defense of putative collective actions.Issuing Notice in FLSA Collective ActionsThe FLSA authorizes employees to sue for minimum wages or overtime compensation "for and in behalf of … themselves and other employees similarly situated." 29 U.S.C. § 216(b). Section 216(b) neither defines "similarly situated" nor sets out procedural requirements for proceeding collectively, and the Supreme Court has provided limited guidance.

In particular, federal courts issued 286 decisions on FLSA certification and decertification issues in 2020, an increase from the 267 certification rulings issued in 2019, the 273 certification rulings in 2018, and the 257 certification rulings in 2017.Of these rulings, 274 addressed first-stage motions for conditional certification of wage & hour collective actions under 29 U.S.C.§216(b), whereas 12 addressed second-stage motions for decertification. Plaintiffs secured a higher rate of success on the former in 2020, while employers secured a lower rate of success on the latter.

More cases were prosecuted and conditionally certified – 36 certification orders in the Sixth Circuit, 36 certification orders in the Second Circuit, 31 certification orders in the Ninth Circuit, and 31 certification orders in the Fifth Circuit – in the district courts in those circuits than in any other areas of the country. For the first time in recent memory, the Sixth Circuit – which encompasses the states of Kentucky, Michigan, Ohio, and Tennessee – had as many or more certifications than either the Second or Ninth Circuits.Second, as the burdens of proof reflect under 29U.S.C. §216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (199 of 245 rulings, or approximately 81%) in 2019, which was even higher than the 2018 numbers (196 of 248 rulings, or approximately 79%, which was the highest percentage of plaintiff wins ever recorded in the last decade). Furthermore, in terms of “second stage” decertification motions, employers prevailed in roughly 58% of those rulings (15 of 26 rulings).

More cases were prosecuted and conditionally certified – 36 certification orders in the Sixth Circuit, 36 certification orders in the Second Circuit, 31 certification orders in the Ninth Circuit, and 31 certification orders in the Fifth Circuit – in the district courts in those circuits than in any other areas of the country. For the first time in recent memory, the Sixth Circuit – which encompasses the states of Kentucky, Michigan, Ohio, and Tennessee – had as many or more certifications than either the Second or Ninth Circuits.Second, as the burdens of proof reflect under 29 U.S.C. § 216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (199 of 245 rulings, or approximately 81%) in 2019, which was even higher than the 2018 numbers (196 of 248 rulings, or approximately 79%, which was the highest percentage of plaintiff wins ever recorded in the last decade). Furthermore, in terms of “second stage” decertification motions, employers prevailed in roughly 58% of those rulings (15 of 26 rulings).

That being said, the district courts in the Third, Fourth, and Sixth Circuits were not far behind, with 22, 23, and 29 certification orders respectively in those jurisdictions. Second, as the burdens of proof reflect under 29U.S.C. §216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (196 of 248 rulings, or approximately 79%). However, in terms of “second stage” decertification motions, employers prevailed in just over half of those cases (13 of 25 rulings, or approximately 52% of the time).