The possibility of a wage and hour class/collective action is a risk that truly keeps in-house counsel up at night. These cases present unique issues that aren't typically present in run-of-the-mill, single-plaintiff cases—much higher defense costs, exclusion of wage and hour cases from most insurance policies, large scale disruption across the company, and considerable potential liability. This anxiety will only increase given the upheaval to businesses caused by the COVID-19 pandemic. As we saw after the financial crisis in 2008, the amount of wage and hour litigation swells during periods of economic disruption. This will be exacerbated in the current environment, as the pandemic has changed the workplace overnight, and put many companies in unchartered wage and hour territory.

This article will discuss seven specific steps companies can take to successfully defend a wage and hour class/collective action. These steps often go overlooked if companies and their counsel dust off the same old playbook used for run-of-the-mill, single-plaintiff cases. Most importantly in a wage and hour class/collective action, in-house and outside counsel must, from the very beginning, work hand-in-hand to steer the ship in the direction that puts the company in the best position to defend itself and achieve its objectives.

Step 1—Understanding the Complaint

The first step in any litigation is to investigate the allegations. In a wage and hour class/collective action, however, counsel must dig deeper into the allegations in the complaint to fully understand the potential scope of the case—i.e. what violations are being alleged, and which employees are alleged to be affected. The complicating factor in a wage and hour class/collective action is that plaintiffs' counsel may intentionally leave the complaint vague to keep the putative class as broad as possible until moving for certification. This requires counsel to think outside of the box to determine whether there are groups of employees or potential violations that, while not apparent on the face of the complaint, could be the subject of discovery or of class/collective certification. Of course, this evaluation will evolve as the investigation into the allegations proceeds, and counsel assesses where the company stands from a wage and hour compliance perspective. Suffice it to say, at all times, counsel must view the complaint with an eye toward identifying—and preparing for—any possible avenue for plaintiffs' counsel to broaden the litigation.

Step 2—Coordination Within the Company

In-house counsel must coordinate among the various departments within the company to ensure that counsel have access to the proper information necessary to investigate and defend the case. This could include the payroll department, human resources, the IT individuals who have access to employee data, and, of course, the actual business line(s) affected. Unlike a single-plaintiff case where the allegations are focused on the circumstances of one individual's employment, a class/collective action implicates a broad range of corporate policies, pay practices, management training, actions by individual managers at various levels, and the individual employment circumstances of the named plaintiff(s).

Step 3—Honest Evaluation

Throughout its investigation, counsel must honestly and objectively evaluate all of the legal issues in the case. This includes evaluating the merits of class/collective certification separate from the merits of the underlying allegations, and determining whether there are any threshold legal issues that could result in early dismissal (see, e.g. Pettanto v. Beacon Health Options, Inc., 425 F. Supp.3d 264 (S.D.N.Y. Oct. 25, 2019) (court rejected nationwide collective action because court could not assert personal jurisdiction over out-of-state plaintiffs); Hsiang Yeh v. Han Dynasty Inc., 2019 WL 633355 (S.D.N.Y. Feb. 14, 2019) (dismissing putative class/collective action because plaintiff did not sufficiently plead he was defendant's employee)).

Counsel must also honestly and objectively evaluate the company's ability to logistically defend a complex wage and hour class/collective action. For example, counsel needs to determine whether the company has accurately maintained records in an easily accessible place and format to evaluate the company's ability to gather class-wide information to defend the suit. The ability to effectively and efficiently respond to class-wide discovery demands can play a large role in the logistical burden a company will face from a class/collective action. If counsel knows that it will be difficult to meet its obligations due to logistical issues within the company, counsel can adjust its strategy and objectives accordingly.

Step 4—Setting the Strategy

Once the company has conducted an initial evaluation of the case, it must set its goals for the case and the strategy for achieving them. Obviously, the company's defenses on the merits of the alleged wage and hour violations are important, but this is only one piece of the puzzle. "Winning" a class/collective action can take many forms—defeating certification, limiting the scope of the class, and early settlement can all be considered "wins" without succeeding on or even contesting the merits of the underlying allegations. Counsel must merge legal strategy with a big-picture view of the company's business (especially with the profound business uncertainty stemming from COVID-19) to determine what the company should be trying to achieve, and how counsel can best go about achieving it.

Step 5—Dealing with Discovery

Throughout the case, counsel must not only be attuned to the discovery demands placed on the company, but also to the discovery the company should be seeking. One of the more common discovery disputes in class/collective actions is whether and to what extent defendants should be limited to "representative discovery" wherein the company seeks written discovery and deposition testimony from only a representative sample of the class (compare Morangelli v. Chemed Corp., 2011 WL 7475 (E.D.N.Y. Jan. 1, 2011) (allowing 40 depositions of approximate 400-person class) with Frisbie v. Feast American Diners, LLC, 2020 WL 2305083 (W.D.N.Y. May 8, 2020) (court reasoned that "[g]iven the small size of the collective [(20 people)] and the basic inquiry of whether plaintiffs are similarly situated, conducting individualized discovery appears to be the appropriate route in this case.")).

Strictly from a litigation perspective, more discovery tends to benefit defendants, who are opposing certification by trying to demonstrate differences among the class. However, in-house and outside counsel must be on the same page as to the benefit of additional discovery versus the cost of such discovery—it does the company no good if the value of the discovery sought is outweighed by its costs.

Step 6—Best Time for Settlement

Even if early settlement is not possible, settlement at a later time may still be considered a "win" for the company, and counsel should always be on the lookout for the opportune time to settle. Because class/collective actions often proceed in stages (e.g. pre-certification discovery, class certification briefing, post certification discovery etc.), settlement should be re-evaluated after each stage is complete. The results of the previous stage of the litigation often soften the parties' positions—for example, plaintiffs and their counsel may accept less after the completion of pre-certification discovery that reveals facts making class certification less likely, or after the company defeats a certification motion (or at least limits the class/collective granted). Settlement that once may have seemed impossible may become much more likely as litigation progresses, and it is important to recognize the proper time to put away the swords.

Step 7—Fixing Problematic Practices

Often, a wage and hour class/collective action will highlight that the company is not fully compliant in its wage and hour practices. In these circumstances, resolution of the case should also involve prompt action to address any problematic wage and hour practices—both those that are the subject of the litigation, and any others that are uncovered. Otherwise, it is a safe bet that the company will face yet another class/collective action in a few years' time. However, this is not always a straightforward task. Counsel must weigh how changing pay practices during the pendency of litigation could affect the case. Moreover, in-house counsel will need to determine the best steps for bringing the business on board in making these (sometimes uncomfortable) changes.

Conclusion

At the end of the day, wage and hour class/collective actions are unique and complex cases. Because of this, they require strategy and solutions that go beyond the typical. If companies and their counsel are able to think creatively, objectively evaluate the strengths and weaknesses of their defense, and set proper objectives, companies will be able to successfully navigate their way through a wage and hour class/collective action.

Seth Kaufman is a partner at Fisher Phillips. His practice focuses on employment litigation. Justin Reiter is an associate at the firm.