Seventh Circuit Decision Sets Forth New FLSA Certification Standard

In its August 2025 decision in Richards v. Eli Lilly & Co. et al., the U.S. Court of Appeals for the Seventh Circuit has fundamentally altered how federal courts manage actions under the Fair Labor Standards Act (FLSA). The ruling governs courts within the Seventh Circuit, including courts in Illinois, Indiana, and Wisconsin. Increased rigor in the FLSA certification standard may save employers substantial litigation costs and reduce settlements.

The FLSA allows employees to pursue claims individually, but also on behalf of "similarly situated" individuals through collective actions. Unlike routine class actions, FLSA collective actions require similarly situated plaintiffs to affirmatively "opt in" to the suit.

Historically, federal district courts have adopted a two-step approach to FLSA collective action certification established in a 1987 New Jersey case. Before a court issues notice of the suit to putative members of the collective, that standard requires a "modest factual showing" that other employees are similarly situated.

However, employers did not benefit from this standard, as the early and widespread notices increased their potential exposure. They also had no chance to present evidence in their defense before the court sent notice to the putative plaintiffs. Therefore, employers were often saddled with either the high litigation costs of a collective action involving hundreds of plaintiffs or a settlement in a weak claim based on insufficient evidence.

In Richards, the Seventh Circuit rejected the historical approach to the certification process, instead opting for a more balanced approach to ensure efficiency, practicality, and neutrality of the court. Therefore, in considering certification, federal district courts must now consider evidence from both sides before issuing notice to potential collective members. The new standard requires the following three elements:

• Proof of a Similarly Situated Collective – The Plaintiffs must introduce evidence that is more than mere allegations showing whether the proposed collective members are similarly situated. However, this burden of proof does not rise to the level of proving similarity by a preponderance of the evidence at this stage.
• Evidence from Both Sides – Courts must consider evidence from both plaintiffs and defendants to determine whether notice is appropriate. Defendants also may submit rebuttal evidence.
• Discretion and Flexibility – The new standard gives judges the discretion and flexibility in their approach to a case. For example, in some cases, a judge might determine that notice to potential collective members is necessary before deciding whether they are similarly situated. Alternatively, if a plaintiff fails to present sufficient evidence of a similarly situated collective, a court can reject a motion for notice.

The New Seventh Circuit Standard and the Approach of the Fifth and Sixth Circuits

As many employers operate in more than one region of the country, they should take note of the important differences between the Seventh Circuit's approach and the new standards adopted by the Fifth and Sixth Circuit Courts of Appeal. The Fifth Circuit established a stricter standard in Swales v. KLLM Transport Services, LLC, which requires courts to "rigorously scrutinize" whether employees are similarly situated. On the other hand, the Sixth Circuit announced an intermediate approach in Clark v. A&L Homecare and Training Center, choosing a standard based on "strong likelihood" of similarity.

The Seventh Circuit's decision appears to land squarely in the middle, eschewing the stricter Fifth Circuit and Sixth Circuit standards, but demanding more than the historically low standard used in FLSA cases. The hallmark of the Seventh Circuit's approach is the new opportunity for employers to present rebuttal evidence at the notice stage, which could short-circuit weak claims before incurring unnecessary expenses. As a result, employers facing FLSA collective actions in the Seventh Circuit should prepare evidence to present early in the case to avoid an overbroad collective action that exposes them to heightened liability.

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