On August 5, 2025, the Seventh Circuit in Richards v. Eli Lilly & Co. replaced the long-used, plaintiff-friendly Lusardi "modest factual showing" standard for conditional certification in Fair Labor Standards Act (FLSA) collective actions. The new framework likely makes it harder for plaintiffs to secure broad, early notice and allows courts to limit or deny notice where evidence of similarity is weak. Still, according to the court, the new "watchword" is "flexibility."
Why Conditional Certification Matters
In FLSA cases, employees may sue on behalf of themselves and "other employees similarly situated." Courts can send notice to potential plaintiffs, who must opt in. While notice doesn't create a legal class, it often has major effects: larger groups increase costs, expand potential liability and drive settlement pressure.
Under Lusardi, plaintiffs needed only minimal, one-sided evidence, and courts typically ignored employer rebuttal at the notice stage. The result was frequent, overbroad notices sweeping in individuals with no viable claim.
The New Standard: "Material Factual Dispute"
In Richards, the Seventh Circuit rejected Lusardi as too lenient. Plaintiffs must now present enough evidence to create a material factual dispute about whether they and the proposed collective are similarly situated.
A "material factual dispute" means there is concrete, relevant evidence — beyond bare allegations — pointing to a common unlawful policy or practice that plausibly links the group's claims. Additionally, employers can present rebuttal evidence now, and courts must weigh both sides.
Plaintiffs bear the burden of making their showing by a preponderance of the evidence — that it is more likely than not such a dispute exists. This is a meaningful elevation from Lusardi's minimal threshold. If plaintiffs fail, the court may deny notice outright.
One-Step vs. Two-Step Approaches
The decision gives courts flexibility on when notice should be issued:
- Two-Step Approach: If deciding similarity requires evidence from potential opt-ins (e.g., testimony about unwritten work practices), courts may issue notice after plaintiffs meet the material dispute threshold, then revisit similarity after discovery.
- One-Step Approach: If available evidence (e.g., policies, time records) allows the court to decide similarity before notice, it can order limited, expedited discovery, resolve the issue, and narrow or deny notice accordingly.
Courts can also send notice only to subgroups where the dispute exists, avoiding unnecessary cost and confusion.
The court declined to follow the Fifth Circuit's rule in Swales v. KLLM Transport Services, which requires plaintiffs to prove at the outset — by a preponderance of the evidence — that all notice recipients are actually similar, finding that standard too rigid and often unworkable when key evidence rests with potential opt-ins. It also rejected the Sixth Circuit's "strong likelihood" test from Clark v. A&L Homecare, reasoning that it suffers from the same flaw — demanding a high level of proof before plaintiffs can access evidence necessary to make their case. Instead, the Seventh Circuit adopted a more flexible "material factual dispute" standard, which it viewed as better balancing timely notice with judicial neutrality.
Why Employers Benefit
While the court did not go as far as the Fifth or Sixth Circuits, this is a positive development. This shift likely makes it harder for plaintiffs to use early "conditional certification" as a settlement lever. Employers can now present counter-evidence early that the court must consider, reducing the chance of an inflated collective. It also deters "fishing expeditions" where notice was used to uncover claims.
By requiring courts to consider both sides' evidence, the Seventh Circuit has taken a positive step toward ensuring that collective actions proceed only where there is real, substantiated similarity among plaintiffs and potential opt-ins, reducing undue settlement pressure and protecting employers from overbroad, merit-light claims.
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