What Is a Collective Action Lawsuit?

If you know what a class action lawsuit is, you’re already halfway to understanding the concept of a collective action. Though class and collective actions are both representative in nature—that is, both generally seek to represent groups of people who have allegedly suffered a similar harm—there are a few important differences between the two. 

What is a collective action?

A collective action, most commonly used to deal with wage and hour and other employment issues, is a type of lawsuit that employees may file against an employer who has allegedly violated their rights under the Fair Labor Standards Act (FLSA), Equal Pay Act (EPA) or Age Discrimination in Employment Act (ADEA). These employment-related federal laws—which protect certain workers’ rights to minimum wage, overtime, meal breaks and tips and aim to prevent discrimination—do not allow employees to bring claims against their employer through a class action. Instead, workers who believe their rights under these statutes have been violated must file a collective action that other employees can join.

In a collective action, a plaintiff, or multiple plaintiffs, band together and file one lawsuit on behalf of a group of employees who they claim are “similarly situated”—that is, who have similar claims of wrongdoing or were similarly harmed by their employer. Even if employees work in different departments or business locations for an employer, they are generally considered “similarly situated” as long as they have been subject to a common policy or practice of the company.

What does it mean to be “similarly situated?”

For example, food handlers at a manufacturing facility who are subject to a policy that requires them to don (put on) and doff (take off) sanitary clothing and cleaning equipment before and after shift hours without being paid may be considered “similarly situated” and could potentially bring a common claim under the FLSA because they have been subject to the same company procedure.

What is an example of a wage and hour violation?

Collective action lawsuits involve alleged labor law violations and often center around an employer’s apparent failure to pay minimum wages or proper overtime at one-and-a-half times a worker’s regular rate. Other violations may include if an employee is not paid for every hour worked or denied lawful tips or meal breaks by their employer.

For example, Vector Marketing—a direct-selling company and distributor of Cutco products—came under fire for allegedly violating the FLSA and state labor laws by failing to pay employees for attending days-long initial training sessions. In 2011 and 2014, two class and collective action lawsuits were filed in California against the company on behalf of affected employees. The earlier case was settled in 2012 for $13 million, and the other in 2016 for $6.75 million.

What’s the difference between a collective action and a class action lawsuit?

As with a class action lawsuit, a collective action starts with a plaintiff (or group of plaintiffs) filing a claim against an employer on behalf of themselves and others who are similarly situated.

The main difference between these types of lawsuits, however, is that individuals who want to participate in a collective action must affirmatively “opt in”—or join—the litigation and are not included as members of the collective until they do so. This is not the case with class action lawsuits, which generally include impacted individuals by default as putative class members, meaning there’s usually no need to join or sign up for the litigation.

If the court preliminarily certifies a collective action, notices are then sent to putative members of the “collective” to inform them of the lawsuit and how to join. By contrast, in a class action lawsuit, class members will usually receive a notice not about how to join the litigation, but to claim their share of the settlement.

An employee who does not opt into a collective action by signing a consent form will not be part of the lawsuit and will not receive benefits from any potential settlement with the employer, should the case be successful. Unlike those who have opted in, individuals who do not join the collective maintain the right to bring their own claims against the defendant company, if they so choose.

Because putative collective members must affirmatively join a proposed collective action, these types of lawsuits typically have a lower number of participants than class actions.

In addition, if a settlement is reached in a collective action, the terms of the deal are usually approved faster than those of a class action settlement. While class action settlements must pass through a multi-step preliminary and final approval process to determine if an agreement is “fair and reasonable,” collective action settlements usually undergo only a one-step approval process in court and are therefore more speedily granted.

What’s the difference between mass arbitration and a collective action?

In contrast to traditional representative litigation like a collective action, where one or more lead plaintiffs band together and file one lawsuit on behalf of a larger group, mass arbitration occurs when hundreds or thousands of people individually file nearly identical arbitration claims against a company over the same issue at the same time.

Like a collective action, mass arbitration can involve a large group of employees filing claims against their employer, but this type of legal action is not limited to labor law violations or a workplace context. Mass arbitration can also occur when there is any type of consumer dispute with a company.

What is the FLSA? What does it have to do with collective actions?

The Fair Labor Standards Act (FLSA) is a federal law that exists to protect the rights of employees. Because this law does not allow workers to bring claims against their employer through a class action lawsuit, a collective action may be filed when there is an alleged violation of a group of employees’ protected rights under the FLSA.

For example, if an employer fails to pay its workers the hourly minimum wage or properly compensate them for overtime hours, a group of employees can file a collective action for themselves and on behalf of others who are “similarly situated.”

In addition, employees participating in an ongoing lawsuit against their employer are likewise protected by the FLSA, which prohibits any kind of retaliation from the company.

What is a collective action notice?

If you receive a notice of a collective action in the mail, it means that you are a putative member of the “collective” in a lawsuit that was just filed or settled. The notice will provide instructions on how to affirmatively “opt into” the collective action, which you must do in order to participate. Potential collective members who do not opt in are not included in the action and cannot collect any benefits from a settlement.

If you received a collective action notice, you were probably listed as an employee of a company that is currently being sued. This information is normally collected during the “discovery” phase of a lawsuit, when the lawyers gather documents from the company being sued and determine who the claims affect and who should be notified of the action.

Is there a downside to joining a collective action? Am I protected by law?

Collective actions are more efficient than many lawsuits filed individually, and bringing claims this way can save employees both money and time. However, collective actions have disadvantages.

For instance, if the claims are not strong enough, the whole lawsuit could be thrown out by a judge, and participants would lose the right to pursue their claims individually. Alternatively, an employee with especially strong claims might not benefit from joining a collective action when they might be able to quickly settle with the employer directly, on their own.

Frankly, many workers may avoid joining a collective action out of fear of retaliation from their employer. However, it is important to note that participating in a complaint or grievance process or filing a lawsuit against your employer over unpaid wages is considered a “protected activity” under federal law. Your employer is not legally allowed to punish you for asserting your right to fair wages, speaking up about discrimination or harassment, or engaging in any other protected activity.

How much is a typical employment lawsuit settlement?

It’s nearly impossible to estimate what an average workplace lawsuit settlement might be, as many factors play a role in the ultimate amount, such as the size of a company, the severity and scope of the alleged damages, the strength of the evidence and the laws relevant to the claims at issue. Another variable that can impact the value of a case is the nature of the claims being brought, such as allegations of unpaid overtime, discrimination, sexual harassment or wrongful termination.

To illustrate how widely settlements can range, cases dealing with unpaid overtime, for instance, might sometimes settle for tens of thousands of dollars but have also been known to settle for tens of millions. In addition, individual payments may range from hundreds of dollars to tens of thousands, depending on an employee’s claims or the terms of the deal.

The average settlement varies so widely and is dependent on so many variables that it is important to take any concrete figures with a grain of salt.

Don’t see the answer to your collection action question on this page? Let us know in the comments below.

Get class action lawsuit and settlement news sent to your inbox – sign up for ClassAction.org’s free weekly newsletter here.