This decision directly impacts the initial stage of collective actions—the process of determining which employees are "similarly situated" and should receive official notice of the lawsuit.

The Seventh Circuit Court of Appeals recently issued a significant ruling for employers facing Fair Labor Standards Act (FLSA) and Age Discrimination in Employment Act (ADEA) collective actions. In Richards v. Eli Lilly & Company, the court vacated and remanded a lower court's decision to issue notice to nonparties in a collective action, establishing a new, uniform standard for determining when court-authorized notice may be sent to potential plaintiffs. This decision directly impacts the initial stage of collective actions—the process of determining which employees are "similarly situated" and should receive official notice of the lawsuit. For employers, this is a welcome shift away from the more plaintiff-friendly standard that was set forth in Lusardi v. Xerox, 99 F.R.D. 89 (D.N.J. 1983).

Background

The FLSA and the ADEA require that similarly situated employees “opt in” to existing lawsuits in order to join. This is in contrast from class actions, where similarly situated employees become members of the class (if one is certified) unless they opt out (presuming the applicable rules allow for an opt out process). In its 1989 decision in Hoffmann-La Roche v. Sperling, the U.S. Supreme Court authorized federal district courts to assist plaintiffs in finding employees who do not opt in. However, that decision did not provide any standard that a plaintiff must meet for a district court to authorize notice. Given the lack of a uniform standard, district courts have been left to their own devices to establish such standards. As a result, there are now four different standards that apply depending on the circuit. One of those standards is the Lusardi standard.

For decades, many district courts, including those in the Seventh Circuit, have relied on the two-step Lusardi approach for collective action notice. Under the Lusardi standard, for conditional certification, plaintiffs only have to make a "modest factual showing" that they were victims of a common illegal policy or plan. The vast majority of courts applying this standard refuse to weigh evidence or consider opposing evidence presented by the defendant. Such lenient notice standards allow plaintiffs to artificially expand the size of a collective action, significantly increasing pressure to settle, regardless of the action's actual merits. In contrast, the Fifth Circuit requires that the plaintiff prove by a preponderance of evidence that the other employees are similarly situated, while the Sixth Circuit requires the plaintiff to show a “strong likelihood” that the other employees are similarly situated.

The New “Richards” Standard in the Seventh Circuit

Under Richards, the Seventh Circuit has now joined in part the Fifth and Sixth Circuits in concluding that this "modest" standard was too permissive and conflicted with the principles of judicial neutrality, although the Fifth and Sixth Circuits have adopted even more rigorous standards than Richards. Accordingly, a four-way circuit split now exists. The Richards court established a new, uniform, and more flexible framework that requires district courts to take a more active role at the notice stage. To secure court-approved notice, the plaintiff must first make a threshold showing that there is a material factual dispute as to whether the proposed collective is "similarly situated." This means producing some evidence suggesting the named plaintiff and the proposed collective members are victims of a common unlawful employment practice or policy. Critically, the court must now consider the employer's rebuttal evidence when assessing if a material dispute exists, where under the previous standard, rebuttal evidence was not considered.

If the plaintiff establishes a material factual dispute, the court's decision to issue notice is based on its "sound discretion" to balance timely notice and judicial neutrality. If the evidence needed to resolve the dispute is likely in the hands of the yet-to-be-noticed plaintiffs, the court may proceed with a two-step approach (notice now, final determination later). Further, if the court is confident that the dispute over similarity can be resolved by a preponderance of the evidence before notice, it may authorize limited and expedited discovery to make that determination and tailor (or deny) notice accordingly.

This flexibility allows a court to "tailor its approach" depending on the specific case. For example, a court may be able to narrow the scope of notice by determining that a policy was limited to a specific geographic location. The court could also consider evidence that touches on the merits, such as whether a proposed plaintiff group includes employees who are exempt from FLSA protections, because this is directly relevant to the "similarly situated" analysis. Additionally, the court can resolve factual disputes regarding whether an employee is bound by a valid arbitration agreement before notice is sent.

Takeaways for Employers and Next Steps

The Richards decision empowers employers in the Seventh Circuit (Illinois, Indiana, and Wisconsin) to more effectively defend against collective actions at the earliest stage and shifts the balance, providing employers with a more meaningful opportunity to challenge the scope and propriety of a collective action before a single notice is mailed. To do so, employers should work with their counsel to compile and highlight evidence showing that the proposed collective is not, in fact, "similarly situated." This includes evidence of different job duties, different locations, different management structures, or evidence showing employees are subject to different policies or are exempt from the law. But notably, the Richards standard is not as favorable to employers as the standards established in the Fifth and Sixth Circuits, and thus falls somewhere in between them and the Lusardi standard. Thus, employers throughout the country can face dramatically different outcomes in similar cases just by virtue of geography.

Employers in circuits that still abide by the Lusardi standard may not enjoy the flexibility of the standard set forth in Richards right now. Moreover, even employers or those who advocate on their behalf in the Fifth, Sixth, and Seventh Circuits may believe that district courts should not authorize and facilitate notice to nonparties at all. All of those impacted should continue to keep an eye on future developments at the Supreme Court. On Oct. 15, 2025, Eli Lilly filed a writ of certiorari asking the SCOTUS to resolve the circuit split by overruling Hoffmann-La Roche and determining that district courts cannot assist plaintiffs in locating putative opt in members, or at the very least, requiring a more substantial showing than the Seventh Circuit’s previous standard that only requires the existence of a fact dispute concerning similarity.

Reprinted with permission from the December 4, 2025 issue of Law.com. © 2025 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.