Third Circuit Reverses Class Certification Of Unpaid Overtime Claims In Off-The-Clock Lawsuit

In Reinig v. RBS Citizens, N.A.,1 a three-judge panel of the U.S. Court of Appeals for the Third Circuit overturned a district court's decision certifying a class of mortgage loan officers ("MLOs") who claimed they were unlawfully denied overtime pay for work performed off-the-clock. This precedential decision is significant for three reasons:

the Third Circuit for the first time set forth the elements of proof in an "off-the-clock" case for overtime pay under the Fair Labor Standards Act (FLSA); Reinig reemphasizes the point that Rule 23 class certification is not appropriate unless the elements of liability can be proven for all class members on common evidence and the class is clearly defined; and the Reining panel took sides in a circuit split concerning whether there is a material difference between the standards for certifying a Rule 23 class action and certifying an FLSA collective action, holding that there is a material difference between the two standards. The decision left unclear, however, just how great the difference is, and the practical significance of the divergence between the two standards. Background

Citizens Bank employed MLOs to sell mortgages. The Bank did not dictate when or where MLOs worked; MLOs had flexibility in structuring their workdays. MLOs received a base salary of $11.50 per hour and earned monthly commissions based on the number of loans sold. As "non-exempt" employees under the FLSA and state wage-and-hour law, MLOs were entitled to overtime pay for each hour worked above forty in a given workweek.

The Bank required MLOs to report all hours worked, including hours over 40, via a computerized timekeeping application. Under the Bank's policy, MLOs submitted their total hours worked in a particular week every Sunday, and their respective supervisors reviewed their timecards for accuracy and approved the MLOs' reported hours the following day. MLOs were required to obtain prior approval from their supervisors for any hours worked over 40 in a particular week.

The MLOs alleged that, despite the Bank's written policy, the Bank maintained an unofficial policy of: (1) requiring MLOs to work over 40 hours per week; (2) restricting the amount of overtime hours managers could approve; (3) discouraging MLOs from actually reporting their overtime hours; and (4) allowing MLOs to submit fictitious timesheets that did not reflect off-the-clock work. The MLOs' shorthand for this alleged scheme was the "policy to violate...