In Richards v. Eli Lily & Co., a panel of the U.S. Court of Appeals for the Seventh Circuit joined the Fifth and Sixth Circuits in departing from the longstanding two-step procedure for distributing notice to potential plaintiffs in collective actions. Instead, the Seventh Circuit created a new test that requires district courts to determine whether a “material factual dispute” exists over the similarity of the proposed collective and whether that dispute is more appropriately resolved through a one-step or two-step notice procedure.

• The FLSA allows similarly situated employees to litigate claims collectively but does not define who qualifies as similarly situated or what showing is required to secure notice.
• Most district courts, including those in the Seventh Circuit, have defaulted to the two-step procedure established by the U.S. District Court for New Jersey in 1987, which requires only a “modest” showing of similarity to issue notice, subject to later challenges at the “decertification” stage.
• The Seventh Circuit found the two-step approach too permissive and the Fifth and Sixth Circuits’ standards too restrictive, opting for a new standard that allows district courts to resolve similarity disputes before issuing notice, where practicable.

Monica Richards, a six-year employee of Eli Lilly & Company, sued for age discrimination under the Age Discrimination in Employment Act (ADEA) after she was passed over for a promotion in favor of a younger, less...

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