From “Modest Showing” to “Material Factual Dispute”:
The Seventh Circuit’s New Standard for Issuing Notice in FLSA/ADEA Collective Actions

Introduction

Monica Richards v. Eli Lilly & Company is a watershed decision from the United States Court of Appeals for the Seventh Circuit that reshapes how trial courts within the circuit decide whether to send court-authorized notice in Fair Labor Standards Act (“FLSA”) and Age Discrimination in Employment Act (“ADEA”) collective actions.

The plaintiff, Monica Richards, alleged age discrimination after being passed over for a sales-manager promotion. She sought to represent a nationwide group of employees allegedly harmed by Eli Lilly’s preference for “Early Career Professionals.” When the district court followed the long-dominant Lusardi “modest showing” approach and authorized notice, the Seventh Circuit accepted an interlocutory appeal to answer a recurring, unsettled question: What evidentiary threshold must a plaintiff satisfy before a court may facilitate notice to potential opt-in plaintiffs under § 216(b)?

Summary of the Judgment

• Holding. District courts must allow both sides to submit evidence and may authorize notice only when the named plaintiff establishes at least a material factual dispute as to whether the proposed collective is “similarly situated.”
• Rejection of Existing Frameworks. The Seventh Circuit rejects the Lusardi “modest” / “modest-plus” standard as too lenient and the Fifth Circuit’s Swales preponderance-of-the-evidence standard and Sixth Circuit’s Clark “strong likelihood” standard as too rigid and sometimes unworkable.
• Flexible Case-Management. Once a material dispute exists, trial courts retain discretion: they may (i) send notice and defer a preponderance assessment until post-discovery certification, (ii) order limited discovery to resolve similarity disputes first, or (iii) tailor or deny notice entirely.
• Concurrent Guidance. The court endorses equitable tolling while notice disputes are litigated and instructs that discovery must remain narrowly targeted to similarity, not merits.
• Outcome. The district court’s order was vacated and remanded for reconsideration under the new standard.
• Concurring Opinion. Judge Hamilton concurred in the judgment but cautioned against dicta addressing burdens at the later certification stage, emphasising that collective actions are more akin to permissive joinder than Rule 23 classes.

Analysis

I. Precedents Cited and Their Influence

1. Hoffmann-La Roche Inc. v. Sperling (U.S. 1989)
   Established that courts may facilitate notice but did not craft a standard. The Seventh Circuit extracts three principles—timely/accurate notice, judicial neutrality, and abuse-prevention—as lodestars for the new rule.
2. Lusardi v. Xerox Corp. (D.N.J. 1987) & progeny
   Two-step “modest showing” framework dominated nationwide. The panel finds it too permissive: it ignores defense evidence, risks “solicitation,” and undermines neutrality.
3. Swales v. KLLM Transportation (5th Cir. 2021)
   Required plaintiffs to prove similarity by a preponderance before notice. The Seventh Circuit considers this impractical where critical evidence lies with yet-to-be-noticed workers.
4. Clark v. A&L Homecare (6th Cir. 2023)
   Adopted a “strong likelihood” standard. The panel finds it shares the same inflexibility problems as Swales.
5. Bigger v. Facebook (7th Cir. 2020)
6. Genesis Healthcare v. Symczyk (U.S. 2013)
7. Alvarez v. City of Chicago (7th Cir. 2010)
8. Vanegas v. Signet Builders (7th Cir. 2024)
9. Numerous district-court cases illustrating disuniformity within the circuit.

II. The Court’s Legal Reasoning

1. Framing the statutory silence. Section 216(b) requires employees to be “similarly situated” but is silent on timing and proof. The Seventh Circuit treats this gap as one to be filled by common-law development informed by Hoffmann-La Roche.

2. Critiquing existing standards.

• Lusardi undercuts neutrality and efficiency because low evidentiary requirements lead to overbroad notice, settlement pressure, and wasted resources.
• Swales & Clark risk barring meritorious claims when only putative opt-ins possess crucial evidence; they also may require extensive pre-notice discovery, prolonging cases and potentially running limitations periods.

3. Crafting the middle ground: “Material Factual Dispute.”

• Definition. The plaintiff must produce evidence—affidavits, documents, policy language, data—indicating that a common unlawful policy or practice plausibly affected the proposed collective. Merely pleading allegations is insufficient.
• Adversarial Testing. Defendants may rebut. Courts must weigh both sides’ submissions (but without making full merits determinations) to see if a genuine dispute exists.
• Discretionary Paths. Upon finding a dispute, judges may:
  1. Send notice immediately and address similarity rigorously at post-discovery certification; or
  2. Allow tightly limited discovery to resolve similarity first, possibly tailoring or denying notice for certain sub-groups.

4. Ancillary tools. District courts may equitably toll FLSA limitations while threshold issues are litigated and must confine discovery to similarity—not broad merits fishing.

III. Likely Impact

• Uniformity within the Seventh Circuit. District courts now have an articulated test, reducing forum shopping and predicting outcomes.
• Balanced Incentives. Plaintiffs retain access to notice where evidence exists; defendants gain protection from strategic “fishing expeditions.”
• Case-management Flexibility. Courts may mix one- and two-step approaches depending on the facts, promoting proportionality under Rule 1.
• Influence Beyond the Circuit. Other circuits grappling with Lusardi may see the Seventh Circuit’s compromise as a workable alternative, potentially encouraging Supreme Court review to resolve the now-three-way circuit split.
• Strategic Litigation Changes. Parties must assemble or attack similarity evidence early. Corporate defendants will marshal declarations, organizational charts, and policy documents at the outset; plaintiffs will seek quick access to policy material and exemplar affidavits.

Complex Concepts Simplified

FLSA Collective Action vs. Rule 23 Class Action

In a class action, absent class members are automatically part of the case unless they opt out, and one representative litigates for all. In an FLSA collective, each worker must opt in and becomes a full party.

Lusardi Two-Step

Step 1 (“conditional certification”): send notice if plaintiff makes a “modest showing.” Step 2 (“decertification”): after discovery, court decides if plaintiffs are actually similarly situated. The Seventh Circuit says “conditional certification” is a misnomer because no legal class exists; only notice is at stake.

Material Factual Dispute

Legal shorthand for “a genuine issue that reasonable fact-finders could decide either way.” Here, the court requires enough competing evidence on similarity to justify informing other workers.

Equitable Tolling

A judge-made doctrine that pauses the statute of limitations when fairness demands—e.g., while the court sorts out whether notice is proper.

Permissive Joinder (Rule 20) & Consolidation (Rule 42)

Procedural tools letting multiple related claims proceed together for efficiency. Judge Hamilton’s concurrence analogises collective actions to these tools rather than to representative Rule 23 classes.

Conclusion

Monica Richards v. Eli Lilly & Company installs a new, balanced standard—“material factual dispute”—for the crucial first step of collective litigation. By discarding both the exceedingly lenient Lusardi test and the prohibitively stringent Swales/Clark thresholds, the Seventh Circuit harmonises the twin goals of the FLSA and ADEA: vigorous enforcement of labor rights and efficient case administration. The ruling empowers district judges with flexible tools while compelling parties to engage the similarity question seriously and early. Though Judge Hamilton flags potential debate about burdens at the later certification stage, the core holding delivers clarity where it was sorely lacking. Going forward, litigants in the Seventh Circuit must prepare substantive evidence of similarity (or dissimilarity) from day one, and courts have a principled framework to decide when—and whether—the courthouse should send word to would-be plaintiffs. In short, the decision meaningfully recalibrates collective action practice and will likely resonate far beyond the circuit’s boundaries.