The commercial construction contracting and subcontracting industry in general is unique under the law for industry professionals, as they’re typically limited to wage and hour litigation under provisions of the Fair Labor Standards Act.

The majority of FLSA cases seek class action status or collective classification, while other FLSA litigation is initiated by individuals seeking damages. For the former, past and current employees can opt into class action litigation and seek collective damages against a construction company. The looming financial burden of class action or collective litigation against construction companies consume time, money and resources to the extent it’s often advisable for Defendants to negotiate an unfair settlement.

Yet, thanks to a recent federal court decision on March 27, 2020, the legal maneuvering behind unreasonable Plaintiff demands may soon be counter-balanced by the class action Defendants’ right to due process review. A recent legal opinion in a recent FLSA case has potentially wide-ranging implications for Defendant employers mired in future class action litigation. Moreover, as the FLSA applies to all employers, this decision potentially applies to all ownership groups representing the commercial construction industry, extending to partners, contractors and subcontractors.

In Laney et al v. Clements Fluids, Inc et al (6:18-cv-00497-JCB-KNM), a class action case pending in the United States District Court for the Eastern District of Texas, Tyler Division, the Court recently considered novel arguments that the Defendants would be summarily deprived of their due process rights, if the Court declined to timely consider merit-based arguments that the four individuals pursuing the litigation and seeking class action or collective designation were without any viable claims against Clements Fluids, thereby negating their standing, which is critical to their ability to proceed as part of a class action. The Court determined that a pretrial “fishing expedition” was improper, essentially declining to approve the class action status of the Plaintiffs.

The court’s opinion reasons that construction companies, in this case future class action Defendants, are owed due process rights to merit-based claims withstanding court-sanctioned production and distribution of protected and privileged information. The decision potentially halts the breadth, scope and relevance of Plaintiff class action certification demands for information when pursuing class action litigation. Plaintiffs’ previously unrestrained demands for sensitive and valuable class action-related information from Defendants, which most in the extended construction industry world would—and should—consider proprietary. These demands will now be subjected to a heretofore unrecognized fundamental due process review as to their relevance, burden and importance to class action claims.

Thus, the playing field becomes balanced, with the Defendants’ interests in keeping their proprietary information shielded from class action litigation demands. Bear in mind, the FLSA applies to all employers. The precedent this decision sets may pave the way for additional levels of protection, not just among those in the commercial construction industry, but other trade sectors including manufacturing and technology, restaurants and hospitality groups, and real estate, energy and health care companies—to name a few.

Before this landmark decision, courts have historically avoided merit-based, preliminary considerations of Plaintiffs seeking class action or collective designation. Many plaintiffs’ lawyers aggressively pursued proprietary information from putative Defendants during conditional class certification process, establishing routine “fishing expeditions” for information which could lead to additional litigants and clients. The “fishing expedition” was made possible by the pretrial disclosure enforced on Defendant employers which required disclosure of the names and contact information of all employees, including employees that no longer work for the company. Moreover, many Defendants were forced to disclose customer lists, pricing, contracts, partnerships and other information-sensitive documentation to facilitate the discovery of potential claims and class members.

Prior to this ruling, Defendant employers lacked any viable objection, defense or remedy to this wholesale court-sanctioned turnover of proprietary, trade secret and privileged information. Plaintiffs formerly needed only to show potential relevance for pre-litigation access to Defendants’ critical information, furnished with only the barest of contractual protective orders. With the new due process review, Defendants can for first time raise substantive objections to handing over valuable and privileged information and challenge class certification attempts.

While the burden and risk of exposure to a business enterprise remains with employers seeking to defend the claims of individuals pursuing class action litigation, this decision represents a monumental shift in judicial review of class action and class certification. The opinion provides precedent for employers seeking to avoid class certification in the litigation phase. Employers throughout the construction industry should be aware they now have the ability to cite a vital new precedent in seeking to avoid the burdensome legal expense and weight of a class action or collective classification. For owners, groups and firms who make up the wide and diverse commercial construction industry, this new ruling could become an effective tool in avoiding premature, unwarranted and costly out-of-court settlement terms.