Seventh Circuit Ruling Provides Employers With Greater Leverage to Challenge Collective Actions and Limit Exposure

The Seventh Circuit’s recent decision in Richards v. Eli Lilly & Co., 2025 U.S. App. LEXIS 19667 (7^th Cir. 2025) significantly changes how federal courts within the circuit will handle collective actions under the Fair Labor Standards Act (FLSA) and the Age Discrimination in Employment Act (ADEA).

Previously, employees only needed to make a “modest showing” to confirm that other employees were similarly situated to move forward with a collective action. This made it relatively easy for large groups of employees to send notices of collective actions and join lawsuits.

Now, under the Richards decision, courts will require a stronger showing: employees must present enough evidence to create a real, material dispute about whether the group is truly similarly situated or subjected to the same unlawful policy.

This shift gives employers a greater opportunity to challenge collective actions early and potentially reduce the size and scope of costly litigation.

Key Change: Employers’ Role in Shaping the Notice Group

A key change is the Seventh Circuit’s explicit recognition of the discovery process. Employers can now present rebuttal evidence, such as differences in job duties, pay structures, or workplace practices, to challenge whether collective treatment is appropriate.

This means employers who are well-prepared with clear documentation and strong records can limit the size and scope of the notice group, potentially reducing litigation costs and the pressure to settle to limit exposure.

Case Background

The Richards case involved a longtime employee who claimed she was denied a promotion in favor of a younger colleague. She alleged age discrimination under the ADEA and sought to send notice of a collective action to all similarly situated employees.

Instead of accepting her “modest showing,” the court required her to present real evidence that her situation was in fact part of a broader pattern. This middle-ground approach balances employees’ ability to pursue claims with employers’ right to contest overbroad or inappropriate notice groups.

Previously, some courts, including those in the First and Third Circuits, have allowed notice to be sent with only a “modest showing” that employees were similarly situated. Others, like the Fifth Circuit, have required a much higher “preponderance of the evidence” standard.

The Seventh Circuit has now adopted a middle ground on the issue: employees must present enough evidence to raise a genuine issue of material fact about similarity, but employers can actively participate by submitting evidence to rebut or narrow the proposed group.

This approach ensures that notice is only sent when there is a real question about whether employees are similarly situated, while also giving employers a meaningful opportunity to contest overbroad or inappropriate notice groups at an early stage.

What This Means for Employers

The Seventh Circuit’s approach creates a higher bar for employees but also presents a greater opportunity for employers to actively shape litigation. Employers now have a meaningful chance to counter collective actions at the earliest stage.

Collective Action Best Practices for Employers

1. Audit Job Classifications and Duties Regularly

Regularly review job titles, descriptions, and actual duties. Make sure employees with the same title are truly performing similar work, and clearly document any differences. These records can be critical if a collective action is threatened.

2. Centralize and Maintain Detailed Records

Establish a system for storing and updating employee-related documentation. Keep records current and highlight any differences among employees. Well-documented distinctions can help rebut claims that a large group is similarly situated.

3. Prepare for Early Involvement in Litigation

Work with your legal team to develop a plan for responding to collective action threats. Be ready to gather and provide evidence that shows differences among employees or demonstrates compliance with the law.

Bottom Line

The Seventh Circuit has made it more challenging for employees to pursue collective actions without solid evidence. For employers, this is an opportunity, but only if you are prepared.

Regular audits, strong recordkeeping, and early engagement with your legal team can significantly limit exposure and control litigation costs.