ERVIN v. OS RESTAURANT SERVICES (JANUARY 18, 2011)
OS Restaurant Services operates an Outback Steakhouse in Calumet City, Illinois. It has both hourly and tipped employees. A number of its former employees brought suit, alleging that certain of its employment practices violated the Fair Labor Standards Act as well as the Illinois Minimum Wage Law and the Illinois Wage Payment and Collection Act. The plaintiffs sought to pursue their federal claims as an FLSA collective action and their state law claims as a Rule 23 class action. Judge Guzman (N.D. Ill.) refused to certify the class. He concluded that the plaintiffs failed to meet the superiority requirement because of a conflict between Rule 23's opt-out approach and the FLSA's opt in approach. The plaintiffs petitioned for an interlocutory appeal.
In their opinion, Seventh Circuit Judges Flaum, Wood, and Hamilton granted the petition and reversed and remanded. The only issue on appeal was whether the plaintiffs satisfied the Rule 23(b)(3) superiority requirement. Although Outback argued that the Court could affirm on the ground that individual issues predominated, the Court concluded that the district court's treatment of that issue was not clear enough to support alternate ground affirmance. On the superiority issue, the Court agreed that the two vehicles had different approaches. An FLSA collective action allows participation only upon the written consent of a party -- while a Rule 23(b)(3) class action includes all potential class members who do not affirmatively opt out of the class. Notwithstanding this distinction, however, the Court found nothing in the FLSA that precluded a companion class action on state law claims. Because the district court concluded that the two claims could not proceed simultaneously as a matter of law, the Court remanded for further consideration of the Rule 23 requirements.