Because the two mechanisms are 'incompatible,' a proposed class of assistant bank managers cannot pursue an opt-out Fed. R. Civ. P. 23 class action and an opt-in Fair Labor Standards Act collective action in the same lawsuit, a federal district court has held. A common strategy employed by Plaintiff's counsel is to bring both FLSA and analogous state wage claims in the same lawsuit. Given that the opt-in mechanism of the FLSA invariably yields a smaller class than the Rule 23 opt-out mechanism, this case highlights a potentially potent tool employed by defendants to limit the scope of wage claims brought as hybrid class/collective actions. The Judge in Bell v. Citizens Fin. Grp. Inc. rejected the notion that Plaintiffs can have their cake and eat it too by combining a class/collective action in the same case.
The Plaintiffs in Bell alleged that defendants had a standard practice of improperly classifying assistant branch managers as exempt from the overtime requirements of the FLSA, the Pennsylvania Minimum Wage Act (PMWA) and the Massachusetts Minimum Fair Wage Act (MMFWA). In September 2010, the court granted plaintiffs’ motion for conditional certification under the FLSA. Notices were mailed to 2,669 individuals and 479 individuals opted in to the class by the December 6, 2010 deadline. On December 19, 2010, the plaintiffs filed motions for class certification under the PMWA and MMFWA. Although the issue was not briefed by either party, Chief Judge Gary L. Lancaster of the U.S. District Court for the Western District of Pennsylvania held sua sponte that the Rule 23 state law claims could not proceed as class actions insofar as they overlapped with the FLSA claims. Accordingly, the court denied certification for those claims.
In denying Rule 23 class certification, the Judge cited Congress's intention in enacting the FLSA opt-in provision. Specifically, the court said that Congress desired to control the volume of litigation and ensure that absent individuals would not have their rights litigated without their input or knowledge. The opt-in mechanism was intended to limit FLSA claims to those affirmatively asserted by employees “in their own right” and to “free employers of the burden of representative actions." The court held that allowing a Rule 23 opt-out action to proceed in the same lawsuit as an opt-in FLSA action would allow plaintiffs to evade the requirements of the FLSA by permitting litigation through a representative action and bringing unnamed plaintiffs into the lawsuit.
Noting that there were no controlling cases on this issue in the Third Circuit, the court relied on a Third Circuit case that held a district court erred in exercising supplemental jurisdiction over a state law opt-out action that was filed in the same lawsuit as an FLSA opt-in action. Noting the inordinate size of the state-law class, the different terms of proof required by the state-law claim, and the general federal interest in opt-in wage actions, the Third Circuit characterized the state law class action as a “second line of attack when the FLSA opt-in period yielded a smaller than desired federal class.” Numerous district courts in the Third Circuit have also dismissed state law claims that parallel federal claims because of the “inherent incompatibility” between opt-in collective actions and opt-out class actions, the court observed.
The Seventh Circuit recently took the opposite approach in Ervin v. OS Restaurant Services Inc., 632 F.3d 971 (7th Cir. 2011), where the appeals court held that a district court abused its discretion when it based the denial of class action certification on the existence of an FLSA collective action in the same case.
“Nothing in the text of the FLSA or the procedures established by the statute suggests either that the FLSA was intended generally to oust other ordinary procedures used in federal court or that class actions in particular could not be combined with an FLSA proceeding,” the Seventh Circuit concluded.
Nonetheless, the argument that federal and state collective/class actions in the same case are inherently incompatible remains one of several potentially effective strategies to attempt to limit the scope of the putative class.