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©2010 ALM
T here has been a recent explosion of
Fair Labor Standards Act (FLSA) and state wage and hour claims by groups of employees. Because the federal and advantages to employees, these claims are state laws provide their own respective increasingly being pursued together in a single lawsuit, as a “dual-filed” action, in federal court. In such dual-filed actions, employees bring the federal claims as an opt-in collective action under FLSA
§16(b) and the state law claims as an opt-out class action under Federal Rule of Civil Procedure 23.
However, federal courts remain split as to whether it is appropriate for them to exercise supplemental jurisdiction over the state law claims in such cases.
The primary source of this court split is whether the opt-in process for FLSA collective actions is compatible with certification of an opt-out Rule
23 class action involving state law wage claims.
On Jan. 21, 2010, the U.S. Department of Labor
(DOL) weighed in on this divide, filing an amicus brief in an appeal pending before the U.S. Court of
Appeals for the Third Circuit. This month’s column addresses the current court split and the DOL’s recent position.
By
John P.
Furfaro
And risa M. salins not precluded by any policy decision implicit in the FLSA’s opt-in requirement. The court explained that where original jurisdiction is provided by the
FLSA, procedural differences in state law alone will not “curtail section 1367’s jurisdictional sweep” as long as the state law claims are closely related to the federal claims. In such cases, supplemental jurisdiction over state law claims, including state law wage claims, is mandatory unless the federal statute expressly provides otherwise or an exception under §1367(c) applies.
Many federal courts have held that supplemental jurisdiction over state law claims is authorized in dual-filed wage actions. These courts reject the proposition that the FLSA and its legislative intent and history make such dual-filed actions incompatible.
For example, in Lindsay v. Government
Employees Insurance Co.
, 448 F.3d 416 (D.C. Cir.
2006), the U.S. Court of Appeals for the D.C. Circuit found that congressional authority for the use of supplemental jurisdiction under 28 USC §1367 is
JohN p. furfaro is a partner at Skadden, Arps, Slate,
Meagher & Flom, and riSa m. SaliNS is an associate at the firm. erik k. ludwig , an associate at the firm, assisted in the preparation of this article.
Under §1367(c), supplemental jurisdiction may be declined if (1) a novel or complex state law claim is raised; (2) a claim over which the federal court has original jurisdiction is “substantially dominate[d]” by a state law claim; (3) no claims remain over which the federal court has original jurisdiction; or (4) where “exceptional circumstances” or “other compelling reasons” exist. Finding that the FLSA did not expressly prohibit the exercise of supplemental jurisdiction over state wage claims and that none of the
§1367(c) exceptions applied, the D.C. Circuit in
Lindsay held that the district court could exercise supplemental jurisdiction over the state wage claims.
Following the Lindsay court’s reasoning, several district courts this year have exercised supplemental jurisdiction over the state law claims in dual-filed wage actions. See, e.g., Cortez v. Neb. Beef, Inc.
, Nos: 8:08CV90; 8:08CV99,
2010 WL 604629, at *6-7 (D. Neb. Feb 16, 2010)
(supplemental jurisdiction over dual-filed wage claims is authorized by §1367(a) where federal and state claims are related and form a “common nucleus of operative fact”); McCormick v. Festiva
Dev. Group , No 09-365-P-S, 2010 WL 582218, at
*6 (D. Maine Feb. 11, 2010) (FLSA does not limit available state law remedies, including supplemental jurisdiction over state wage claims, noting in part, that the FLSA simply set a national floor which states are permitted to exceed).
Courts have also found that dual-filed actions should be permitted for purposes of judicial economy, convenience and fairness. For example, in Guzman v. VLM Inc.
, No. 07-CV-1126, 2008 WL
597186 (EDNY March 2, 2008), plaintiffs alleged overtime violations under the FLSA and New
York Labor Law. The court determined that even if few plaintiffs were likely to join a FLSA collective action, principles of “judicial economy, convenience, and fairness, all favor exercising supplemental jurisdiction” since the federal and state claims overlapped and “it would ill serve the interests of convenience or judicial economy to relitigate in state court the defendants’ pay practices.”
Some courts have permitted dual-filed wage actions, but only to the extent that the state law claims could be brought by those opting in to the FLSA collective action. For example, in
Bartelson v. Winnebago Indus. Inc.
, 219 FRD 629,
639 (N.D. Iowa 2003), the district court found that supplemental jurisdiction would be limited to those plaintiffs who opted in to the FLSA collective action because a substantially larger
Rule 23 class would create “a strong litigational hardship or inconvenience.”

Other courts have deferred ruling on Rule 23 class certification until the number of employees opting in to the collective action is known. In
Thiebes v. Wal-Mart Stores Inc.
, No. 98-802-KI, 2002
WL 479840, at *2 (D. Or. Jan. 9, 2002), the district court deferred Rule 23 certification because, among other reasons, it would be prudent to see how many employees in fact chose to opt in to the collective action. It explained that at that point, the court will be best able to determine whether a state law opt-out class action would also be appropriate.
On the other hand, district courts in numerous jurisdictions have refused to certify both the
FLSA collective action and state wage law class action in a single case. These courts have found that the federal and state law claims in dualfiled wage actions are “inherently incompatible” based on Congress’ intent in requiring an optin mechanism in order to bring FLSA collective actions.
In Pereira v. Foot Locker Inc.
, 261 FRD 60,
70 (E.D. Pa. 2009), for example, the court declined to exercise supplemental jurisdiction over state wage claims in a dual-filed action, reasoning that by requiring plaintiffs to opt in to a collective action under the FLSA, Congress sought to limit private FLSA claims to those affirmatively asserted by affected employees
“in their own right.” The court continued that to permit a state law opt-out action to proceed in the same lawsuit would give plaintiffs the ability to circumvent this requirement by bringing other, unnamed plaintiffs into the lawsuit and “eviscerate the purpose of…opt-in requirement.”
Other recent opinions have also found federal and state claims in dual-filed wage actions to be inherently incompatible. See, e.g., Aguilera v. Mich. Turkey Prods. Co-op. Inc.
, No. 1:09-CV-
420, 2009 WL 3585722, at *2 (W.D. Mich. Oct.
28, 2009) (“Managing a class action under a state law theory, and a collective action under federal law with divergent procedural postures would place administrative demands on the
Court and create the possibility of confusion among potential collective action participants and potential class members”); Dillworth v. Case
Farms Processing Inc.
, No 5:08CV1694, 2009 WL
2766991, at *6 (N.D. Ohio Aug. 27, 2009) (FLSA’s opt-in requirement is a device meant to prevent litigation of employees’ substantive rights absent knowledge and affirmative consent); Warner v.
Orleans Home Builders Inc.
, 550 FSupp2d 583, 588-
89 (E.D. Pa. 2008) (Congress’ intent in creating an opt-in requirement in FLSA actions was to limit the number of private plaintiffs to those employees bringing claims in their own right);
De La Fuente v. FPM Ipsen Heat Treating Inc.
, No
02-CV-50188, 2002 WL 31819226, at *2 (N.D. Ill. Dec.
16, 2002) (it would “seem[] an inherently difficult task to adequately inform the recipient of his choices in a non-confusing manner” in a dual-filed action).
Several district courts have declined to exercise supplemental jurisdiction over state law claims in dual-filed wage actions, not because the courts found such actions to be inherently incompatible with the FLSA, but rather, pursuant to exceptions to supplemental jurisdiction set forth in §1367(c) listed above.
For example, in De Asencio v. Tyson Foods Inc.
,
342 F.3d 301 (3d Cir. 2003), where current and former plant employees alleged violations of minimum wage and overtime provisions under the FLSA and Pennsylvania law, the court held that the state wage claims should be resolved by Pennsylvania courts, because among other reasons, the FLSA claims would be substantially dominated by the state wage claims in that case.
Specifically, the court found that the great disparity in size of the federal and state classes supported the denial of supplemental jurisdiction where only 11 percent of the eligible current and former employees had opted in to the federal claims and thus would likely “transform[] the action to a substantial degree.” See also Glewwe v. Eastman Kodak Co.
, No 05-CV-6462T, 2006
WL 1455 1455476, at *4 (WDNY May 25, 2006)
(supplemental jurisdiction declined under the exceptions set forth in 1367(c)(1) and (2) where the number of state laws involved 35 jurisdictions’ wage laws and 50 jurisdictions’ breach of contract laws, creating complex and diverse state law issues that would “substantially predominate over the FLSA claim”).
In Parker v. NutriSystem Inc.
, No 2:08-CV-
1508 (E.D. Pa. July 25, 2008), the district court dismissed call center employees’ Pennsylvania state overtime pay claims brought in a dual-filed action, explaining that the opt-out mechanism of a Rule 23 class action is “inherently incompatible” with the FLSA’s opt-in collective action mechanism.
Plaintiffs appealed the dismissal, which is currently pending before the Third Circuit in Parker v.
NutriSystem, Inc.
, No. 09-3545. In an amicus brief filed by the DOL on Jan. 21, 2010, in this matter, the DOL took the position that state law class actions are compatible with FLSA collective actions, such that they can be brought in the same federal lawsuit under 28 USC §1367.
The DOL adopted the holding and reasoning of the Lindsay court, agreeing that “supplemental jurisdiction over state law claims that are sufficiently related to the underlying federal claims is mandatory unless a federal statute expressly provides otherwise or the exceptions set forth elsewhere in 28 USC 1367 apply.” The
DOL concluded that §16(b) of the FLSA and its legislative history in no way suggest that dual-filed actions are incompatible. Since §16(b) applies only to minimum wage, overtime, and retaliation claims, and makes no mention of state or other claims, the DOL read the act as limiting the optin requirement to FLSA claims and not to state wage claims.
Additionally, the legislative history of §16(b), the DOL argued, demonstrates that Congress’ intent was simply to restrict FLSA actions and not to prohibit state wage claims under Rule 23 because originally, §16(b) was silent on whether non-named plaintiffs were required to opt-in to a collective action. Rather, the opt-in provision was added by the Portal-to-Portal Act of 1947, which stated that it was “applicable only with respect to actions commenced” under the FLSA.
Pub. L. No. 80-49 §5. The amicus brief further argued that congressional reports regarding the
Portal-to-Portal Act do not suggest any intent to prohibit supplemental jurisdiction over state wage law claims.
Lending additional support to its position, the DOL asserted that there exists no basis for interpreting the FLSA opt-in provision as a choice against Rule 23’s opt-out process since Rule 23 did not contain an opt-out provision until 1966, nearly
20 years after inclusion of the opt-in provision in the FLSA. Based on the DOL’s review of the
1966 advisory committee notes, it further argued that the addition of the Rule 23 opt-out provision was not intended to affect the provisions of FLSA
§16(b), and that in fact no attempt was made “to reconcile the FLSA’s opt-in process and Rule 23’s opt-out process.”
Counsel are advised to stay abreast of developments in this area.
Reprinted with permission from the April 1, 2010 edition of the NEW
YORK LAW JOURNAL © 2010. ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. # 070-04-10-09