A DISTINCTION WITHOUT A DIFFERENCE—FEDERAL COURT EXTENDS INHERENT INCOMPATIBILITY DOCTRINE TO SEPARATELY FILED FLSA AND STATE WAGE-AND-HOUR CLAIMS

By: Jason E. Reisman and Tiffani McDonough, Obermayer Rebmann Maxwell & Hippel LLP

     Recently, in Knepper v. Rite Aid Corporation, No. 09-cv-2069 (M.D. Pa. Feb. 16, 2011) and Fisher v. Rite Aid Corporation, No. 10-cv-1865 (M.D. Pa. Feb. 16, 2011), the United States District Court for the Middle District of Pennsylvania addressed the issue of whether Fair Labor Standards Act (“FLSA”) § 216(b) collective actions and Federal Rule of Civil Procedure 23 class actions are “inherently incompatible,” where the actions are filed separately.[1]  In Knepper and Fisher, the plaintiffs were assistant store managers who filed putative Rule 23 class actions against their employer claiming to be misclassified and seeking overtime pay under state law.  Prior to filing the Rule 23 class actions, both plaintiffs had consented (i.e., opted in) to become party-plaintiffs in Craig v. Rite-Aid Corporation, No. 08-cv-2317, (M.D. Pa.) (“the Craig action”).  In the Craig action, current and former Rite Aid assistant managers had filed a § 216(b) collective action alleging that they were misclassified as exempt from the FLSA’s overtime-pay requirements.

     In Knepper and Fisher, the court dismissed the Rule 23 class actions, holding that the § 216(b) collective action (the Craig action) and the Rule 23 class actions were “inherently incompatible” despite the fact that the actions were filed separately.[2]  The Court explained that “Congress labored to create an opt-in scheme when it created Section 216(b) specifically to alleviate the fear that absent individuals would not have their rights litigated without their input or knowledge . . . .   To allow [a] Section 216(b) action to proceed accompanied by a Rule 23 opt-out state law class action claim would essentially nullify Congress’s intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b)’s opt-in requirement.”  The court further explained that allowing the plaintiffs “to proceed in a separate action that is in contravention of the important policies underlying the federal statute . . . would still ‘eviscerate the purpose of Section 216(b)’s opt-in requirement’ just as much as in a dual-filed action . . . .  [F]iling a separate action rather than asserting the same, related claim in another action . . . is a distinction without a difference.” 

     Although Knepper and Fisher dealt with separately filed actions, there is a substantial body of conflicting case law regarding the compatibility of FLSA opt-in collective action claims and state-law wage-and-hour Rule 23 opt-out class claims asserted in the same lawsuit—often referred to as “hybrid” actions.  As such, there is no established rule defining the parameters of the inherent incompatibility doctrine.  Because plaintiffs increasingly file state-law wage-and-hour claims alongside FLSA claims, the procedural split amongst the courts translates into the prospect of increased litigation and costs associated with wage-and-hour claims.  This issue will likely make its way to the Supreme Court for final clarity.  But, for now, at least in the Middle District of Pennsylvania, FLSA opt-in collective action claims are “inherently incompatible” with Rule 23 opt-out class claims, whether pursued together in a hybrid action or separately in different actions.


[1] There is a deceptively simple difference between “collective actions” brought pursuant to the FLSA and “class actions” brought pursuant to Federal Rule of Civil Procedure 23 (“Rule 23”).  FLSA claims are governed by an “opt-in” mechanism in § 216(b).  In these collective actions, litigants who do not affirmatively file notice and join the litigation are not bound by the judgment.  Conversely, the Rule 23 “opt-out” device governs non-FLSA claims: class action litigants who do not affirmatively file notice and exit the litigation are bound by the judgment. 

[2] Of interest, the court dismissed the cases without prejudice, thereby allowing both plaintiffs the opportunity to re-file their claims in state court.

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