Frequently, when a Fair Labor Standards Act (“FLSA”) case is commenced, a state law claim is added to the civil action. This creates a dilemma as a FLSA case can be commenced on behalf of the named plaintiff and others similarly situated. Assuming, the plaintiffs can make the minimal necessary showing for conditional certification of a collective action, the court will approve a notice and consent form to be sent to the same or similarly situated employees and former employees. An employee or former employee can join the suit by filing a fully executed consent form with the court. The opt-in procedure was enacted as part of the Portal-to-Portal Act. The intent of Congress was to prevent massive lawsuits by persons who did not necessarily want to be part of the suit. Thus, Congress required an employee or former employee to take an affirmative action to become part of the lawsuit—filing their own consent form. The statute of limitations (2 or 3 years) continues to run on the individual until the consent form is filed with the court.
Unlike a FLSA claim, a state law claim normally does not have a provision that permits filing on behalf of same or similarly situated employees. More state law wage statutes contemplate individual filers. However, most state law wage statute do not preclude class actions. Thus, in federal court, where most FLSA cases are filed or removed, plaintiffs will seek class certification based on Federal Rule of Civil Procedure. While the showing necessary for class certification is more stringent that conditional action certification, if that showing is met, the state law claims become opt-out as opposed to opt-in. That is, as noted above, in a collective action one is not a party until they affirmatively opt-in to the case. In a class action everyone in the class is in the case unless they affirmatively opt-out. Plaintiffs’ lawyers know that the opt-in rate among employees and former employees is 5-30%. When the case is a class action opt-out, very few people opt out of the case.
In situations where there are both federal (FLSA) and state law claims defendants (employers) have argued that the federal court should not assert supplemental jurisdiction, that is, leave the state law claims in the same case as there is an inherent conflict between the two mechanisms for participating in the lawsuit. Recently, in Shahriae et al v. Smith & Wollensky Restaurant Group, Docket No. 10-1884-cv (2d Cir. September 26, 2011), the Second Circuit Court of Appeals joined the Seventh, Ninth and District of Columbia Circuits, in holding that it is permissible for a court to allow both federal and state wage claims to proceed together in the same action. The Third Circuit has held to the contrary. The Court held that there was no conflict or incompatibility between the opt-in and opt-out mechanisms in the case. One of the rationales for permitting the two action was the fear of retaliation in a FLSA case by employees making them reluctant to participate. The court cited a few district court cases for the proposition, but no empirical studies. The court also relied on the provision in the FLSA that states: “No provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter…” 29 U.S.C. § 218(a) (2006). Finally, the court reasoned that the exercise of supplemental jurisdiction over state law claims was the rule, not the exception.
The Courts in their altruistic approach fail to realize that restoring plaintiffs pay is secondary to increasing the amount of the back pay in order for the plaintiffs’ lawyers to receive a larger amount of fees. Until courts apply restraints to the huge attorney fee awards the onslaught of collective actions coupled with state law class actions will continue.
By Bernie Siebert, Sherman & Howard LLC, Denver, CO