New York Labor and Employment Law Report
Second Circuit Rules FLSA Collective Action and State-Law Class Action May Be Brought in the Same Case
October 19, 2011
At one point in the Hitchhiker’s Guide to the Galaxy series by British author Douglas Adams, Arthur Dent finds himself confronted by a door that will not open unless he can demonstrate a high degree of intelligence. When Dent somehow manages to possess both tea and no tea at the same time, the door opens, noting that Dent must be quite a philosopher to overcome the inherent contradiction of holding and not holding an item at once.
A recent decision by the Second Circuit is reminiscent of Dent’s feat. In Shahriar v. Smith & Wollensky, the Second Circuit Court of Appeals was confronted with the question of whether plaintiffs could simultaneously maintain a collective action under the Fair Labor Standards Act, as well as a class action based on state-law claims under Rule 23 of the Federal Rules of Civil Procedure. If you are wondering why that poses an issue, in a collective action potential plaintiff class members are not in unless they affirmatively opt in, whereas the plaintiffs in Rule 23 class actions are in unless they affirmatively opt out. As a result, the same person could be both a plaintiff and not a plaintiff in the same action; out of the collective action because she did not opt in, but in the class action because she did not opt out.
Despite the many potential consequences of permitting both participation and non-participation by the same person in a single action, the Second Circuit found that there is no inherent conflict in a federal court allowing both a collective FLSA action and a Rule 23 class action asserting parallel state law claims. The defendant argued that permitting a state law opt-out class action to proceed concurrently with the FLSA opt-in collective action would be inconsistent with the opt-in scheme created by Congress. The Second Circuit rejected that argument and found no inconsistency, concluding that nothing in the language of the FLSA or its legislative history indicated a Congressional intent to preclude concurrent class actions on state law claims, and that other circuits had reached the same conclusion. Another factor may have also influenced the Court’s decision. Earlier in the opinion, the Court stated that the potential FLSA plaintiffs may decide not to take the step of affirmatively opting into the collective action out of fear of retaliation, but that the same risk is not posed by participation in an opt-out class action.
