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Third Circuit Rules FLSA and State Wage Claims Are Not Incompatible: A Brave New (And Dangerous) World

Posted in Class Actions

In FLSA collective action cases, there has been a doctrine of law prevalent for a number of years. Federal claims and state law claims are not compatible and cannot be maintained in the same lawsuit.  I have successfully moved to sever New Jersey state claims when made components of a FLSA action.  What that does is to erode away the state statute of limitations, while the motion is pending and decided.  The Third Circuit, in a case entitled Knepper vs. Rite Aid Corporation has now changed this longstanding principle.

This brave new world has emerged because the Third Circuit has held that state law class-action, overtime claims and FLSA collective action claims were not, ab initio, incompatible.  In a precedential opinion, the Third Circuit has reversed a district court, which was following the long-established rule.  The Court “disagree[ed] with the conclusion that jurisdiction over an opt-out class action based on state-law claims that parallel the FLSA is inherently incompatible with the FLSA’s opt-in procedure.”  Although the Court reversed on the inherent incompatibility issue, it affirmed the portion of the decision finding that the FLSA did not preempt state law on this matter.

The plaintiffs were Assistant Managers and had opted in to the FLSA collective action.  They then filed state law claims in Maryland and Ohio.  The plaintiffs contended that under the Class Action Fairness Act, the state law claims could be maintained due to diversity jurisdiction and allowed to proceed, although the actions would be parallel to the federal case.

The district court held that the Rule 23 opt-out class actions, founded on laws that provided the same remedies as the FLSA, were incompatible with opt-in process of the federal court..  The lower court extended the incompatibility doctrine because it had usually been applied to scenarios in which the federal and state claims were filed together, i.e. the hybrid cases.  In this situation, separate state lawsuits were instituted.

The Third Circuit disagreed. “We join the Second, Seventh, Ninth and D.C. circuits in ruling that this purported ‘inherent incompatibility’ does not defeat otherwise available federal jurisdiction."  I disagree.  I think this is a way of giving plaintiffs the ability to circumvent the FLSA, which is the reasoning adopted by the courts that had applied the doctrine in these hybrid cases.
 

More to follow, I am sure…