In a decision issued March 27, 2012, the US Court of Appeals for the Third Circuit reversed in part a district court's ruling dismissing plaintiffs' claims under the FLSA and state wage and hour laws. The key issue facing the court was whether jurisdiction over an opt-out state law wage and hour class action brought under Rule 23 of the Federal Rules of Civil Procedure (FRCP) is inherently incompatible with jurisdiction over an FLSA opt-in collective action, and whether the FLSA preempts state laws that parallel its protections.

The plaintiffs, assistant store managers at Rite Aid, joined a nationwide opt-in FLSA class action in 2009, seeking back pay for alleged misclassification of assistant managers as overtime-exempt. One month later, the plaintiffs separately filed state law class action claims in Maryland and Ohio alleging identical misclassification under state wage and hour laws.

The three claims were ultimately heard by a Pennsylvania federal district court. In its decision granting the defendants' motion to dismiss, the court held that FRCP 23 opt-out class actions claims based on state laws paralleling the FLSA are inherently incompatible with the opt-in procedure provided by the FLSA. This procedure, the court noted, reflected Congress's intent to eliminate representative, or "opt-out," actions. Because of this incompatibility, the court held it was barred from hearing the action.

On appeal, the Third Circuit reversed the district court, holding that the plaintiffs' FRCP 23 class actions and FLSA collective action are not inherently incompatible. In support of its decision, the court noted that:

The court also distinguished a 2003 decision cited by the defendants, De Asencio v. Tyson Foods, Inc., in which the Third Circuit held that a trial court abused its discretion by exercising supplemental jurisdiction over an opt-out class action based on Pennsylvania wage law filed together with an opt-in FLSA class action. De Asensio does not control, the court noted, because neither of the plaintiffs' state law claims are novel or complex, nor does the case involve supplemental jurisdiction.

With its decision, the court joins the Second, Seventh, Ninth and D.C. Circuits in ruling that jurisdiction over an opt-out class action based on state law claims is not inherently incompatible with the FLSA's opt-in procedure.

The Third Circuit's opinion reinforces a trend among circuit courts of declining to recognize the incompatibility of parallel class action and collective claims brought under state wage and hour law and the FLSA. Employers in the Third Circuit must now be prepared to defend more wage and hour claims under both the FLSA and state law pursuant to FRCP 23.

For more information on state wage and hour laws, see State Q&A Guide to Wage and Hour Laws.