In wage-hour lawsuits, plaintiffs commonly assert claims under both the federal Fair Labor Standards Act (FLSA) and state wage-hour law. The United States Court of Appeals for the Third Circuit recently issued a significant decision discussing the relationship between claims under the FLSA and state law class actions proceeding under Rule 23 of the Federal Rules of Civil Procedure. Analyzing the FLSA provision that governs opt-in collective actions, the Court held that plaintiffs in a class action can include potential class members’ unasserted FLSA claims in an opt-out class settlement. The decision is a first-of-its-kind expansion of the ability of defendants in FLSA cases to secure FLSA releases from all members of a putative Rule 23 class who do not affirmatively opt out of the settlement.
Under the FLSA, claims brought on behalf of large groups of plaintiffs operate as “opt-in” collective actions under 29 U.S.C. § 216(b), meaning potential collective members have to choose to be part of the lawsuit or settlement. Rule 23 class actions, in contrast, usually work under an “opt-out” structure, where potential class members must choose to exclude themselves. Hybrid class/collective actions are lawsuits where both FLSA and Rule 23 claims have been brought simultaneously for the same violations.
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