3d. Cir: Stay Classy, FLSA Plaintiffs!

The 3d Circuit’s recent decision in Knepper v. Rite Aid opened the door for plaintiffs in wage-and-hour litigation to bring two different types of class actions against their employers in a single lawsuit.

James Fisher was employed as an assistant store manager in a Rite Aid store in Maryland. He alleges that he was misclassified as exempt from the FLSA’s overtime provisions and that they are entitled to additional compensation for all hours worked over 40 per week. In June 2009, Fisher joined a nation-wide, opt-in class action brought under the FLSA. At the same time, Fisher filed a Rule 23 opt-in class action under Maryland’s state Wage and Hour Law. Faced with two parallel lawsuits, Rite Aid asked the Court to dismiss the Rule 23 state law class action as inherently incompatible with the FLSA’s opt-in class action structure. The Court granted Rite Aid’s motion, and Fisher and other state law plaintiffs appealed the decision to the Third Circuit.

On appeal, the Third Circuit joined the Second, Seventh, and Ninth Circuits in holding that there is not “inherent incompatibility” between the FLSA and Rule 23. Instead, the Court noted that it was within the trial court’s discretion to administer parallel claims. The Court ruled that, notwithstanding Congress’s clear intent in creating a unique process for the FLSA, there was no evidence that it intended to impact the litigation of similar state law claims.
There is another important implication of the Knepper decision. Because the ADEA incorporates the class procedures of the FLSA, the 3d Cir.’s opinion opens the door for parallel ADEA and Rule 23 class actions in age-discrimination claims, as well.

Unfortunately, the road just got a little harder for employers facing wage-and-hour litigation. The FLSA is already a notoriously difficult statute to litigate under, and employers may now be faced with parallel FLSA and Rule 23 class actions. In this case, as in all matters, the best defense is a good offense. Misclassification litigation can be avoided by carefully considering the job responsibilities of your employees and consulting counsel if you are in doubt about classification. If you misclassify employees, the penalties are steep and the cost of litigation just got higher.

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