Labor & Employment Law

Momentous Development In FLSA Class Action Law

By Mark Tabakman

I have handled a number of wage-hour class actions where the plaintiffs allege federal (i.e. Fair Labor Standards Act) and parallel/identical state law claims for wages and overtime. Here, in New Jersey,  I have made motions to sever the state claims because they cannot exist as a component of the FLSA action due to the inherent tension in the opt-in (federal) versus opt-out (state) procedures.  Now, the legitimacy of pursuing two actions will be resolved (maybe, maybe not) by at least one Circuit in a case now coming before it.

The Second Circuit will decide whether a collective action can proceed with identical state law claims co-existing with it.  The case is Shahriar et al. v. Smith & Wollensky Restaurant Group, Inc. The Circuit has granted the company special leave to appeal the decision of the federal district judge that has allowed both claims to simultaneously proceed, as the judge certified a class of current and former waiters, who worked at the Park Avenue Café, for their New York State Labor Law claims.

Since the state case is opt-out, the number of plaintiffs in that case is significantly higher than the number of plaintiffs who chose to top in to the federal, FLSA, collective action case.  In fact, only twenty-two (22) employees opted in to the federal case, while the parallel state case contains an employee class of almost 300 employees.  There is, to me, something fundamentally and diametrically wrong with such a construct as it allows the plaintiffs and their lawyers to have the best of both worlds.

The company charges, and I think with some validity, that the plaintiffs are using the state claims to widen the scope of the case and, according to the company, 'extort' a massive settlement.  Indeed, the company would be under pressure to settle, if it were, in the end, facing a class of 300 as opposed to two dozen..

The lawyers for the plaintiffs shot back that the defendants should be careful what they wish for when they contend that both suits cannot remain parts of the same litigation.  If the suits are severed, the defendant will have to fight cases in both federal and state court.

The case itself involves allegations that the tip pool was destroyed by inappropriate people sharing in the tips, such as managers.  When this happens, the tip credit that the employer has been allowed to take is destroyed, creating shortages in minimum wage payments and the liability for the company escalates dramatically.

I will be watching this case closely, as will all practitioners of wage hour law, especially on the defense side.
 

Full post as published by Wage & Hour - Development & Highlights on May 25, 2010 (boomark / email).