Class action defense counsel, at least, have argued for a long time that there is a basic incompatibility between collective action claims under the FLSA, which require individual plaintiffs to opt in to the litigation, and wage claims brought under state law, which generally are opt -out cases — meaning that everyone in the job classification at issue is part of the class unless they affirmatively choose not to be.

That argument has gained some traction in some districts, and has been rejected in others, but has not had the attention of a federal circuit court until now.  In Ervin v. OS Restaurant Services — the Outback Steakhouse chain — the Seventh Circuit ruled yesterday that opt-in and opt-out classes can happily coexist in the same litigation.  The court found indications in the FLSA’s text that it was not intended to override state law.  The court also brushed off the inevitable confusion of class members — who will be invited to opt in to one claim in order to participate, but to opt out of a different claim to avoid participation — as a “case management” matter that district courts should think about but can manage.  (Specific suggestions on this point, however, were not presented).

In Hoffman-LaRoche Inc. v. Sperling, a 1989 case, the Supreme Court noted that Congress intended to limit employers’ exposure to representative litigation under the FLSA, by the 1947 Portal-to-Portal Act:

In part responding to excessive litigation spawned by plaintiffs lacking a personal interest in the outcome, the representative action by plaintiffs not themselves possessing claims was abolished, and the requirement that an employee file a written consent was added. . . . The relevant amendment was for the purpose of limiting private FLSA plaintiffs to employees who asserted claims in their own right and freeing employers of the burden of representative actions.

Courts that have differed from the Seventh Circuit’s view have argued that combining state-law opt-out claims in the same case as a collective action undermines the intent of Congress, because the trial of opt-in and opt-out cases together effectively wipes out the limitations of the opt-in mechanism.  The Seventh Circuit was not impressed, refusing even to consider Congressional intent because it found the text of the statute itself clear enough as to what Congress meant to do.  It will be interesting to see whether other circuits will follow the Seventh.