As noted in earlier postings, in March of this year, a federal judge in New York handed Chipotle Mexican Grill a significant victory, denying a request by salaried management apprentices alleging misclassification as exempt from overtime to certify claims for class action treatment under the laws of six states, as well as granting Chipotle’s motion to decertify an opt-in class of 516 apprentices under the Fair Labor Standards Act (“FLSA”).  The plaintiffs then sought—and in July 2017 the U.S. Court of Appeals for the Second Circuit granted—a discretionary interlocutory appeal of the ruling concerning the six state-law putative classes, allowing the plaintiffs to obtain immediate review of that decision under Rule 23(f) of the Federal Rules of Civil Procedure rather than waiting until after final judgment in the case to pursue an appeal as of right.

The plaintiffs also asked the district court for permission to appeal the order decertifying the FLSA collective action.  Under the pertinent statute, 28 U.S.C. § 1292(b), a district court may certify a non-final ruling for immediate appeal if the “order involves a controlling question of law as to which there is substantial ground for difference of opinion and … an immediate appeal from the order may materially advance the ultimate termination of the litigation[.]”  The plaintiffs argued that “a conflict exists in this Circuit between Rule 23 standards for class certification and FLSA Section [16(b)] standards for certification of a collective action” and that the court’s rulings regarding the FLSA and the state-law classes reflect uncertainty regarding the differences, if any, between the class certification standard and the FLSA decertification standard.

On September 25, 2017, the district court granted the plaintiffs’ motion for an interlocutory appeal.  Although the court “disagrees with Plaintiffs’ argument that there is a ‘rift’ between” those standards, the court nevertheless concluded that the “Plaintiffs’ assertions do point to controlling questions of law which may have substantial grounds for a difference of opinion.”  (Order at 2.)  The court emphasized that “[t]he Second Circuit will review this Court’s Rule 23 class certification decision pursuant to Rule 23(f)” but that this review “would not likely encompass the portion of this Court’s decision decertifying the . . . collective action.”  (Id.)  Because “Plaintiffs are adamant that the two standards need elucidation and that this Court erred in applying the standards, it seems proper to grant Section 1292(b) relief in order for the Circuit to review the entire” ruling—i.e., both the FLSA and the state-law class aspects of the decision—and thereby “avoid the possibility of conflicting decisions on Plaintiffs’ class motions, promote judicial efficiency, and avoid piecemeal appellate litigation.”  (Id.)  The court also remarked that “the Second Circuit has recognized that class certification decisions have the potential to materially advance the ultimate termination of the litigation which the Second Circuit has held may warrant Section 1292(b) relief.”  (Id. at 3.)

Stepping back from the specific wording of the court’s decision, the ruling reflects a pragmatic approach to the matter: because the Second Circuit has already decided to take up the Rule 23 class certification issue in the case, there is no real harm in allowing the appellate court the opportunity to decide whether it also wants to address the FLSA decertification issue at the same time.  The district court’s decision certifying the matter for interlocutory appeal does not require the Second Circuit to hear the full case at this time; instead, it authorizes the plaintiffs to proceed with a petition for permission to that court to appeal the decertification order.

It remains to be seen to what extent this court and other courts will apply the actual verbiage of this decision even-handedly when employers seek review of orders granting class certification or conditionally certifying FLSA collective actions.  Will being “adamant” that the law needs “elucidation” and that the court “erred” features of nearly every employer-side request for interlocutory review—or the “potential” for class certification decisions “to materially advance the ultimate termination of the litigation” similarly lead to interlocutory review when employers make comparable requests?  Stay tuned for further developments.

Our colleague Adriana S. Kosovych, associate at Epstein Becker Green, has a post on the Hospitality Employment and Labor blog that will be of interest to many of our readers: “Chipotle Exploits Wide Variation Among Plaintiffs to Defeat Class and Collective Certification.

Following is an excerpt:

A New York federal court recently declined to certify under Rule 23 of the Federal Rules of Civil Procedure (“Rule 23”) six classes of salaried “apprentices” at Chipotle restaurants asserting claims for overtime pay under New York Labor Law (“NYLL”) and parallel state laws in Missouri, Colorado, Washington, Illinois, and North Carolina, on the theory that they were misclassified as exempt executives in Scott et al. v. Chipotle Mexican Grill, Inc. et al., Case No. 12-CV-8333 (S.D.N.Y. Mar. 29, 2017).  The Court also granted Chipotle’s motion to decertify the plaintiffs’ conditionally certified collective action under Section 216(b) of the Fair Labor Standards Act (“FLSA”), resulting in the dismissal without prejudice of the claims of 516 plaintiffs who had opted in since June 2013.

The putative class and collective action of apprentices working in certain of Chipotle’s 2,000-plus restaurants nationwide were provisionally employed while being trained to become general managers of new Chipotle locations. The Scott action challenged Chipotle’s blanket exempt classification of the apprentice position, claiming that the duties plaintiffs actually performed during the majority of their working time were not managerial, and therefore, as non-exempt employees they were entitled to receive overtime pay. …

Read the full post here.

By Evan J. Spelfogel

For several years, employers’ counsel have moved to block the combining of state wage and overtime claims with federal Fair Labor Standards Act (“FLSA”) claims, arguing that Rule 23 opt-out class actions were inherently inconsistent with FLSA collective opt-in actions. For support, they cited to the decision of the Third Circuit in De Asencio vs. Tyson Foods, Inc., 342 F. 3d 301 (3rd Cir. 2003) reversing a district court’s exercise of supplemental jurisdiction because of the inordinate size of the state-law class, the different terms of proof required by the implied contract state-law claims, and the general federal interest in opt-in wage actions. Since De Asencio, numerous district courts in the Third Circuit have dismissed state law wage claims that paralleled FLSA claims because of the “inherent incompatability” between opt-in collective actions and opt-out class actions. 

On September 26, 2011, the Second Circuit U.S. Court of Appeals approved the combining of state law Rule 23 opt-out class wage claims with an FLSA opt-in collective action. Salim Shahriar, et al. vs. Smith & Wollensky Group, Inc. d/b/a Park Avenue Restaurant, et al., __________ F. 3d _________ (2nd Cir. No. 10-1884). The Court noted that nothing in the FLSA statutory language or legislative history precluded joint prosecution of FLSA and state law wage claims in the same federal action. The U.S. Department of Labor weighed in with an amicus brief stating that the Restaurant had misinterpreted the FLSA, urging the court to reject any attempt to use the FLSA to bar certification of a class action of state law wage claims in federal courts merely because a FLSA collective action was pending.

The Second Circuit in Smith & Wollensky approved and relied substantially upon the Seventh Circuit’s decision in Irvin vs. OS Restaurant Services, Inc., 632 F. 3d 971 (7th Cir. 2011) holding that a district court had abused its discretion in denying Rule 23 class action certification of state claims merely because of the existence of a parallel FLSA collective action. The Seventh Circuit noted that neither the text of the FLSA nor the procedures established by that statute suggested that the FLSA was intended generally to oust other ordinary procedures used in federal courts, or that class actions in particular could not be combined with an FLSA proceeding. 

The Ninth and District of Columbia Circuits also concluded that any alleged incompalability between the FLSA and Federal Rule 23 was insufficient to deny supplemental jurisdiction. See, Wang vs. Chinese Daily News, Inc., 623 F. 3d 743 (9th Cir. 2010) (vacated and remanded in light of Walmart, 564 U.S. _____, 10/3/11); and Lindsay vs. Government Employees Insurance Co., 448 F. 3d 416 (DC Cir. 2006). In summary, these Circuits have held that, while there may in some cases be exceptional circumstances or compelling reasons for declining jurisdiction, the “conflict” between the opt-in procedure under the FLSA and the opt-out procedure under Rule 23 was not a sufficient cause by itself to decline jurisdiction.   

Ultimately, the US Supreme Court may be called upon to review an apparent split in the Circuits on this issue. In the meantime, employers are urged to continue to raise the issue in courts that have not yet ruled, and to urge “exceptional circumstances” and “compelling reasons” for courts in the Second, Fourth, Seventh, Ninth and D.C. Circuits to bar hybrid state Rule 23 opt-out claims from the federal processes. 

This might include, for example, the size of the putative opt-out Rule 23 class in the state law claims as compared with the number of opt-ins in the FLSA collective action. Hybrid collective and class actions typically arise where only a small number of potential opt-in plaintiffs under a FLSA claim actually opt-in, while there are hundreds and perhaps thousands of putative class members with potential state law claims. One purpose of Congress in enacting the FLSA opt-in provision, it may be argued, was to control the volume of litigation and ensure that absent individuals would not have their rights litigated without their input or knowledge. The opt-in mechanism under the FLSA limits FLSA claims to those affirmatively asserted by employees “in their own right” and frees employers from the burden of representative actions. Allowing a Rule 23 opt-out option to be combined in the same lawsuit with an opt-in FLSA option allows plaintiffs to evade the requirements of the FLSA by permitting litigation through a representative action and bringing unnamed plaintiffs into the lawsuit. See, e.g., Dell vs. Citizens Financial Group, Inc., Western District Pennsylvania No. 2:10-Civ-00320, 6/8/11.