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Circuit Courts Are Split on FLSA Collective Actions Against Out of State Employers

Large multi-state collective actions continue to be filed under the federal Fair Labor Standards Act (“FLSA”). In addition, with the increase of remote work, more and more employers are employing workers outside of the companies’ home states. This has resulted in relatively new questions about the reach of a court’s jurisdiction over out of state employers. For example, if a Michigan employee sues a New York employer for overtime in Michigan, can other employees located outside of Michigan join the lawsuit? Does the Michigan federal district court have personal jurisdiction over out of state employees when the employer is located in New York? The federal Circuit Courts of Appeals are divided on the issue. 

To date, four federal circuit courts have considered this question, and the Seventh Circuit recently accepted an interlocutory appeal to decide the issue in the near future. The Third, Sixth, and Eighth Circuits have ruled that there is no personal jurisdiction over out-of-state plaintiffs suing an employer not otherwise subject to personal jurisdiction. The First Circuit has held the opposite.  The circuit split seems likely to go up for U.S. Supreme Court review, but until then, multi-state employers should be aware of a potential case-changing defense.

1. Multi-State Employers Need to Be Aware of Both Types of Personal Jurisdiction

The above question about jurisdiction is not straightforward. The analysis turns on the two types of personal jurisdiction in federal court that can extend to an out-of-state employer. First, courts examine whether there is general personal jurisdiction, which a court may assert where an out-of-state employer’s affiliations with the State are so “continuous and systematic” as to render them essentially at home in the forum state. A corporate defendant is “at home” in the states where the corporation has its principal place of incorporation and where it has its principal place of business. 

Second, if there is no general jurisdiction, there may still be specific personal jurisdiction over a non-resident defendant. Specific personal jurisdiction exists whenever the person would be amenable to suit under the laws of the state in which the federal court sits. These rules become more complicated in FLSA cases. 

While in the normal class-action context unnamed class members are not actual plaintiffs, in the FLSA context, “opt-in” employees have party plaintiff status. An opt-in plaintiff’s party-plaintiff status comes with the same status as a named plaintiff in asserting the claims in the lawsui . Thus, after opting in, there is no statutory distinction between the roles or nomenclature assigned to the original and opt-in plaintiffs. An opt-in plaintiff’s status is, therefore, different from that of an unnamed class member.

In a class action, a certified class has independent legal status and each class member is represented by the court-approved representative and bound by any judgment (unless they “opt out”).  However, in an FLSA collective action, only those who “opt in” have legal status. Courts have held that the collective action itself is really a kind of mass action, in which aggrieved workers act as a collective of individual plaintiffs with individual cases and litigate those cases together.  Thus, this has given rise to the legal argument that out-of-state plaintiffs could not sue an out-of-state employer that was not subject to general personal jurisdiction in the forum state. In other words, in the above hypothetical, the New York employee could not join a FLSA collective action to sue the New York employer in a Michigan court.

2. The Real-World Impact and Circuit Court Decisions to Date

To date, the Third, Sixth, and Eighth Circuits have endorsed the above rationale. In the view of these three courts, the FLSA opt-in is, by virtue of opting in, an active plaintiff like any other.  The First Circuit, on the other hand, has decided that district courts do not need to conduct a separate personal jurisdiction analysis for opt-in plaintiffs because only the named plaintiff’s FLSA claims need to arise from the defendant’s contacts with the forum state.    

We expect more circuit courts to take up this issue in the near future given the growing trend in both multi-state FLSA collective actions and in multi-state employers asserting this personal jurisdiction defense. Given the existing circuit split, this issue could be ripe for Supreme Court review sooner rather than later, and is certainly one to watch in the wage and hour space over the next several years.

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