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Class Action Defense Cases-Otto v. Pocono Health: Federal Court Grants Defense Motion To Dismiss State Law Overtime Class Action Claims As Incompatible With Federal Overtime Class Action Claims Because Of Conflict Between Opt-In/Opt-Out Requirements

Pennsylvania Federal Court Agrees With Defense that Fair Labor Standard Act (FLSA) Opt-In Requirement for Overtime Class Actions is “Inherently Incompatible” with Rule 23 Opt-Out Requirement for State Law Overtime Class Action Cases Mandating Dismissal of State Claims

Former employees filed a putative class action in Pennsylvania federal court against Pocono Health System and Pocono Medical Center alleging violations of the federal Fair Labor Standard Act (FLSA), and of Pennsylvania’s Minimum Wage Act and Wage Payment and Collection Law, because defendants paid overtime on an “8 and 80” plan, requiring overtime if employees work more than 8 hours in a day or more than 80 hours over a two-week period. Otto v. Pocono Health System, 457 F.Supp.2d 522, 522-23 (M.D. Pa. 2006). Defense attorneys moved to dismiss the state law class action claims on the grounds that FRCP Rule 23 requires that class members must affirmatively “opt-out” of state law class action cases filed in federal court, but FLSA § 216(b) requires that putative class members affirmatively “opt-in” to class action cases seeking overtime pay under the FLSA. Defense attorneys urged that the state law and federal law claims advanced in plaintiffs’ class action complaint were thus “inherently incompatible” and compelled dismissal of the state law claims. Id., at 523. The district court agreed.

The federal court began by noting that several New Jersey federal courts “have held that Section 216(b) opt-in collective actions are incompatible with Rule 23 opt-out class actions.” Otto, at 523. And while those sister court decisions are not binding, the district court found the reasoning therein to be persuasive. In granting the defense motion plaintiffs’ state law class action claims, the district court explained at page 524: “It is clear that Congress labored to create an opt-in scheme when it created Section 216(b) specifically to alleviate the fear that absent individuals would not have their rights litigated without their input or knowledge. To allow an Section 216(b) opt-in action to proceed accompanied by a Rule 23 opt-out state law class action claim would essentially nullify Congress’s intent in crafting Section 216(b) and eviscerate the purpose of Section 216(b)’s opt-in requirement.”

Download PDF file of Otto v. Pocono Health System