Ervin v. OS Restaurant Services, Inc.

632 F.3d 971, 17 Wage & Hour Cas.2d (BNA) 97, 78 Fed. R. Serv. 3d 720, 2011 U.S. App. LEXIS 863, 2011 WL 135708
CourtCourt of Appeals for the Seventh Circuit
DecidedJanuary 18, 2011
Docket09-3029
StatusPublished
Cited by137 cases

This text of 632 F.3d 971 (Ervin v. OS Restaurant Services, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ervin v. OS Restaurant Services, Inc., 632 F.3d 971, 17 Wage & Hour Cas.2d (BNA) 97, 78 Fed. R. Serv. 3d 720, 2011 U.S. App. LEXIS 863, 2011 WL 135708 (7th Cir. 2011).

Opinion

WOOD, Circuit Judge.

In this appeal we consider whether employees who institute a collective action against their employer under the terms of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq. (“FLSA”), may at the same time litigate supplemental state-law claims as a class action certified according to Federal Rule of Civil Procedure 23(b)(3). The district court thought not; it rejected the plaintiffs’ effort to proceed as a class under Rule 23(b)(3) on the ground that there is a “clear incompatibility” between the FLSA proceeding and the proposed class action. The problem, as the court saw it, stems from the fact that the FLSA requires potential plaintiffs to opt in to participate in an action, while the plaintiffs in a Rule 23(b)(3) class action are included in the case unless they opt out. Trying to use both systems side-by-side would be rife with complications, it concluded; more formally, it held that one could never find the superiority requirement of Rule 23(b)(3) satisfied if the case also involved an FLSA collective action.

The question whether these two distinct types of aggregate litigation may co-exist within one case has divided the trial courts in this circuit and elsewhere. In the Northern District of Illinois alone, compare Barragan v. Evanger’s Dog and Cat Food Co., 259 F.R.D. 330 (N.D.Ill.2009), and Ladegaard v. Hard Rock Concrete Cutters, Inc., 2000 WL 1774091 (N.D.Ill. 2000), with Riddle v. National Sec. Agency, Inc., 2007 WL 2746597 (N.D.Ill.2007), McClain v. Leona’s Pizzeria, Inc., 222 F.R.D. 574 (N.D.Ill.2004), and Rodriguez v. The Texan, Inc., 2001 WL 1829490 (N.D.Ill.2001). As far as we can tell, no court of appeals has yet had occasion to address it. But see Wang v. Chinese Daily News, Inc., 623 F.3d 743, 753-55, 760-62 (9th Cir.2010) (holding that a district court properly certified a Rule 23(b)(2) class along with an FLSA collective action and properly exercised supplemental jurisdiction over the state-law claim); Lindsay v. Government Employees Ins. Co., 448 F.3d 416, 420-25 (D.C.Cir.2006) (concluding, in the context of an appeal under Rule 23(f), that the FLSA does not necessarily preclude an exercise of supplemental jurisdiction over related state-law claims); De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 307-12 (3d Cir.2003) (concluding that a district court presiding over an FLSA collective action should not have exercised supplemental jurisdiction over parallel state-law claims).

We conclude that there is no categorical rule against certifying a Rule 23(b)(3) *974 state-law class action in a proceeding that also includes a collective action brought under the FLSA. (We refer to these as “combined” actions, rather than “hybrid” actions, to avoid confusion with other uses of the term “hybrid” — e.g., for cases certified under more than one subsection of Rule 23(b).) In combined actions, the question whether a class should be certified under Rule 23(b)(3) will turn — as it always does — on the application of the criteria set forth in the rule; there is no insurmountable tension between the FLSA and Rule 23(b)(3). Nothing in the text of the FLSA or the procedures established by the statute suggests either that the FLSA was intended generally to oust other ordinary procedures used in federal court or that class actions in particular could not be combined with an FLSA proceeding. We reverse the district court’s class-certification determination and remand for further consideration in accordance with this opinion.

I

The plaintiffs are former employees of an Outback Steakhouse in Calumet City, Illinois. The restaurant is owned and operated by the defendant, OS Restaurant Services, Inc.; we refer to the defendant as “Outback” throughout this opinion. The employees sued Outback on behalf of themselves and all others who had previously worked or were currently employed at the restaurant as hourly or tipped employees. (A tipped employee, like a waiter or bartender, is paid a tip-credit wage, which is less than the minimum wage; the expectation is that her earnings for each pay period, including both the base wage and tips, will equal or exceed the minimum wage.)

The complaint alleges that Outback’s employee policies run afoul of the FLSA, the Illinois Minimum Wage Law, 820 ILCS 105/1 et seq. (“IMWL”), and the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (“IWPCA”). Specifically, the plaintiffs argue that Outback violated the minimum wage and maximum hour provisions of both the FLSA and the IMWL in three ways: (1) by requiring tipped employees to perform tasks during which they could not earn tips; (2) by using money that tipped employees were required to deposit in a “tip pool” to make up for shortages in restaurant cash registers; and (3) by demanding that the tipped employees contribute an excessive amount of their tips to the tip pool. The plaintiffs’ state-law claim under the IWPCA is based on their allegation that Outback altered entries in its timekeeping system to reflect fewer hours for each person, thereby enabling it to pay its employees for less time than they actually worked.

The plaintiffs moved for conditional approval of a federal collective action under section 16(b) of the FLSA, 29 U.S.C. § 216(b), which authorizes employees to act together to seek redress for violations of the statute’s minimum wage and maximum hour provisions, see 29 U.S.C. §§ 206 and 207. The conditional approval process is a mechanism used by district courts to establish whether potential plaintiffs in the FLSA collective action should be sent a notice of their eligibility to participate and given the opportunity to opt in to the collective action. See, e.g., Myers v. Hertz Corp., 624 F.3d 537, 554-55 (2d Cir.2010). The plaintiffs proposed that notice be given to anyone who had worked as a tipped employee at Outback since 2005. At the same time, they sought certification under Rule 23(b)(3) of three different classes alleging state-law claims: (1) all tipped employees who earned less than minimum wage, in violation of the IMWL; (2) all tipped employees who worked more than 40 hours per week but were not paid over *975 time, in violation of the IMWL; and (3) all employees who by virtue of Outback’s incorrect timekeeping were not paid for some of the time that they worked, in violation of the IWPCA.

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632 F.3d 971, 17 Wage & Hour Cas.2d (BNA) 97, 78 Fed. R. Serv. 3d 720, 2011 U.S. App. LEXIS 863, 2011 WL 135708, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ervin-v-os-restaurant-services-inc-ca7-2011.