I read an interesting post in the Seyfarth Shaw blog about out-of-state employees and their ability to become part of a FLSA collective/class action. The FLSA allows individuals to bring suits claims for overtime violations “for and in behalf of’ themselves and other “similarly situated” employees. Often, in these cases, there are but a few resident plaintiffs in the jurisdiction where the case is filed and dozens/hundreds of out-of-state employees. The proper jurisdiction for these suits, as the Seyfarth post notes, became open to debate after a US Supreme Court 2017 decision in Bristol Myers Squibb v Superior Court. In that case, many of the class were nonresidents and the Court held that the similarity in claims was an “insufficient basis for jurisdiction.” As there was no connection between the forum and the out of State claims, an essential element of due process was absent.
After this, employers fighting FLSA collective actions have sought to use the Bristol-Myers rationale. The Courts have been fleshing out the meaning, with more than four dozen federal courts opining on the subject, breaking roughly fifty-fifty on the issue. Well, now, two Circuit Courts of Appeal have chimed in. On August 17, 2021, in Canaday v. The Anthem Companies, Inc. the Sixth Circuit held that a court cannot exercise specific jurisdiction over FLSA suits where the conduct was “unrelated to the defendant’s conduct in the forum state.” The very next day, the Eighth Circuit came to the same ruling in Vallone v. CJS Solutions Group LLC.
These courts started with the premise that service of process was a condition precedent for exercising authority over a defendant employer. There can be countrywide service (and many laws have that component) but the Fair Labor Standards Act does not. Under Federal Rule of Civil Procedure 4(k), there are limits constraining effective service within the limits prescribed by a forum state’s long-arm statute and, derivatively, the Fourteenth Amendment’s Due Process Clause.
These cases stand for the proposition that the power to exercise jurisdiction under that amendment is limited. A court may assert so-called “all purpose,” jurisdiction over a defendant where the corporation is situate or where it was incorporated. Alternatively, a court may assert “case-based,” jurisdiction if the allegation “arises out of or relates” to the employer’s conduct or activity in its home forum. As neither named plaintiff sought to litigate in the home jurisdiction, they could only rely upon specific jurisdiction to launch their suit, which the Courts concluded did not exist.
The appellate Courts also rejected the contention that the collective opt-in procedure of the FLSA circumvented that “problem.” They concluded that even the opt-in plaintiffs were required to individually prove that their own claims were linked to the actions of the company in its home State. The Circuit Courts concluded that no such showing could be made as the named plaintiffs did not work in the corporate home State. Thus, the Courts held that where “nonresident plaintiffs opt in to a putative collective action under the FLSA, a court may not exercise specific personal jurisdiction over claims unrelated to the defendant’s conduct in the forum state.”
The Takeaway
These decisions point the way for employers to curtail the scope and size of FLSA collective actions. There is another case pending in the First Circuit and this will also clarify (or confuse) this crucial issue of personal jurisdiction. The issue may end up in the US Supreme Court and likely will. For employers, this is welcome news and another tool, an offensive tool, (as opposed to the usual defensive ones) to fight collective and class actions.
The more weapons we have, the merrier…
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