Seventh Circuit Aligns With Majority On FLSA Nationwide Collective Actions: BMS Applies

Seyfarth Synopsis: The Seventh Circuit held that out-of-state plaintiffs must be dismissed from FLSA collective actions when the court lacks personal jurisdiction over them.

In a 2-1 decision reversing the lower court, the Seventh Circuit last week joined the Third, Sixth, and Eighth circuits in holding that the Supreme Court's 2017 decision in Bristol-Myers Squibb Co. v. Sup. Ct. of Cal. applies to FLSA collective actions. This means that four of the five circuit courts to analyze this issue agree that out-of-state plaintiffs must be dismissed from FLSA collective actions when the court lacks personal jurisdiction over them.

Ultimately, this means that a "nationwide FLSA collective action" can only proceed in jurisdictions where the employer is "essentially at home," or where the employer otherwise consents to the Court's general jurisdiction. A court must establish its jurisdiction over claims one at a time—and every employee who participates in an FLSA collective action has an independent claim.

This ruling does not act as a complete bar against nationwide collective actions. What it does do is disincentive forum shopping: absent the employer's consent, a plaintiff cannot bring a nationwide collective action in a court within the Seventh Circuit where the employer has only "minimal contacts."

For example, if an Illinois based employee wants to sue her Georgia-based employer for an overtime violation, she will be required to (a) pursue her claim individually in Illinois, (b) pursue a statewide collective action in Illinois, (c) pursue the case as a nationwide collective action in Georgia, or (d) convince the employer to consent to the Illinois courts' jurisdiction with respect to out-of-state plaintiffs. In Luna Vanegas, a Wisconsin-based employee overreached in his bid to invite other out-of-state H-2A construction workers to join his case against his Texas employer in the Western District of Wisconsin.

Although this decision represents an emerging consensus, defining exactly what an FLSA collective action is supposed to be continues to confound courts. In BMS, the Court recognized that in true class actions, the court would not have to re-establish personal jurisdiction over absent class members. But as the Seventh Circuit observed, FLSA collective actions are not class actions. Although they are a form of "aggregate litigation," every participant in a collective action becomes a "party plaintiff." Each party plaintiff is entitled to present their own evidence at trial, and the outcome is not binding on absent plaintiffs. Unlike in class actions, the court is not required to undertake a "rigorous analysis" before conditionally certifying a collective action. That means, the named plaintiff in an FLSA collective is not required to prove that she will "fairly and adequately protect the interests of the class." So while in a true class action, the "class as a whole is the litigating entity," the FLSA collective action is not afforded any independent legal status. And because of this, BMS requires a claim-by-claim personal jurisdiction analysis in the FLSA context.

In the end, this is a well reasoned opinion that is favorable to employers. Undoubtedly, district courts in the circuits that have yet to decide this issue will look to Luna Vanegas for guidance, just as they have done for the last three years with the conforming decisions in Fischer (3d Cir. 2022), Canaday (6th Cir. 2021), and Vallone (8th Cir. 2021). The anomalous decision in Waters (1st Cir. 2022) will now appear as an even greater outlier—its persuasiveness outside of the First Circuit is now diminished even further.

Nonetheless, when confronted with a potential nationwide FLSA collective action, employers would still be well advised to invoke Luna Vanegas cautiously. While precluding a single court from overseeing a nationwide collective action will be the right choice in many instances—especially in hostile jurisdictions—it is not necessarily costless. In the absence of a single, consolidated court proceeding, employers could easily become embattled with fragmented litigation over the same minimum wage or overtime claims across many courts across the country. Whether this is preferable to a single nationwide collective can depend on many factors, including but not limited to the state of the case law in the original forum, and opposing counsel's ability to independently recruit case participants absent the formal "collective action notice" procedures. But again, this is overwhelmingly a favorable decision.