Why Are Some Labor Cases Heard in Federal Court and Not State Court?

Interviewer: You mentioned federal court versus state court.  How do you know where a case is going to go?  Where do they typically go and why?

Michael: There’s a number of differences between federal court and state court.  In federal court, in order to get into the door of federal court, you need to establish that the employer either grosses over $500,000 in revenue per year and in addition that they handle goods that are produced in interstate commerce.

Cases against Smaller Businesses Are Generally Heard in State Court

If a plaintiff comes in and we see that he works for a very small company with only a few employees and we’re nervous that the employer won’t meet the $500,000 test, we would consider bringing something like that in state court.

The Statute of Limitations Differs in Federal and State Courts

In addition, the statutes of limitation are different in federal court versus state court.  In federal court, typically we can go back three years, which means that if a plaintiff comes in today and we file suit today, we can go back three years from today for any federal violations.

Some Cases Filed in Federal Court Can Be Joined by State Claims

State court, however, allows us the opportunity to go back six years from the date we file, so there are benefits to bringing state claims, and there are also benefits to bringing federal claims.  Typically, what we do is even if we file in federal court using the three year statute, we are also allowed to bring any state court claims into the federal action as well.

The state court claims that are brought into federal action will still have the six year statute of limitations, but the federal claims can typically go back three years.

Liquidated Damages

One other difference between federal claims and state claims are federal claims, there is something called liquidated damages, which means if an employer cheats an employee out of wages, out of overtime wages in the amount of let’s say $10,000, they’re entitled to these liquidated damages. This means an amount equal to the amount that they were cheated out of, so if they’ve got $10,000 in unpaid overtime, they’re entitled to an additional $10,000 in liquidated damages.  That would be under federal law.

Under state law, the rule was it was only 25% liquidated damages.  However, in April of 2011, the New York law was changed to increase the liquidated damages to 100%.

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