Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (FLSA) lawsuits, particularly lawsuits combining FLSA collective action and state law class action claims (a.k.a. “hybrid” lawsuits), are on the rise. Typical FLSA lawsuits involve claims for unpaid wages and challenge employer compensation policies, such as automatic meal break wage deductions or management participation in employee tip-pools. Hybrid wage and hour class actions combine those FLSA claims with claims under state wage and hour laws. Regardless of the precise nature of the claim, FLSA lawsuits, particularly hybrid FLSA lawsuits, can be extremely expensive to defend and litigate.
Under certain circumstances, there may be a way to inexpensively and quickly resolve some FLSA claims. Employers may be familiar with Fed. R. Civ. P. 68 (Rule 68), or its state counterpart, which provides that “at least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If a Rule 68 offer is rejected and the judgment ultimately obtained by the plaintiff is less favorable than the rejected offer, the plaintiff “must pay the costs incurred after the offer was made.” Fed. R. Civ. P. 68(d). Recoverable costs in FLSA lawsuits do not include attorney fees, but do include costs such as hefty expert witness fees.
While the possibility of being saddled with defense costs may entice an FLSA plaintiff to settle, Rule 68 offers can provide an even more powerful tool for employers. In some cases, a Rule 68 offer may moot an FLSA plaintiff’s claim, even if the offer is rejected, meaning that the plaintiff will no longer have damages or standing to proceed with the lawsuit. Some courts considering this situation have held that a rejected Rule 68 offer of judgment renders a claim moot if the offer provides maximum relief to plaintiffs, and the offer is made after the court has preliminarily certified the FLSA collective action. See Darboe v. Goodwill Indus. of Greater NY & Northern NJ, Inc., 485 F. Supp. 2d 221, 223 (E.D.N.Y. 2007) (holding that, in a case where plaintiff rejected an offer of judgment, “dismissal is ordered because the FLSA plaintiff has identified no other class members and is therefore held to pursue the action only on behalf of himself. Since the individual plaintiff has been offered the full relief sought, the offer of judgment renders the case moot.”); Mackenzie v. Kindred Hosps. E., 276 F. Supp. 2d 1211, 1218-1219 (M.D. Fla. 2003) (holding that “an offer of judgment of full relief renders the case moot.”). But see Yates v. Applied Performance Techs., Inc., 205 F.R.D. 497, 501-503 (S.D. Ohio 2002) (rejected Rule 68 offer of judgment does not moot claim where there is no consensus regarding amount owed and plaintiffs refused to provide a demand for a sum certain); Nash v. CVS Caremark Corp., 683 F. Supp. 2d 195, 196-198 (D.R.I. 2010) (holding that rejected Rule 68 offer of judgment did not moot plaintiff’s claims where offer was made prior to provisional collective action certification).
The circuit courts are split regarding whether a Rule 68 offer of judgment to a named FLSA plaintiff made before a collective action has been certified will moot an action. In Symczyk v. Genesis Healthcare Corp., the Third Circuit Court of Appeals held that “there must be some time for an FLSA plaintiff to move to certify a collective action before a defendant can moot the claim through an offer of judgment.” 656 F.3d 189, 201 (3rd Cir. 2011) (quoting Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 920-921 (5th Cir. 2008)). Ultimately, the court held that “when an FLSA plaintiff moves for ‘certification’ of a collective action, the appropriate course—particularly when a defendant makes a Rule 68 offer to the plaintiff that would have the possible effect of mooting the claim for collective relief asserted under § 216(b)—is for the district court to relate the motion back to the filing of the initial complaint.” Symczyk, 656 F.3d at 201. In other words, a premature Rule 68 offer will not moot claims of a plaintiff who opts in after the offer is made.
The United States Supreme Court recently granted certiorari in Symczyk, and will consider the issue of whether a Rule 68 offer of judgment made prior to collective action certification will moot an action. Oral argument before the Supreme Court is scheduled for December 3, 2012. If the Supreme Court ultimately reverses the Third Circuit, early Rule 68 offers of judgment in FLSA collective action lawsuits may be more common and more attractive to employers wishing to cut off otherwise lengthy litigation and expensive defense costs. Nothing, of course, is that simple. For example, Rule 68 offers are public records and, while an offer may cut off one lawsuit, another one may grow in its place. Each employer will need to weigh the pros and cons of possible early resolution through a Rule 68 offer.
Another reason an early Rule 68 offer may make sense strategically for employers—especially if the Supreme Court reverses Symczyk—is that dismantling FLSA claims may destroy a federal court’s supplemental jurisdiction over state law claims in a hybrid action. In hybrid actions, courts generally exercise supplemental jurisdiction over state law claims (often brought as class actions) pursuant to 28 U.S.C. § 1367. If the FLSA claims fall by the wayside via a Rule 68 offer, the court may no longer have jurisdiction to hear the state law claims and the case may be dismissed for lack of subject matter jurisdiction. Plaintiffs may, of course, refile their state wage and hour claims in state court. However, the resulting state lawsuit—depending on the laws of that particular state—may have no statutory hook for plaintiffs to recover attorney’s fees, as with FLSA claims. The state lawsuit may then be simpler and less expensive to defend.