A rapidly growing area of employment litigation involves collective actions brought by groups of employees claiming that they have been cheated out of overtime by employers who have failed to follow the requirements of the Fair Labor Standards Act. Yesterday, the United States Supreme Court decided Genesis Healthcare Corp. v. Symczyk, sidestepping one of the key questions presented while at the same time validating a defense strategy for employers wishing to achieve the early dismissal of an FLSA collective action.
The facts of Genesis likely are familiar to any employer who has defended an FLSA claim in the past. The plaintiff, Symczyk, worked as a nurse in a hospital run by the defendant. Symczyk claimed that Genesis violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks, even where an employee performed compensable work during those breaks. Symczyk sued on her own behalf and on behalf of “all other persons similarly situated” to recover compensation for that time, along with attorneys’ fees and liquidated damages.
Before the litigation could advance very far, and before a collective action was certified, Genesis made Symczyk an offer of judgment under Federal Rule of Civil Procedure 68 for $7,500 plus costs and attorneys’ fees to be determined by the Court. Although that offer was for everything that Symczyk could hope personally to recover if she took the case forward, she rejected it by not responding before the offer expired. Genesis then moved to dismiss, claiming that because it had offered Symczyk full relief, there no longer was a case in controversy for the Court to rule upon. The trial court agreed and dismissed the case, extinguishing Symczyk’s lawsuit before she had an opportunity to have the collective action certified. The Third Circuit Court of Appeals reversed, holding that while Symczyk’s claim was moot, her collective action was not because allowing defendants to “pick off” named plaintiffs before certification frustrated the goals of collective actions. The case was remanded to the trial court to allow Symczyk to seek conditional certification which, if successful, would relate back to the date of Symczyk’s original complaint. Genesis sought review from the United States Supreme Court, which was granted.
Genesis asked the Supreme Court to resolve whether an offer of judgment for full relief to an individual moots not only the individual plaintiff’s claim, but also the entire collective action, assuming that no other employees had opted in at the time the offer was made. Importantly, Symczyk had not accepted the offer, and had received no payment of any compensation at the time of the dismissal. If validated by the Supreme Court, employers would have an effective strategy to shut down potential FLSA collective actions quickly and cheaply – simply make an offer of judgment for full relief to the single plaintiff who brought the claim, and, whether the individual plaintiff accepts it or not, the entire collective action must be dismissed. Such a tactic substantially reduces the bargaining power that plaintiffs’ counsel has to pressure an employer to resolve a claim with a substantial payment of attorneys’ fees.
Unfortunately, the Supreme Court sidestepped one of the key issues. Rather than deciding whether an offer of judgment for full relief moots a claim for relief even if it is declined, the Supreme Court held that the parties had not preserved that question for appeal. The parties had agreed below that, under Third Circuit precedent, a rejected offer of judgment for full relief does moot the claim of the individual litigant. As a result, the Supreme Court held that whether an unaccepted offer of judgment for full relief moots a claim was not preserved for appeal. The split between the various circuits on this question remains unresolved.
The Supreme Court did, however, resolve what happens to a purported collective action when the claim of an individually named plaintiff is mooted. In short, the Court held that an FLSA collective action (unlike a class action certified under Federal Rule of Civil Procedure 23) has no independent legal status and, as a result, if the claim of the only individual who brought the claim has been mooted, the entire lawsuit properly is dismissed.
This ruling endorses a strategy that has been used by employers in various jurisdictions to shut down purported FLSA collective actions before they can get off the ground. Specifically, making an offer of judgment (in jurisdictions where such offers are found to moot claims even where rejected) or sending a check to the individual defendant for the allegedly unpaid wages, liquidated damages, and an offer to pay a reasonable attorneys’ fee to be determined by the Court, can “pick off” the plaintiff spearheading an FLSA collective action and result in dismissal of the lawsuit before the plaintiff’s attorneys can solicit other employees to expand the size of the class. If an employer can accomplish that task through a rejected offer of judgment, then it would pay nothing for the dismissal. Even if payment of back wages and a relatively minor attorneys’ fee is required, that often is preferable to a large collective action and the significant inconvenience and expense that its defense requires.
Every situation is different, and a strategy that makes sense in one case may not make sense in another. Genesis provides, however, an important new strategy for employers attempting to minimize their liability for alleged FLSA violations.