Some good news for employers. In a recent 5-4 opinion, the U.S. Supreme Court held that collective-action claims brought under the Fair Labor Standards Act (FLSA) are moot when the named plaintiff has no continuing personal interest in the outcome of the lawsuit and no motion for conditional certification has been filed. Genesis Healthcare Corp. v. Symczyk, Case No. 11-1059.
Laura Symczyk, a registered nurse, sued her former employer, Genesis Healthcare Corp. (Genesis), for violations of the FLSA. Specifically, she alleged that Genesis violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks, even when the employees performed compensable work during those breaks. Symczyk sought damages on behalf of herself and other similarly situated individuals using the so-called “collective action” mechanism prescribed in the FLSA, though no other such individuals had consented to join the suit and no motion for conditional certification had been filed.
When Genesis answered the complaint, it offered Symczyk $7,500 plus attorney’s fees and costs, an “offer of judgment” under the Federal Rules of Civil Procedure (FRCP). After Symczyk failed to respond to the offer, Genesis moved to dismiss the complaint by arguing that since it had offered Symczyk complete relief for her individual claims, she no longer had a personal stake in the litigation. Absent a personal stake in the claim, the lawsuit was moot. Both the district court and the U.S. Court of Appeals for the Third Circuit agreed that Symczyk’s individual claims were moot in light of the offer of judgment. The Third Circuit, however, held that Symczyk’s collective action was not moot because such calculated attempts by a defendant to “short-circuit” collective actions by “picking off” named plaintiffs with strategic offers of judgment would frustrate the goals of the collective-action process. The Supreme Court reversed the Third Circuit, rejecting the idea that the purpose of the FLSA would be frustrated.
As an initial matter, the Court held that it could not decide whether the unaccepted offer of judgment rendered Symczyk’s case moot since she did not challenge the lower courts’ rulings and did not properly preserve the issue on appeal to the Supreme Court. The Court therefore did not decide the question of whether Symczyk’s individual claim was moot based on the unaccepted offer of judgment. Rather, the Court assumed that Symczyk’s claim was moot based on the offer of judgment in deciding the question before it, i.e., whether her collective-action claims remained in controversy after her individual claims had been mooted.
Turning to the merits, Court held that the collective-action claims did not remain in controversy for a number of reasons. First, the Court differentiated between class actions under FRCP 23 and collective actions under the FLSA. In class actions, similarly situated individuals who are not named as plaintiffs are considered part of the class—and therefore bound by the court’s judgment—unless they affirmatively opt out. In contrast, in collective actions, individuals who are similarly situated to the named plaintiffs are not part of the suit unless they affirmatively agree to join it. Consequently, when a court certifies a class under FRCP 23, the class acquires a “legal status” of its own. On the other hand, conditional certification under the FLSA merely means that notice and an opportunity to opt in to the suit are sent to the putative collective-action members. Therefore, the Court reasoned, if no one has consented to join the collective action at the time of the offer of judgment, no one has a personal interest in the outcome of the suit as required to keep the suit alive.
Second, the Court rejected Symczyk’s argument that her collective-action claims related back to the date of the complaint because Genesis’ offer of judgment made the claims “inherently transitory.” In other words, Symczyk argued that it was possible that no plaintiff would have a personal stake in the suit long enough for the litigation to run its course if the defendant could “pick off” named plaintiffs before the collective-action process was complete. This rationale, the Court explained, only applies where the challenged conduct is effectively unreviewable, not to a defendant’s litigation strategy. If putative FLSA collective-action members do not consent to join the suit before it is resolved, they remain free to bring their own lawsuits against the defendant to vindicate their rights.
Finally, the Court rejected Symczyk’s argument that the purposes of the FLSA’s collective-action mechanism would be frustrated by allowing offers of judgment to named plaintiffs to moot a collective action before the process had run its course. Distinguishing prior case law on class actions under FRCP 23, the Court found that Symczyk had not asserted that she had any continuing economic interest in the outcome of the case—such as shifting a portion of the attorney’s fees to the other putative collective-action members—and therefore could not continue to represent these individuals as the named plaintiff.
Insights for Employers
Symczyk is important for what it says about the Court’s attitude toward claims asserted on behalf of a group as well as for what it actually holds. In the past several terms, the Court has issued multiple opinions narrowing the ability of plaintiffs to bring class actions, such as its 2011 decision in Walmart Stores, Inc. v. Dukes. As one Supreme Court observer noted, Symczyk extended this trend to FLSA collective actions.
Conversely, this opinion may actually come back to bite employers by pushing plaintiffs’ attorneys to move more quickly to seek opt-in consents and file a motion for conditional certification to avoid falling victim to the “pick off” strategy used in this case. Although the opinion sanctions an employer’s right to use this strategy, employers must proceed with caution when making early offers of judgment because doing so may result in having to defend multiple lawsuits. Other plaintiffs who might have opted in to the original litigation are still free to file their own lawsuit. In addition, since the Court did not decide whether an unaccepted offer of judgment moots an individual plaintiff’s claims, this issue remains the subject of a split among the Courts of Appeal.
As our readers know, we often suggest that employers conduct an internal audit of their timekeeping and overtime policies to avert such lawsuits altogether. Symczyk is just another reminder of the complexities of federal and state wage and hour laws and the benefits of conducting such an audit to ensure compliance with these laws.