Supreme Court Rules That Offer of Judgment to Named Plaintiff Could Moot FLSA Collective Actions

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In its April 16, 2013 ruling in Genesis Healthcare Corp. v. Symcyzk, No. 11-1059, the U.S. Supreme Court decided that once the claim of a named plaintiff in a Fair Labor Standards Act ("FLSA") collective action has been satisfied and is moot, the entire lawsuit has to be dismissed.

In its 5-4 ruling, the Court said that the mere fact that the named plaintiff in an FLSA collective action asserts her claims on behalf of other similarly situated employees "cannot save the suit from mootness once the individual claim is satisfied." The decision clarifies the fundamental differences between FLSA collective actions and Rule 23 class actions. It also may give employers a way to "pick off" the named plaintiff and thereby derail the entire FLSA collective action.

Background

The FLSA allows employees to sue for overtime and minimum wage violations on their own behalf and on behalf of "other employees similarly situated." Laura Symcyzk, a registered nurse, brought such a "collective action," claiming that Genesis failed to pay her and a group of "similarly situated" employees for work they performed during meal breaks. Genesis made Symcyzk an "offer of judgment" under Federal Rule of Civil Procedure 68: $7,500 for alleged unpaid wages and reasonable attorneys' fees, costs and expenses. When Symcyzk failed to respond to the offer, Genesis argued that its offer of complete relief made Symcyzk's claim moot and also required dismissal of the claims she was trying to pursue on behalf of other nurses. Noting that Symcyzk was the only named plaintiff and that no other employees had yet joined Symcyzk's suit, the district court agreed with Genesis and dismissed the case.

The U.S. Court of Appeals for the Third Circuit reversed. Although it agreed that Genesis had offered Symcyzk complete relief, thus making her individual claim moot, the circuit court ruled that allowing employers to use strategic Rule 68 offers to "pick off" named plaintiffs would frustrate the FLSA's collective action process. The court said that Symcyzk was entitled to continue her lawsuit and try to certify a collective action and invite others to join the suit.

The Supreme Court Ruling

The Supreme Court reversed the Third Circuit. Notably, it declined to decide whether the unaccepted Rule 68 offer of judgment actually made Symcyzk's individual claim moot. Rather, it assumed this to be the rule because Symcyzk chose not to challenge the two lower courts rulings on that issue. The only question, then, was whether Symcyzk could continue her suit on behalf of others. In deciding this question, a five-member majority declared that “Rule 23 class actions are fundamentally different from collective actions under the FLSA.” Conditional certification of an FLSA collective action merely gives similarly situated individuals an opportunity to join the case, but such individuals have no status in the case until they file a written consent to join it. For that reason, the Court determined that Symcyzk “had no personal interest in representing others” in the case, and that the case as a whole had to be dismissed when her own claim became moot.

Potential Significance of Genesis Healthcare

Wage and hour class or collective action lawsuits have boomed in recent years, and they can be extremely expensive and difficult to defend. Although the amounts of disputed wages for each individual employee in such cases are often quite small, when added together over a several-year period, they can quickly add up to huge sums in back wages and penalties. And these cases often result in substantial legal fees.

By holding that a plaintiff can no longer represent a collective group under the FLSA once his or her individual FLSA claim becomes moot, the Supreme Court created the possibility — and the incentive — for employers to try a "pick-off play" by offering complete relief to the individual named plaintiff in an effort to make both the individual claim and the entire action go away.  

The case will also be important because it draws a much clearer line between class and collective actions than has existed in the past. That distinction will affect the way collective actions are litigated — from the certification process to discovery and ultimately to trial.

Possible Limits of the Ruling

Even though Genesis Healthcare provides a possibility for employers to cut off FLSA collective actions at an early stage, there are a number of caveats:  

  • First, the federal circuit courts are split about the question the Supreme Court did not decide: whether an unaccepted offer of judgment moots the named plaintiff's FLSA claim (and thus the collective claim). The four dissenting members of the Court said "no." The strategy will work only in those judicial circuits that find an unaccepted offer of judgment to moot the claim.
  • Symcyzk's collective action only became moot because she was the sole named plaintiff and no other plaintiffs had yet joined or "opted-in" to the case. We can expect that FLSA plaintiffs' lawyers will start filing collective actions with multiple named plaintiffs, requiring an employer to make offers to moot all such claims. In any event, employers wishing to try the pick-off tactic must do so early in the litigation before others opt-in.
  • The dismissal of the FLSA collective action does not eliminate the claims of the "similarly situated" employees. Those other employees are still free to file their own individual or collective lawsuits. The pick-off play may still be worth trying, though, because when a lawsuit is dismissed, it can be difficult for the plaintiffs’ attorneys to find others willing to file additional lawsuits.
  • The holding only applies to collective actions under the FLSA; the Court specifically stated it may not work with class actions governed by Federal Rule of Civil Procedure ("FRCP") 23. We can expect that in states with their own wage and hour laws, FLSA plaintiffs’ lawyers will either bring "hybrid” lawsuits alleging both a collective action under FLSA and a class actions under state law, or will bring only state-law claims as a class action. In the first situation, the pick-off play probably would at most succeed only in ending the FLSA claims; the state law class action under state law could go on. In the second situation, the pick-off play may not work at all.

To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.