We have understood for many years that early assessment and action can help resolve claims by current and former employees.  The Supreme Court recently provided employers with additional ammunition with which to derail, or even avoid, collective action lawsuits brought by current and former employees for unpaid minimum wage and overtime under the Fair Labor Standards Act (FLSA).  FLSA collective actions, similar to traditional class actions, allow an individual representative to pursue litigation on behalf of himself and all other similarly situated current and former employees.   The pursuit of FLSA claims in a collective action dramatically increases an employer’s exposure to damages and litigation costs, as well as the effort that is required by the employer to defend against the action.

A little more than a month ago in Genesis Healthcare Corp., et al. v. Laura Symczyk, 133 S. Ct. 1523 (2013), the Supreme Court determined in a 5 – 4 decision that a Rule 68 offer of judgment, even though neither responded to nor accepted by the named plaintiff in a FLSA collective action, could prevent the pursuit of a collective action.   A Rule 68 offer of judgment is a procedural device used in litigation which permits a party defending against a lawsuit to make “an offer to allow judgment on specified terms, with the costs then accrued” to be entered against it.  The rule additionally provides that if the offer is accepted within 14 days and the offer and acceptance are filed, the clerk of the court must enter judgment.  The benefit to making such an offer is that if the offer is not accepted and the plaintiff fails to obtain a judgment that “is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”  Costs can include things such as attorneys’ fees, expert fees, court reporter fees and the like.

Laura Symczyk, the named plaintiff in Genesis Healthcare, failed to respond to a Rule 68 offer of judgment within the designated time period.  The offer of judgment would have provided her with full relief for unpaid wages and “such reasonable attorneys’ fees, costs, and expenses … as the Court may determine.”    Genesis Healthcare subsequently argued that the offer of judgment removed Symczyk’s personal stake in the litigation, and mooted her ability to bring a collective action on behalf of other individuals.  The Supreme Court agreed with this argument and dismissed Symczyk’s attempted collective action, determining that she “had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.”  There can be no “headless class” in FLSA collective actions.

The impact of the Court’s decision in Genesis Healthcare will no doubt continue to be debated and litigated.  Nevertheless, it provides employers with additional ammunition to avoid protracted and costly collective FLSA litigation by being proactive early in the litigation.