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Supreme Court Endorses Possible Strategy for Employers in Defending FLSA Collective Actions

Posted on Mon, May 06, 2013 @ 09:06 AM

by Jack B. HarrisonJack B. Harrison

The past few years have seen the rise of litigation involving “collective actions” under the Fair Labor Standards Act (“FLSA”).  In these collective actions, groups of employees have alleged that they were denied required overtime pay by employers in violation of the FLSA.  In a recent decision, Genesis Healthcare Corp. v. Symczyk, the United States Supreme Court, in a 5-4 decision, upheld one possible defense strategy for employers in attempting to resolve FLSA collective actions early in the litigation process and before the collective action has been certified by the court

In Symczyk, Laura Symczyk, who worked as a nurse, claimed that Genesis Healthcare had violated the FLSA by automatically deducting break time from her and other employees’ pay, regardless of whether they performed compensable work during their 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.  Early in the case and before the court had ruled on whether a collective action could be properly certified in this case, Genesis Healthcare made an offer of judgment, pursuant to F.R.C.P. 68, to Symczyk for $7,500 plus costs and attorneys’ fees to be determined by the Court.  This offer represented all that Symczyk could possibly recover individually in the case.  However, she made no response to the offer of judgment before it expired, thus, in effect, rejecting the offer.  Genesis Healthcare then sought dismissal of the case, arguing that since it had offered Symczyk all that she could possibly recover individually in the case, no case or controversy remained for the court to adjudicate.  The court granted Genesis Healthcare’s motion to dismiss, ending the lawsuit before any decision was made as to the certification of the collective action.

On appeal to the United States Court of Appeals for the Third Circuit, Symczyk argued that, despite the offer of complete relief, she continued to have a personal stake in the litigation and further argued that the interests of potential plaintiffs that had yet to join the collective action creates ongoing jurisdiction for the court.  The Court of Appeals reversed the decision of the district court dismissing the case, concluding that while Symczyk’s claim was moot as a result of the offer of judgment, the overall collective action was not made moot as a result.  The Court of Appeals rationale for this decision was that to allow defendants to “pick off” named plaintiffs before certification would undermine the goals of collective actions.

In its decision, the Supreme Court did not decide whether an offer of judgment for full relief always moots a claim for relief even where the offer is declined.  Because a split among the Courts of Appeals of the various circuits exists on this fundamental issue, it had been hoped that the Supreme Court would resolve this issue.  Instead, the Supreme Court, relying on Third Circuit precedents, held that it was the law of the Third Circuit that a rejected offer of judgment for full relief moots the claim of the individual litigant.  Based on this conclusion, the Supreme Court then held that, in a collective action context, where the claim of the individual named plaintiff is mooted, the FLSA collective action (unlike a class action certified under Federal Rule of Civil Procedure 23) has no remaining independent legal status, and dismissal of the entire lawsuit is proper.

This decision impacts FLSA collective-action litigation for both plaintiffs and defendants, including plaintiffs’ use of the discovery process to identify and then join additional plaintiffs to the collective action and defendants’ use of individual offers of judgment to resolve collective actions early in the litigation process and before certification.  The Supreme Court essentially endorsed a strategy by defendants to try and “pick off” individual named plaintiffs in collective actions by making offers of judgment to those named plaintiffs in an effort to moot the claims of the individual named plaintiffs prior to a collective action being certified.  This would arguably be an effective defense strategy, particularly in those jurisdictions where a rejected offer of judgment moots a claim.  A prudent employer might conclude that paying the full amount an individual plaintiff claims to be owed, along with some measure of attorney’s fees, might well be preferable to being involved in a large collective action with significant risks and defense costs.

Tags: Fair Labor Standards Act