Supreme Court Helps Employers Combat FLSA Collective Actions

April 18, 2013
Legal Updates

This week, in Genesis Healthcare v. Symczyk, the U.S. Supreme Court decided that a collective action brought under the Fair Labor Standards Act (FLSA) is fundamentally different than a class action brought under Civil Rule of Procedure 23. So why does anyone other than a lawyer care? Because this decision may serve as a useful tool for employers to prevent a simple case of some unpaid overtime from turning into nightmarish litigation involving hundreds of employees' claims.

It has become commonplace for employers to face claims for unpaid overtime or off-the-clock work brought by one employee not only for him or herself but also on behalf of all other "similarly situated" employees. This is a collective action under Section 216 of the FLSA. If the court conditionally certifies a class of employees, notice of the lawsuit is sent to all the class members who are given the opportunity to "opt-in" to the lawsuit. Depending on how many opt-ins there are, a small case may turn into major and costly litigation.

In Genesis Healthcare, the plaintiff filed a claim under the FLSA for unpaid time resulting from interrupted breaks for herself and all other similarly situated employees for a three year period. In response to the complaint, the employer made an offer of judgment to the plaintiff under Civil Rule 68 of $7500 in alleged unpaid wages plus attorney fees and costs. When the plaintiff failed to respond, the employer filed a motion to dismiss the complaint on the basis that the plaintiff no longer had an ongoing stake in the litigation because the offer provided her with complete relief for her claims. The district court granted the motion because no other individual had joined the litigation, the plaintiff conceded that she no longer had an individual interest in the outcome of the litigation, and she had not yet filed a motion for class certification.

The Third Circuit Court of Appeals reversed. While concluding that Ms. Symczyk's claim was moot due to the offer of judgment, it concluded that the case could still proceed as a collective action to adjudicate the potential claims of any individuals who opted into the litigation.

In a 5-4 decision, the Supreme Court disagreed with the Third Circuit and dismissed the case. The Court concluded that a collective action brought under the FLSA is fundamentally different than a class action brought under Rule 23. Under the FLSA, and unlike under Rule 23, because of the opt-in requirement, a conditionally certified class does not acquire independent legal status and no one is automatically added to the lawsuit. Consequently, if the plaintiff's claim becomes moot, then the alleged collective action becomes moot because no other interested party remains in the litigation.

The Court's decision, while positive for employers, should not be read as a panacea for collective action litigation. Federal courts disagree whether an offer of judgment for complete relief in an FLSA case moots an individual's claim, and the Supreme Court did not address that conflict because of the plaintiff's concessions in the lower courts. Second, an offer of judgment will likely not have the same effect on employment law class actions filed under Rule 23, and such claims are frequently filed concurrently with FLSA collective actions. Finally, in many cases it will be more difficult to ascertain the amount of complete relief necessary to moot an FLSA claim, and the amount may be costly because liquidated damages and attorneys' fees are available under the FLSA.

However, this decision should encourage employers to further consider Rule 68 offers of judgment as part of their overall strategy in defending collective actions under the FLSA. Employers should consult with their counsel to determine whether an offer of judgment should be made. While such an offer will never prevent lawsuits by other employees over the same issue, if made soon enough and in the appropriate case, an offer of judgment may prevent the court from issuing notice to the other employees asking if they want to join an already filed lawsuit.

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