The Supreme Court Renders an Important Pro-Employer Decision

In the past two weeks, both the United States Supreme Court and the Fifth Circuit Court of Appeals have rendered decisions that will add roadblocks to certain employee lawsuits.  Last week, the Supreme Court decided Genesis Healthcare v. Symczykwhich I have previously identified as a case to watch in 2013 (here).

In Genesis Healthcare v. Symczyk, the Court held that when an employee brings a collective action under the Fair Labor Standards Act (FLSA) against an employer, and the employer makes an offer of judgment to the employee under Federal Rule of Civil Procedure 68 prior to class certification, if such offer fully settles the employee’s individual claim, the collective action becomes moot as well.

In this case, Symczyk, a nurse, brought a collective action on behalf of herself and “other employees similarly situated” and alleged that the medical center violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks.  When Genesis Healthcare answered the complaint, they simultaneously served upon Symczyk an offer of judgment under Rule 68.

The District Court found that this offer of $7,500 provided Symczyk a complete relief on her individual damages claim, and, since no other individuals had joined her lawsuit, the case was rendered moot.  The Third Circuit Court of Appeals reversed the District Court and held that while the individual claim had become moot, the collective action had not.  The Court explained that allowing defendant employers to “pick off ” named plaintiffs with strategic Rule 68 offers before class certification, would frustrate the goals of collective action under the FLSA.

The Supreme Court, however, reversed the Third Circuit Court of Appeals and found that where a judgment offer under Rule 68 completely satisfies the named employee’s individual claim, and the class has not yet been certified, both the individual claim and the collective actions are rendered moot.

HOW WILL THIS AFFECT EMPLOYERS AND EMPLOYEES?

Now, anytime an employee brings a collective action under the FLSA against an employer, all the employer has to do to get the collective action dismissed, is to make a Rule 68 judgment offer prior to the class certification, and the collective action will be mooted, if the district court finds that the amount of the judgment offer fully satisfies such employee’s individual claim.  Note, however, that 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 Rule 68 offer strategy will work only in those judicial circuits that find an unaccepted offer of judgment to moot the claim.

The Court’s decision makes it more difficult for employees to bring the FLSA collective actions because they are now forced – prior to class certification – to either identify a sufficient number of class members or claim a sufficiently large amount of damages so that the employer is not willing to make a Rule 68 offer or the employer’s offer is not large enough to satisfy all the individual claims.

The Court specifically pointed out that the judgment offers under Rule 68 might not work in class actions governed by Federal Rule of Civil Procedure 23.  Thus, employees might want to try to bring lawsuits that allege both a collective action under FLSA as well as Rule 23 class actions, or bring only state-law claims as class actions.

It will be interesting to see if, as a result of this decision, the Congress attempts to amend the FLSA to close the loophole created by Rule 68 offers that many employers are now sure to use to dismiss collective actions brought under the FLSA.

For more information, contact Leiza Dolghih.

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