On April 16, 2013, the United States Supreme Court held in Genesis Healthcare Corp. v. Symczyk that an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure precluded the plaintiff from bringing a collective action under the Fair Labor Standards Act (the “FLSA”) because she no longer had a personal interest in representing others in the action, notwithstanding the fact that the plaintiff did not accept the offer.
In this case, the plaintiff, a nurse, filed a complaint against her former employer alleging that it violated the FLSA by automatically deducting a 30 minute meal break from each work shift even when she and certain other employees actually worked during those breaks. The FLSA provides that non-exempt employees who work in excess of 40 hours in a given week are entitled to be paid time and a half for the overtime hours worked. Because she often worked through her meal break, the plaintiff claimed that she was entitled to receive overtime pay for such work. She brought suit on behalf of herself and “other persons similarly situated.”
When the employer answered the complaint, it simultaneously served a Rule 68 Offer of Judgment, which included an offer to pay the plaintiff $7,500 for the alleged unpaid wages in addition to “such reasonable attorney’s fees, costs and expenses . . . as the Court may determine.” The Court noted that there was no dispute that the offer of $7,500 fully compensated the plaintiff for any overtime pay she might be entitled to receive. The plaintiff refused the offer.
The district court found that the employer’s Rule 68 offer fully satisfied the plaintiff’s individual claim. It, therefore, dismissed the complaint for lack of subject matter jurisdiction because she no longer had a personal claim even though she also intended to bring the case as a collective action on behalf of others. The Court of Appeals reversed explaining that “calculated attempts by some defendants to ‘pick off’ named plaintiffs with strategic Rule 68 offers before certification [as a collective action] could short circuit the process and, thereby frustrate the goals of collective actions.”
The Supreme Court disagreed with the Court of Appeals. In its decision the Court addressed whether the plaintiff’s action remained judiciable in light of the collective action allegations in her complaint even though at the time that the Rule 68 Offer was made she had not yet moved to certify the case as a collective action. The Court held that, “[i]n the absence of any claimant’s opting in, the [employee’s] suit became moot when her individual claim became moot, because she lacked any personal interest in representing others in this action” and that “the mere presence of collective-action allegations in the complaint cannot save the suit from mootness once the individual claim is satisfied.”
Collective actions pose a particular risk for employers. They expose employers to significantly greater damages by allowing other employees to “opt in” to the lawsuit as additional plaintiffs. Collective actions are also more lucrative for plaintiffs’ attorneys because attorney’s fees are provided for by statute if the plaintiffs are successful. The Court’s decision creates a potent weapon for employers faced with a FLSA lawsuit by an employee who looks to expand the suit by having it certified as a collective action. If the employer acts quickly by making a Rule 68 Offer of Judgment that makes the individual plaintiff whole before he or she moves for certification, it may be able to have the case dismissed as moot, thereby avoiding the protracted litigation and expense involved in defending a collective action.
Please contact us if you have any questions regarding this recent development in the law and how it affects your business.