Authored by Alex Passantino

‘Twas the week before Christmas, 2-0-1-5
When the poetry elves on the blog came alive.
Crafting their rhymes with a purpose so clear:
Presenting the wage-hour gems of the year.

In January, for new regs in this year our breath bated.
Then for six painful months, we speculated and waited.
And just as we geared up to celebrate Independence,
Out came a proposal that will create more defendants.

With a salary level that for 10 years has been flat,
They looked at New York’s and said “higher than that.”
More than double the old; and then they got clever …
The proposed sal’ry level will increase for forever.

Anticipated changes to duties caused quite a fuss
When DOL said “If you’ve got some ideas, just tell us.”
Of the Department’s proposal, employers were understandably wary,
So we wrote down some ideas on how to make it less scary.

Nearly 300 thousand comments they have to review,
It will be late into next year before they are through.

Next up on the list of your wage-hour joy,
Are the efforts to change what it means to employ:
ContractorsJoint employment. Fissured industry.
Interns. The “third way” and gig economy.

Economic realityRight to control.
They’re integral to your business? Now you’re in a deep hole.
So many angles, it can drive you berserk.
As agencies and courts figure out what is “work.”

And if divergent decisions bring you a sense of elation,
Then please focus attention on class certification.
Approvals, denials, and some decerts, too.
No matter the side, there’s a case for you.

But as summer approached, there arose quite a stir,
A case that’d explain what the class cert rules were.
A Supreme explanation, o my-o, o me-o
We’d learn about class via Bouaphakeo.

They’ve argued, but there’s no decision, not yet,
And a limited ruling on records might be all that we get.
But the cases keep coming. Their numbers broke the charts.
Whether giant class actions or cases broken in parts.

And the response to those filings? The employers’ retort?
A wide range of ways to get them out of court.

Some cases get mooted. Some cases do not.
At Genesis’s open question, SCOTUS might take a shot.
Does an offer of judgment that’s not been accepted
Mean the plaintiff cannot proceed with his class as expected?

Increasingly used as a litigation life saver
Arbitration agreements with a class action waiver;
And when asked if state laws could class waivers prevent, yo,
The Supremes laid the smack-down to dear Sacramento.

With all of these options, it comes as a surprise then,
That one resolution keeps on getting the Heisman.
For reasons that many cannot understand,
To settle wage claims courts think they must hold your hand.

That’s our year in review, we whipped you right through it.
Next year? The new regs and a mad dash to review it.
But before 2015 joins the past’s ranks,
You keep on reading our blog, and for that we give thanks!

THANKS TO ALL OF OUR READERS. BEST WISHES FOR A HAPPY, HEALTHY, AND PROSPEROUS NEW YEAR!

Authored by Noah Finkel

The Tampa Bay Buccaneers had a tough week last week.  It wasn’t just their loss to the Detroit Lions.  Defeats on Sundays are something with which the Bucs have grown accustomed.  Rather, last week the 11th Circuit Court of Appeals held that the Bucs’ attempt to have an adverse judgment against themselves would not end a class action lawsuit they faced.

Why is it that the Bucs can’t even succeed in losing a lawsuit?  It has a lot to do with the intricacies of Federal Rule of Civil Procedure 68, and dual standing that a class representative carries under Federal Rule of Civil Procedure 23.

In short, the Bucs made a Rule 68 offer of judgment for full relief to a class representative in a Telephone Consumer Protection Act putative class action in an attempt to moot the case.  The 11th Circuit in Stein v. Buccaneers Limited Partnership held that the case could nevertheless proceed as a class action.  A post earlier this week from our colleagues on Seyfarth Shaw’s Workplace Class Action blog explains the details, and makes the point that employers defending any sort of workplace class action need to be cognizant of this ruling.

The ruling bears further examination for its potential effects on wage-hour cases.  Trying to moot a wage-hour collective or class action is often an attractive strategy for an employer.  Many of the cases involve relatively low potential liability to the named plaintiff(s) and/or class representative(s), but involve significant exposure when that potential liability is multiplied by the number of current and former employees who might participate in the class or collective action.  By offering complete relief to a named plaintiff in an FLSA collective action, an employer can cause a court to hold that no case or controversy exists, and thus a court loses jurisdiction of a case and must dismiss it before it blossoms into a collective action.  The Supreme Court’s Genesis Healthcare Corp.’s ruling makes this clear, and so does a post-Genesis Fifth Circuit ruling.

But the Stein case illustrates the limits to Genesis in wage-hour cases, and raises the question of whether employers should ever use Rule 68 at all in the wage-hour context.  A simple offer of complete relief may be the better move.

First, in Stein, the 11th Circuit joined the 3rd, 5th, 9th, and 10th Circuits in holding that a Rule 68 offer of full relief to a class representative does not moot a Rule 23 class action.  This is significant because so many wage-hour cases are now filed under state wage-hour laws, and use Rule 23 to attempt to obtain a class action.  (The 7th Circuit has held to the contrary in Damasco v. Clearwire Corp., but its holding doesn’t help employers much because it further held that a Rule 68 offer won’t moot a class action if a motion for class certification is filed first, even if that motion is a perfunctory one on which briefing is stayed.  Accordingly, careful plaintiffs’ lawyers in the 7th Circuit now file Damasco motions for class certification at the same time they file the complaint, even though briefing on that motion won’t occur usually for more than a year later.)  Thus, in many circuits, an offer of complete relief under Rule 68 won’t moot a case in a wage-hour action that includes a Rule 23 claim under state law.  It only potentially may work in a collective action brought solely under the FLSA.

Second, Stein shows that, even in an FLSA collective action context, Rule 68 may be a poor vehicle for an employer to make an offer of full relief.  Under Rule 68, an offer not accepted within 14 days is considered withdrawn.  Thus, the 11th Circuit held in Stein, an unaccepted offer no longer moots a claim after 14 days because it technically no longer exists. Rule 68 also requires that a defendant-employer take a judgment against itself.  This causes two problems:  (a) taking an adverse judgment could complicate matters for a company in future lawsuits or DOL investigations, in government contracting, or in obtaining financing or completing other types of transactions; and (b) when a judgment is entered against an employer under the FLSA, the plaintiff is considered to have prevailed in the case, and thus is entitled to an award of reasonable attorneys’ fees for which an employer is liable.  If the offer is made early, these fees may not be significant.  But many employers find that, in this context, some (but not all) plaintiff’s attorneys seem to have a “heavy pencil” when completing their time sheets.

There is a better way.  Just make an unconditional offer of complete relief to the plaintiff.  Even include a check. There is no need to invoke Rule 68.  At least in some circuits, such an offer in a single-plaintiff, multi-plaintiff, or collective action context — whether accepted or unaccepted — can moot a case even when Rule 68 is not in the picture.  The 7th Circuit, for example, has made this clear on multiple occasions.  This provides two benefits.  First, there’s no judgment against the employer.  Rather, the case gets dismissed for lack of jurisdiction due to mootness.  Second, there is no liability for fees.  Under the FLSA, only prevailing plaintiffs are entitled to attorneys’ fees.  But when a case is dismissed as moot and a plaintiff is not awarded a favorable judgment, the Supreme Court has held that there is no entitlement to fees.

At bottom, Rule 68 should have no role in attempting to moot a wage-hour case in most circuits.  If the case includes class action allegations under state wage-hour law, a Rule 68 offer of complete relief doesn’t moot the putative class action.  And if the case is a pure FLSA collective action claim, an offer of complete relief — without resort to Rule 68 — may moot a case without carrying the baggage that Rule 68 offer brings.  And even then, an employer has to weigh whether it should try to moot a named plaintiff’s FLSA claim.  Other potential plaintiffs may be waiting in the wings anyway, and an offer of full relief to the first current or former employee who files a claim risks putting “blood in the water” and also making an enemy of a plaintiff’s counsel. As with virtually any strategy decision, whether to try to moot a case must be decided on a case-by-case basis.

Co-authored by Gerald L. Maatman, Jr. and Scott Rabe

“Sometimes surrender is the best option.”  That is how Judge Raymond J. Dearie of the U.S. District Court for the Southern District of New York described how the Rule 68 Offer of Judgment may be used by employers to pay—i.e., “pick off”—individual plaintiffs to defeat a broader and significantly more costly FLSA collective action in his recent opinion in Anjum v. J.C. Penney Co., Inc.. The Anjum decision provides the most fulsome analysis of the current state of the law in the Second Circuit regarding Offers of Judgment made in FLSA cases following the Supreme Court’s important decision last year in Genesis Healthcare Corp. v. Symczyk, which we wrote about here. And the decision provides hope for employers that the Offer of Judgment “pick off” strategy may be used with great effect to eliminate FLSA collective actions early and at far less cost.

Facts Of The Case

In Anjum, defendant J.C. Penney made offers of judgment to all named plaintiffs in a FLSA collective action. The named plaintiffs rejected the offers, and J.C. Penney moved to dismiss the action as moot. After the original offers of judgment were made and rejected, more than fifty new plaintiffs opted-in to the suit. The Court denied J.C. Penney’s motion on two primary bases: (1) the Court found that there was a question of fact as to whether J.C. Penney’s offers of judgment fully satisfied each of the Plaintiff’s claims, and (2) even if complete offers of judgment had been made, the case was not moot because more than 50 opt-ins joined the lawsuit before judgment had been entered, and a matter is not moot, and the Court retains subject matter jurisdiction, until judgment is entered.

Lessons Of The Ruling

Notwithstanding the result in Anjum, the decision provides significant fodder for employers looking to shortcut a potentially onerous and expensive FLSA collective action by using the offer of judgment.

(1)  Anjum re-emphasizes that the “pick off” is a legitimate strategy for obtaining dismissal of FLSA actions.

The Court in Anjum not only rejected the notion that a “pick off” strategy is disfavored in the FLSA context, it blessed the strategy as a legitimate means for employers to potentially avoid the significant cost of litigating and settling a FLSA collective action. Employers should, therefore, evaluate the feasibility of an early “pick off” strategy as a means of short-cutting a potentially expansive and costly FLSA collective action.

(2)  The “pick off” strategy applies even if a motion for conditional certification is pending.

The Court in Anjum not only endorsed the “pick off” as a valid means of defeating FLSA collective actions, but also opined that the “relation back” doctrine also does not apply in the FLSA context. The “relation back” doctrine stands for the proposition that after class certification is granted, an event in the interim that moots the named plaintiffs’ claims does not moot the entire lawsuit.  Anjum re-emphasized what the Supreme Court said in Genesis Healthcare, that the “relation back” doctrine did not apply to FLSA cases because of the fundamental differences between a Rule 23 class and a FLSA collective. But Anjum went even further to state that an offer of judgment could moot a FLSA case even where there was a pending motion for conditional certification. This will likely have broad impact in the FLSA context, as it will prevent Plaintiffs from filing motions for conditional certification shortly after filing a complaint so as to prevent employers from making viable offers of judgment.

(3) Timing is important!!

Anjum also underscores that a Court retains subject matter jurisdiction over a FLSA case even after offers of judgment have been made fully satisfying all Plaintiffs’ claims up until the point the Court enters judgment on the basis of mootness. In other words, after making a complete offer of judgment, an employer must move for dismissal and await judgment from the Court before the matter is mooted. The practical effect of this rule is that opt-ins may continue to join the lawsuit before entry of judgment so as to prevent a finding of mootness. Therefore, to maximize the potential benefit, employers should make offers of judgment sooner than later, before potential plaintiffs are aware of the lawsuit, and if at all possible, before notice is distributed to potential members of the collective, and quickly move to dismiss the action following expiration or rejection of an offer. Employers should also be prepared to make immediate supplemental offers of judgment to opt-ins that join the lawsuit after the original offers have been made to prevent plaintiffs from defeating the motion to dismiss by adding new plaintiffs.

Authored by Alex Passantino

It’s the week before Christmas, so you know it’s the time
For our review of the year—our wage-hour rhyme.
Our look-back on issues from the past 52 weeks
That grabbed the attention of you wage-hour geeks.

Leading us off is no big surprise:
FLSA filings continue to rise.
A 10% bump; they’re not going away,
‘Cause they’re filed at a rate of like 30 a day.

Next up on our list is that place at One First,
Where nine Justices use words like “affirmed” and “reversed.”
A flurry of cases from the Court so Supreme,
For the most part?  A wage-hour defense lawyer’s dream.

Individualized damages may take Rule 23 off the table
As we learned in the context of allocation of cable.
When damages cannot be measured en masse,
Then SCOTUS has ruled that there shall be no class. 

For state law wage cases, was Comcast the end?
Would class cert responses simply say “How will you calculate, friend?”
Then five short days later, the Court kicked back Ross.
‘Twas a heck of a hint that these classes get tossed.

T.L. Cannon and Ginsburg and Family Movie
And Martins they all made defendants feel groovy.
We’ll have a better idea of what this all means
When circuit number two rules in 2014.

Another huge trend that’s been sweeping the nation:
Supreme Court decisions on class arbitration.
With an agreement, class claims you can prevent.
But you’d better be sure that it says what you meant

For if your clause can be wiggled by the rules of contract,
Then with class arbitration, you might find yourself smacked.
But a well-drafted waiver will protect you from the many,
Even if each individual claim is worth but a penny.

And collective wage claims can be waived, if done clearly,
At least we’ve heard that in both Sutherland and Raniere
And the NLRB’s efforts at class waiver thwartin’?
Got kicked to the curb by the Fifth in D.R. Horton.

Our last big decision from SCOTUS this year
Makes the difference ‘tween class and collective more clear.
An FLSA case can be given the boot,
If an offer of judgment makes a named plaintiff moot.

The Court did not say if it must be accepted.
Or if failure to take it leaves the case unaffected. 
At least one court says offers kill claims class-wide.
Death by Rule 68—call it Genesis-cide.

Now, we’d be remiss if Sandifer was neglected,
Where the Supremes will decide which clothes are protected
From inclusion within the scope of “hours of work”
Be they fireproof gloves or what you wear when you twerk.

In the next year, the new government guys have big plans,
Investigating employers across the whole land.
Just be cautious if an investigator should mention:
“If you like it, then of course you can keep your exemption.”

Thank you for indulging this year’s aggregation,
Though we skipped over interns and halftime calculations.
We wish you success in 2014.
From your favorite wage hour lit blogging team.

THANKS TO ALL OF OUR READERS.  BEST WISHES FOR A HAPPY, HEALTHY, AND PROSPEROUS NEW YEAR!

Authored by Steve Shardonofsky

What happens when an object with greater mass collides with a smaller object?  Yes, the smaller object typically bears the brunt of the force and splits into two or more pieces.  According to a recent decision by Judge Keith Ellison of the Southern District of Texas, this is exactly what happens when Fifth Circuit precedent collides with the Supreme Court’s groundbreaking ruling in Genesis Healthcare Corp. v. Symczyk (see our prior blogs regarding that case here and here).

In Silva v. Tegrity Personnel Services, Inc., Judge Ellison ruled that Genesis Healthcare partially overturned prior Fifth Circuit precedent, making it easier for employers in Texas, Louisiana, and Mississippi to pick-off FLSA collective actions even when a Rule 68 offer of judgment is not accepted.  Like peering back into the planetary collisions of the early universe, this case give us a glimpse into the early aftermath of Genesis Healthcare.  Cosmologist and wage/hour practitioners should continue reading…

Case Background and Analysis:

Paula Silva sued her former employer on behalf of herself and other similarly-situated employees to recover unpaid overtime wages under the FLSA.  She also brought an FLSA retaliation claim.  Another employee, filed a notice of consent and opted into the lawsuit the same day that Silva filed the lawsuit.  On June 19, 2013, Tegrity made Rule 68 offers of judgment to the two employees.  The employees did not accept the offers.  Instead, on June 28, Silva filed a motion to conditionally certify her FLSA collective action.  That same day, four additional plaintiffs filed consent notices to join the lawsuit.  Each of them also received offers of judgment from Tegrity.  In July 2013, the Defendants filed a motion to dismiss for lack of subject matter jurisdiction, arguing that the unaccepted offers of judgment had expired (or would soon expire) and therefore those offers rendered the plaintiffs’ claims moot and divested the Court of subject matter jurisdiction.

Judge Ellison analyzed prior Fifth Circuit precedent and considered how Genesis Healthcare “alters the landscape.”  In Sandoz v. Cingular Wireless LLC, the Fifth Circuit held in 2008 that an employee who received a Rule 68 offer of judgment could still pursue conditional FLSA certification—even when no other plaintiffs had joined the case.  The Fifth Circuit found that when a plaintiff timely files a motion for FLSA conditional certification, the motion “relates back” (as it does under Rule 23 class certification) to the date the employee filed the initial complaint.  Judge Ellison explains in Silva that under Sandoz, if the court grants the motion to certify, then a prior Rule 68 offer to the individual plaintiff would not fully satisfy the claims of the class members and therefore would not moot the plaintiff’s claims.  But if the court denies the motion, the offer of judgment would render the individual plaintiff’s claims moot.

But according to Judge Ellison, the Supreme Court’s Genesis Healthcare ruling rejects the Fifth Circuit’s “relation back” theory—primarily because Rule 23 class actions are fundamentally different from collective actions under FLSA:

Symczyk did no favors to FLSA plaintiffs in the Fifth Circuit.  The decision left untouched the part of Sandoz that plaintiffs do not like and abrogated the part that plaintiffs do like.  That is, while Symczyk left open the possibility that the Sandoz court got mootness wrong . . . for now, Sandoz is good law and dictates that, in the Fifth Circuit, unaccepted offers can moot FLSA claims.  In contrast, whereas Sandoz offered a life raft in the form of the relation-back doctrine to plaintiffs whose personal FLSA claims were mooted by Rule 68 offers, Symczyk effectively overruled that half of SandozSandoz and Symczyk put together would seem to require that this Court hold for defendants.

In a surprising twist, however, Judge Ellison concluded that Silva’s claims were not moot because the offer of judgment did not include any damages for her FLSA retaliation claim and therefore did not fully satisfy her damages.  Judge Ellison also refused to decide whether the Rule 68 offers to the other opt-in plaintiffs mooted their claims, since Silva could proceed with certification of her FLSA collective action.  Instead, he urged the Defendants to renew their motion at the summary-judgment stage, when “the Court will be able to rule on whether Plaintiffs’ claims were mooted with the benefit of additional evidence.”

Implications For Future Wage/Hour Cases:

The Silva case is a welcomed ruling for employers in the Fifth Circuit, who now have additional ammunition to pick-off FLSA collective actions.  Here are some practical takeaways from the decision:

  • Although the Court in Genesis Healthcare did not explicitly decide whether an unaccepted offer of judgment truly makes a claim moot, it explicitly rejected any reliance by prior courts on Rule 23 cases to make that determination, and thus overruled the “relation-back” doctrine in Sandoz.
  • When taken together, Sandoz and Genesis Healthcare allow unaccepted Rule 68 offers to moot plaintiff’s FLSA claims.
  • The portion of the Fifth Circuit’s Sandoz case that remains viable holds that unaccepted Rule 68 offers can moot a plaintiff’s FLSA collective action, as long as any offer satisfies the damages that the plaintiff and any opt-in plaintiff could recover.
  • Defendants who wish to make a Rule 68 offer of judgment must adhere to the strict substantive and procedural requirements for making such offers.  Otherwise if the offer of judgment is deficient in some respect, as in the Silva case, an unaccepted offer will not moot the plaintiff’s claims.

Supreme Court Seal.jpgCo-authored by Richard Alfred and Jessica Schauer

The Supreme Court heard argument in Genesis Healthcare v. Symczyk on Monday.  See Transcript.  While the Supreme Court agreed to hear the case to decide whether putative collective actions under the Fair Labor Standards Act must be dismissed when the named plaintiff’s claim becomes moot, the argument focused on narrow procedural issues that had not been addressed by the court below. 

The named plaintiff asserted claims on behalf of herself and other similarly situated employees alleging that the defendant had failed to pay for work performed during meal breaks in violation of the FLSA.  Prior to conditional certification, the defendant made an offer of judgment under Federal Rule of Civil Procedure 68 covering all of the named plaintiff’s alleged damages.  After the plaintiff failed to accept the offer, the district court dismissed the case, ruling that there was no longer a controversy between the plaintiff and defendant and the case therefore had become moot.  The Third Circuit reversed, ruling that the potential for putative members of the as yet uncertified FLSA collective to join the case allowed it to stay alive, even though no other individual had actually opted in.

At oral argument, the Justices focused intensely on whether the plaintiff’s failure to accept the offer of judgment actually mooted her claims, an issue not decided by the Third Circuit.  Counsel for the plaintiff and an Assistant U.S. Solicitor General (appearing as a friend of the court) argued that the district court should have held a hearing to address the adequacy of the offer of judgment and, if appropriate, entered judgment in the plaintiff’s favor.  While defense counsel termed this a “housekeeping issue,” Justice Kagan observed that “the plaintiff’s claims have not been fully satisfied.  She walked away with nothing.”  Chief Justice Roberts suggested that, had the Court understood the full procedural history of the case, it might not have granted the defendant’s petition for review.

When the Court turned to the specific question for which it had granted certiorari – whether a case becomes moot when the lone plaintiff receives a Rule 68 offer from the defendants to satisfy all of the plaintiff’s claims – several of the Justices expressed concern that “Rule 68 doesn’t say anything about dismissing [the] suit” if a plaintiff rejects an offer for complete relief.  Rather, by its plain language the rule merely allows for cost-shifting in the event that a plaintiff ultimately recovers less than the amount of the unaccepted offer.  Justice Sotomayor opined that only if the proposed judgment were entered as a default judgment in favor of the plaintiff could the matter become moot, and that mere rejection of a Rule 68 offer would not be sufficient.  The liberal justices, led by Justice Ginsburg, further objected to the concept that Rule 68 could be used to shortcut “the normal process of inviting opt-ins to occur” in FLSA cases.  

As we have stated in prior posts, the greater impact of this case on wage and hour litigation arises from the opportunity it provides the Court to discuss the legal differences between a collective action under the FLSA and a class action under Rule 23, an opportunity the Court has not had since its 1989 opinion in Hoffman-LaRoche v. Sperling.  The Court of Appeals relied heavily on two 1980’s Supreme Court decisions, United States Parole Commission v. Geraghty and Deposit Guaranty National Bank v. Roper, that a defendant may not “pick off” a named plaintiff in a class action by making an offer of judgment for plaintiff’s maximum potential recovery.  In so doing, that court failed to recognize the essential differences between a collective action and a class action, including the fact that FLSA plaintiff s must affirmatively opt-in to participate in the action, and the statute of limitations for any individual employee is not tolled until his or her opt-in consent is filed with the court.  If the Supreme Court were to reverse the Third Circuit, it could do so by rejecting the application of those class action cases in the collective action context on the basis that these two procedures, at least in this context, operate differently. 

Yesterday’s argument included only relatively brief discussion of this core issue.  Apparently looking for a way to apply the class action rule, Justice Ginsburg asked whether the fact that § 216(b) of the statute specifically “authorizes . . . the employee [to] seek relief on behalf of himself and others similarly situated” affects the outcome, suggesting that this language represents a Congressional policy in favor of collective actions that might justify allowing claims of opt-in plaintiffs to relate back to an earlier point in the litigation.  Justice Breyer, however, took a different view of § 216(b)’s language, asking “isn’t it a little hard to read this statute as providing that mechanism since what it says is . . . no one shall be a party unless he signs in writing.”  Justice Scalia, harkening back to the theme in his dissent in Hoffman (in which then Chief Justice Rehnquist joined), quipped, “I mean, I must say I’m not terribly impressed by the fact that, you know, if she drops out there is — there is no collective suit for those other people.  There is no collective suit for these other people if she never appeared in the first place.  I don’t know that the law demands that there be a collective suit.  If she doesn’t bring suit or if she brings suit and is given everything she wants, the case is over unless other people have come in.”

Based on the tenor of the Court’s questions, it is not clear whether the Court will reach the issue of whether a putative collective action survives the mooting of the named plaintiff’s claim.  Instead, the Court may decide to limit its ruling to the narrower issue of whether the district court in this case properly found the named plaintiff’s claim to be moot.  We continue to hope, however, that the Court will take this opportunity to provide greater clarity regarding the relationship between Rule 23 and § 216(b).  We will update our readers as events warrant.

sup court seal.bmpCo-authored by Richard Alfred and Loren Gesinsky

On June 25, 2012, the U.S. Supreme Court agreed to review whether an entire lawsuit is mooted when the employer in a Fair Labor Standards Act (FLSA) collective action makes an offer of judgment that would fully satisfy the sole plaintiff’s claims before any certification effort.  (Genesis Healthcare Corp. v. Symczyk).  Employers should benefit from clarity about offers of judgment in this context.  More significantly, however, this case provides the Court with the first clear opportunity since 1989 to revisit the very nature of FLSA collective actions and give employers needed defenses to the process and standards applied almost routinely by district courts regarding facilitating notice and the status of opt-in plaintiffs.

In the case now heading for Supreme Court review, a registered nurse claimed that her healthcare employers automatically deducted a daily 30-minute meal break even for such periods in which she and colleagues had actually worked.  She filed her lawsuit both individually and on behalf of a group of “similarly situated” individuals.  Her employers filed a $7,500 offer of judgment as part of its initial response, which she rejected but admitted would have fully satisfied her individual claim.

An offer of judgment under Federal Rule of Civil Procedure 68, despite many inherent limitations, forces a plaintiff either to accept the offer or be responsible for the defendant’s post-offer costs if the ultimate judgment does not exceed the offer.  Where the judgment offered is clearly equal to or in excess of the full relief sought by the plaintiff(s), some courts have also determined that the offer, even if rejected, moots the controversy.

While an offer of judgment is clearly an available option for an employer defending against an individual claim, it cannot be used to, in the words of a 32-year-old Supreme Court decision, “pick off” the designated representatives in a class action brought under Federal Rule of Civil Procedure 23.  The murkier issue is the applicability of offers of judgment in the context of a collective action brought under Section 216(b) of the FLSA. 

The Third Circuit reversed the district court’s determination that the Rule 68 offer mooted the case, relying on decisions prohibiting the “picking off” of designated class representatives in Rule 23 class actions before courts have a chance to consider whether class certification is appropriate.  The Supreme Court granted the employers’ petition for review, which was supported in amicus briefs filed by, among others, the U.S. Chamber of Commerce and DRI – The Voice of the Defense Bar.  A central focus of these briefs was the fundamental difference between a FLSA named plaintiff not being the “representative” of similarly situated employees who opt into a collective action under Section 216(b), while all individuals within a defined Rule 23 class, including the named representative(s), are legally bound unless they opt out of the action.

Thus, the Supreme Court seems poised to closely analyze the distinctions between collective and class actions for the first time since its 1989 decision in Hoffman-LaRoche Inc. v. Sperling.  In Hoffman, the Supreme Court ruled that “in appropriate cases” a district court could oversee a collective action by authorizing, or facilitating, notice to potential opt-ins.  Since Hoffman, many lower courts have lost sight of the fundamental nature of collective actions, blurring the lines between a representative class action and the joinder of individual claims in a collective action.  This has resulted in confusion about the way in which collective actions should be treated, from courts’ overly “modest” standard for conditional certification, to the unfair and unreasonable discovery limitations of opt-in plaintiffs, to the “heightened” class-like standard commonly applied for decertification, and ending with the class treatment of a collective-action trial.

If the Court applies its 1980’s class-action precedents to FLSA collective actions in determining the mootness issue, the line between those two types of lawsuits will be further blurred.  On the other hand, if the Court distinguishes its prior cases and applies a different rule in the context of settlements and offers of judgment, the decision could have sweeping implications for the way in which FLSA collective actions are litigated.  

A decision is not expected until early next year, depending on the briefing and argument schedule to be set by the Court. We will report on the Supreme Court’s decision and any other developments of note in this case.