On April 16, 2013, the Supreme Court issued a decision that makes it easier for employers to limit the scope of wage and hour "collective actions."
Executive Summary: On April 16, 2013, the Supreme Court issued a decision that makes it easier for employers to limit the scope of wage and hour "collective actions." In Genesis Healthcare Corp. v. Symczyk (Apr. 16, 2013), the Court held that an employer can obtain dismissal of an FLSA collective action by mooting the named plaintiff's claims before the trial court rules on a motion for conditional certification.
Background
The Fair Labor Standards Act ("FLSA") is the federal statute that requires that employers pay at least minimum wage and time and a half for overtime to most "nonexempt" employees, and a fixed salary to most "exempt" employees. The FLSA permits an individual to bring a lawsuit on his or her own behalf, and on behalf of "similarly situated" individuals. However, any individual not specifically named as a plaintiff in the complaint does not become a plaintiff until (1) a court grants the named plaintiff's motion to certify the case as a collective action and (2) the similarly situated individual "opts in" to the case by filing a notice of consent to join the lawsuit.
"Mootness" is a doctrine relating to a court's jurisdiction to entertain a lawsuit. Courts have jurisdiction only if there is a live "case or controversy." There must be a live case or controversy at all times; if not, then the court loses jurisdiction and the case must be dismissed.
Employers have tried for years, with varying degrees of success, to curtail FLSA collective actions by offering "full relief" to the named plaintiff (or named plaintiffs), before certification of the case as a collective action. Employers then argue that there is no live case or controversy before the court because (1) the offer of full relief has mooted the claims of the named plaintiff(s), and (2) putative opt-in plaintiffs are not yet in the case because the case has not been certified as a collective action. If successful, this strategy can keep a single plaintiff case from exploding into a case with hundreds or even thousands of plaintiffs.
Plaintiffs' lawyers have objected strenuously to these efforts to curtail collective actions. Courts have reached different conclusions. Some have seen this as a matter of black letter law: Once the named plaintiff's claims are moot there is no plaintiff before the court with a live case or controversy, so the entire case must be dismissed for lack of jurisdiction. Others have held that result to be contrary to the purposes of FLSA and have found various rationales for allowing cases to continue.
The Genesis Healthcare Decision
In Genesis Healthcare, before the named plaintiff filed a motion for certification, the employer made an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure. The offer included all relief that could be due to the named plaintiff, including attorneys' fees and entry of judgment. The plaintiff ignored the offer which, by Rule, meant that the offer was rejected. The trial court agreed with the employer that the offer mooted the plaintiff's claim, and that the entire case, including the claims brought on behalf of similarly situated individuals (who had not yet joined the case), should be dismissed.
The plaintiff appealed and the case eventually reached the Supreme Court. However, the plaintiff failed to preserve for appeal the issue of whether her own claims had become moot. So, the Court assumed, without deciding, that the Rule 68 offer, even though rejected, mooted the named plaintiff's claims.
The Court held that because the named plaintiff's claims became moot before the plaintiff had filed a motion for conditional certification, the entire case – including the claims made on behalf of putative opt-in plaintiffs – became moot. At that instant, the trial court lacked jurisdiction, and properly dismissed the entire case.
Remaining Issues
The decision is a major victory for employers. However, it leaves important questions unanswered:
- The biggest question may be: Can an employer moot a named plaintiff's claims by making an offer of full relief under Rule 68, even if the plaintiff rejects the offer? The dissent argued that it is a matter of basic contract law that when an offer is rejected it is as though the offer was never made; hence, according to the dissent, a rejected offer cannot moot a claim. Also, it is not entirely clear that the decision would have been the same had there been a pending motion for certification of a collective action when the offer of full relief was made.
- Another important question not answered by the Supreme Court is: Can a mere tender of full relief, outside the context of a formal Rule 68 offer of judgment, moot a plaintiff's claims under the FLSA? Some courts, including the U.S. Court of Appeals for the Eleventh Circuit (in a debt collection case), have held that a defendant does not offer full relief unless it offers to have judgment entered in the plaintiff's favor.
- Also, in some cases, employers will continue to face a substantial hurdle in establishing that the back wages they offer are sufficient to constitute "full relief." Savvy plaintiffs' lawyers wishing to avoid dismissal based on mootness may do their best to avoid disclosure of the specific amount of damages claimed, and courts are not always helpful to employers attempting to obtain that information in discovery.
The Bottom Line:
Regardless of any lingering issues, the Supreme Court's decision is beneficial for employers because it permits an employer to obtain dismissal of an FLSA collective action by mooting the named plaintiff's claims before the trial court rules on a motion for conditional certification.
If you have any questions regarding this Alert or the FLSA, please contact the FordHarrison attorney with whom you usually work or the author of this Alert, Shane Muñoz, smunoz@fordharrison.com, who is an attorney in our Tampa office.