The U.S. Supreme Court will soon issue a decision on whether an employer’s offer to an employee of the full amount of claimed overtime pay moots that employee’s Fair Labor Standards Act (“FLSA”) case, and stops any larger scale collective action that employees and their attorneys might bring.
Under the FLSA, most employees who work more than 40 hours in a week are entitled to overtime compensation at one and one-half times their regular rate of pay. An employee who files a lawsuit can bring it as a “collective action” on behalf of other similarly situated fellow employees, thereby converting a lawsuit by one employee for unpaid overtime into a much larger case. The other employees will have the choice to opt in to the case if the Court conditionally “certifies” the matter as a collective action, i.e., confirms that the potential opt-ins are similarly situated to the named plaintiff and that other requirements are met. If the case is conditionally certified, and a large number of employees opt in, the lawsuit can transform from one involving thousands of dollars into one involving millions or even tens of millions of dollars.
Some employers have adopted an approach at the outset of a case to try to “moot” the case before certification by offering to pay the individual plaintiff all the money that person claims she or he is owed including liquidated damages and attorneys’ fees. Under long-established principles of law founded in the U.S. Constitution, federal courts cannot hear “moot” cases, i.e., ones in which the plaintiff does not actually have anything sufficiently substantial to gain by suing the defendant. The theory here is that if the individual employee accepts the employer’s offer, the case should be over because the employee has no further claim against the employer, notwithstanding that other similarly situated employees who could assert claims in the future have not been paid. Instead, those other employees themselves would have to come forward with their own lawsuits. Employers have argued that the mere fact that they made the offer to satisfy the individual employee plaintiff should moot the lawsuit, even if the employee rejects the offer.
The U.S. Supreme Court will soon issue a decision that should help answer the question whether this early settlement approach by employers will be effective. The case is Symczyk v. Genesis Healthcare. There, after the plaintiff nurse filed her FLSA lawsuit, but before she moved to certify it as a collective action on behalf of other employees, her employer made an offer of judgment to pay the plaintiff $7,500 plus attorneys’ fees and expenses to satisfy all her claims. The plaintiff refused to accept the offer and the District Court dismissed the case as moot, because plaintiff had been offered what she sought for herself in the lawsuit. The U.S. Court of Appeals in Philadelphia reversed, reasoning that allowing an early offer of settlement to moot the case thwarted the purpose of the collective action procedure authorized by the FLSA.
In 2012, however, the U.S. Supreme Court agreed to hear the Genesis Healthcare appeal. The Court heard oral argument on December 3, 2012. The questions asked by the Justices suggest that the Court had not yet reached any consensus on how to rule.
The Justices had the following significant comments/questions:
Chief Justice Roberts asked the plaintiff’s counsel if the case could not be resolved through a sequence of individual settlements: “Why don’t you just — if somebody comes forward, just take them in, go in, you get a check for $7,500, or whatever it is, you get attorney’s fees, and you can do that as often as you want?”
Justice Alito asked if the District Court could conduct a hearing to determine if the offer of judgment “actually gives the plaintiff everything that the plaintiff could possibly get under the complaint.”
Justice Kagan expressed skepticism at the mootness arguments, by describing: “[H]ere, the plaintiff’s individual claims have not been fully satisfied. She walked away with nothing. She walked away with no judgment, and she walked away with no $7,500. And the question is: How can it possibly be that her individual claim was moot?”
Justice Ginsburg asked: What should happen “when you have a governing statute that says that an employee may bring suit for and [on] behalf of himself and other employees similarly situated? . . . Mustn’t you give a chance for the statutory provision to work, which you didn’t. By filing [an offer of settlement] immediately, you didn’t allow the normal process of inviting opt-ins to occur.”
The full transcript of argument is at: http://www.supremecourt.gov/oral_arguments/argument_transcripts/11-1059.pdf .
The U.S. Supreme Court’s ruling in Genesis Healthcare will likely be very significant to employer litigation strategies in FLSA cases.