The Supreme Court Addresses Offers of Judgment in the Context of Collective Actions

In Genesis Healthcare Corp. v. Symcyk, the U.S. Supreme Court, by a vote of 5 to 4, rejected an employee’s contention that her employer should not have been permitted to thwart her attempt to bring a collective action under the Fair Labor Standards Act (“FLSA”) by making an offer of judgment to her under Rule 68 of the Federal Rules of Civil Procedure that included all of the relief to which she would have been entitled in connection with her individual FLSA claim. The Court’s April 16, 2013, ruling provides encouragement to employers who may seek to block an FLSA collective action with an offer of judgment—although, as detailed below, the Court’s opinion did leave one issue unresolved. The Court’s opinion also applies to cases brought under the Age Discrimination in Employment Act (“ADEA”) and the Equal Pay Act (“EPA”), as both of those statutes are governed by the collective action procedures of the FLSA rather than by the class action procedures of Rule 23 of the Federal Rules of Civil Procedure.

Background

Plaintiff brought suit under the FLSA alleging that her former employer improperly automatically deducted 30 minutes of time per shift for meal breaks even though plaintiff and certain other employees performed work during those breaks. Plaintiff purported to bring the action on behalf of herself and all similarly situated persons. The FLSA expressly permits such a “collective action” provided each similarly situated person affirmatively elects to “opt in” to the action.

When the employer answered the complaint, it simultaneously served on plaintiff an offer of judgment under Rule 68. That offer included all of plaintiff’s purported lost wages and “such reasonable attorneys fees, costs and expenses . . . as the Court may determine.” The offer was conditioned on it being accepted within 10 days. Plaintiff never responded to the offer. The employer then moved to dismiss the complaint for lack of subject matter jurisdiction, arguing that the offer of judgment deprived plaintiff of a personal stake in the litigation and thus rendered the entire action moot.

The District Court granted the employer’s motion to dismiss, but the United States Court of Appeals for the Third Circuit reversed. The Third Circuit agreed that no other potential plaintiff had yet opted into the suit, that the offer of judgment fully satisfied plaintiff’s individual claim, and that, under its precedents, such an offer generally moots a plaintiff’s claim, whether or not it is accepted. Nevertheless, the Third Circuit held that plaintiff’s collective action was not moot because allowing defendants to “pick off” named plaintiffs with an offer of judgment before a District Court certified a collective action “could short circuit the process, and, thereby, frustrate the goals of collective actions.” The Third Circuit remanded the case to the District Court to allow plaintiff to seek “conditional certification.

The Supreme Court’s Opinion

Writing for the majority, Justice Thomas held that the issue before the Court was simply whether the employer’s offer of judgment terminated the “actual controversy” between the parties over which a federal court could constitutionally assert jurisdiction, in that it offered plaintiff complete relief on her individual FLSA claim. To resolve that issue the Court had to determine whether the offer of judgment rendered the controversy moot even though plaintiff had never accepted it. The Court noted that the Circuit Courts of Appeals were split on the issue, but concluded it did not have to resolve the split, as plaintiff had conceded the issue in the District Court and in the Third Circuit and thus could not raise it in the Supreme Court.

The Court then rejected plaintiff’s contention that her attempt to bring a collective action gave her a personal stake in the action that survived the offer of judgment. The Court distinguished collective actions from class actions certified under Rule 23. Once a court certifies a Rule 23 class action, the class members attain a legal status before the Court separate from that of the named plaintiff, so that a live controversy continues to exist even should the named plaintiff’s individual claim become moot. In collective actions, however, the class certification procedures of Rule 23 do not apply and thus, until some other person opts into the action, there is no claim before the Court over which it can assert jurisdiction once the plaintiff’s claim becomes moot. Accordingly, the Court held that the District Court had properly dismissed the action.

In dissent, Justice Kagan took the view that plaintiff, in the courts below, had not waived the issue of whether the offer of judgment had rendered her claim moot. Reaching that issue, the dissent maintained that only an accepted offer of judgment moots the action, that a District Court has no authority under Rule 68 to enter a judgment based on the offer of judgment over the plaintiff’s objection, and thus that the District Court in the present case should have considered plaintiff’s request for a collective action in order to provide her with all of the relief requested in her complaint.

Conclusion

The Genesis Healthcare decision clearly provides employers faced with collective actions in FLSA, ADEA or EPA cases with the option of making offers of judgment that would give the named plaintiffs complete relief and thereby nip in the bud a request that the Court allow a collective action to proceed. However, the issue of whether such offers, if not accepted, will moot the plaintiff’s claim and thus bar the collective action has not been finally decided by the Court. Whether any members of the majority will side with the dissent on that issue remains to be seen, and plaintiffs’ lawyers in jurisdictions that have not ruled on the issue will certainly press the point.

For answers to any FLSA questions or questions regarding collective actions or class actions, please feel free to contact an attorney in the Gibbons Employment & Labor Law Department.