Today the US Supreme Court issued its long-awaited opinion in Genesis Healthcare v. Symczk. In the case, the Court held that employers could effectively end collective action lawsuits under the Fair Labor Standards Act (FLSA) by agreeing to pay the named plaintiffs in those lawsuits whatever they claim they are owed. The Court held that because the named plaintiff was made completely whole by the employer’s offer her individual claim was moot, and because the named plaintiff’s claim was moot the entire collective action litigation was dismissed. This decision provides a helpful tactical weapon for employers that face the prospect of long and expensive collective action litigation.
How To “Pick Off” A Big FLSA Collective Action Lawsuit
Laura Symczk was employed as a nurse for Genesis, and was non-exempt under wage laws like the FLSA. She filed an FLSA “collective action” against Genesis claiming that it unlawfully failed to pay her and other nurses for meal breaks in which she had to work (the FLSA requires that employers pay employees for all their work time, including during meal breaks when the employee is not relieved of all work duties). Very early in the litigation, Genesis Healthcare issued what is called an “offer of judgment” under Federal Rule of Civil Procedure (FRCP) 68, offering to pay Symczk everything she claimed she was owed for her own unpaid work time (about $7,500, plus her attorney fees to date). The trial court then dismissed her entire collective action lawsuit, finding that because Symczk was made completely whole by Genesis’ offer and no others had yet joined the collective action, the case was “moot.”
The case was eventually appealed up to the Supreme Court, where Symczk’s attorneys argued that it was unfair to allow employers to end FLSA collective actions by “picking off” at an early stage the individual named plaintiffs bringing the lawsuit. The U.S. Supreme Court rejected Symczk’s argument, holding that the issue was resolved by basic principles of “justiciability”; the U.S. Constitution limits cases that can be in federal courts to only those live cases in which the parties have a genuine dispute. Once the only named plaintiff’s claims in a FLSA collective action are moot, there is no current controversy before the court.
Why Genesis Healthcare Matters
As any employer knows, wage and hour class or collective action lawsuits, which have boomed in recent years, can be extremely expensive and difficult to defend. While the amounts of disputed wages for each individual employee in such cases are often quite small (so small that the pay practices at issue often go unnoticed), when those claims are aggregated among hundreds or even thousands of employees over a several year period, they can quickly add up to big money in back wages and penalties (judgments or settlements in the millions, tens of millions, or more are not uncommon for large cases). Further, because of their large size, the cases involve very complex discovery and often take years to resolve, resulting in big legal fees.
Faced with such daunting potential costs, many employers with their eyes on the bottom line might jump at the chance to simply pay the individual plaintiffs bringing the lawsuit whatever they wanted for themselves (usually a few thousand dollars; in Symczk’s case it was $7,500) to make the whole thing go away. That is exactly what Genesis Healthcare did by issuing what’s called an “offer of judgment” under FRCP 68. An offer of judgment is a familiar tool to civil litigators in all types of cases—the offer stops the plaintiff from accruing attorney fees beyond the date of the offer unless the plaintiff wins more than the offer amount at trial.
Possible Limited Reach Of Genesis Healthcare
Obviously, Genesis Healthcare provides a powerful weapon for employers to use to potentially nip in the bud expensive wage and hour collective litigation under the FLSA at an early stage. The decision comes with caveats, however, and employers must be mindful of its possible limitations when considering using this litigation tactic:
- Smyczk’s collective action only became moot because no other plaintiffs had yet joined. Under the FLSA, other employees must specifically choose to “opt in” to the collective action; that usually happens relatively early in the litigation during the “conditional certification” stage. Employers wishing to take advantage of the tactic approved in Genesis Healthcare must therefore do so early in the litigation.
- The dismissal of the FLSA collective action does not end it forever with respect to other employees not “picked off” by the offer of judgment. Those other employees are still free to file their own individual or collective lawsuits. Depending on the particular case, however, that may be a risk worth taking. Wage and hour class or collective actions are often driven by one or a few (often disgruntled) employees and, even more so, plaintiffs’ attorneys. When a lawsuit is dismissed, it can be difficult for the plaintiffs’ attorneys to find others willing to file additional lawsuits.
- The holding only applies to collective actions under the FLSA; the Court specifically stated it may not work with class actions governed by FRCP 23. In states with their own wage and hour laws (like Washington, Oregon and California), plaintiffs often bring “hybrid” lawsuits alleging both collective actions under FLSA and class actions under state law pursuant to FRCP 23. In fact, because some state wage laws are so much more favorable to employees, such as in California and Washington, it is not uncommon for plaintiffs to raise only state law claims, and bring class action lawsuits, rather than bring the FLSA claim at all. Because of the procedural differences between collective and class claims (most notably, other employees must affirmatively “opt in” to FLSA collective claims, but state law class actions will usually include all affected employees except those who specifically “opt out”), employers facing such a “hybrid” claims may only succeed in ending the FLSA claims, but a (larger) law class action under state law could go on. Indeed, just several days ago in Busk v. Integrity Staffing Solutions, the Ninth Circuit Court of Appeals became the latest Circuit Court to allow these "hybrid" claims, despite the conflict between the FLSA collective "opt in" and FRCP 23 class action "opt out" procedures (blog post coming…).
- Somewhat strangely, the Court specifically declined to decide whether the offer of judgment actually rendered Smyczk’s individual claim moot and simply assumed that it did because the parties did not dispute that point. In going out of its way to state this curious caveat the Court may have left the door open for arguments that class claims should survive because offers of judgment or settlement do not, in fact, moot a particular named plaintiff’s individual claims.
Still, for the time being Genesis Healthcare represents a win for employers facing FLSA claims. We’ll have to continue to watch this very hot area of law as it continues to develop.