On Tuesday, April 16, 2013, the U.S. Supreme Court handed down a major victory to an employer who defeated a collective action under the federal Fair Labor Standards Act by "picking off" the named plaintiff. Although the Court's decision in Genesis Healthcare Corporation v. Symczyk left a significant legal issue unresolved, it still provides a potential strategy for employers to avoid those lawsuits.
Background
Under California law, plaintiffs assert representative wage-hour claims in a class action. But under the federal FLSA, a plaintiff seeking relief on behalf of similarly situated employees must pursue a so-called "collective action." In an FLSA collective action, upon convincing a court that there is a group of similarly-situated employees, the court allows such persons to "opt in" to the lawsuit; in a class action under state law, employees are presumed to be in unless they "opt out."
Laura Symczyk brought a collective action under the FLSA for time she allegedly worked during breaks. Before the court determined whether there were similarly situated employees, her employer made an Offer of Judgment to her for the full amount of her individual damages[,] which she rejected. The trial court found that the Offer of Judgment fully satisfied Symczyk's demand, leaving her with no "personal stake" in the outcome of the suit and making it moot. The appellate court rejected this strategy, reasoning that "picking off" named plaintiffs prior to collective action certification frustrated the purpose of the FLSA.
In a 5-4 decision, the U.S. Supreme Court reversed the appellate court and approved of the "picking off" strategy in this case. Although it declined to rule on whether the case was mooted by the unaccepted Offer of Judgment, it assumed that it was and found that there was no "actual controversy" because the individually named plaintiff had been offered full relief which made her whole. In so holding, the Court distinguished two of its own past decisions which had found that a class action could proceed even where a lead plaintiff's claims became moot.
Takeaway
What is most notable about the Symczyk decision is that it approved of the "pick off" strategy at least insofar as FLSA collective actions are concerned. Employers will be pressed to test that strategy in future actions.
But, Symczyk did leave a number of unanswered questions which may limit its application in the future. Most notably, the Court dodged the issue of whether a case is made "moot" by an unaccepted Offer of Judgment. Although the Court acknowledged a split between the Circuit Courts of Appeal on the issue (the Ninth Circuit has not yet opined on the issue), it cited to a number of cases finding that "a plaintiff's claim may be satisfied even without the plaintiff's consent." Even the four dissenting justices noted that "a court has discretion to halt a lawsuit by entering judgment for the plaintiff when the defendant unconditionally surrenders."
As for California class actions, Symczyk may be of less utility. One California Court of Appeal found that an employer could "pick off" class members in a class action where class members had been offered compensation for their claims and where the employer was able to show that there was a bona fide dispute as to the validity of those claims. But, no court has ever gone so far as to allow an employer to end a lawsuit by "picking off" only the named plaintiffs and, in fact, they have seemingly rejected that strategy.
Nonetheless, Symczyk appears to encourage the creative but careful use of Offers of Judgment where multiple parties may be involved. Whether Symczyk suggests a change in Supreme Court jurisprudence on class actions remains to be seen, but at the very least it offers employers a chance to avoid potential liability in this one kind of suit.
Stay up-to-date on post-Symczyk developments in the courts by visiting our blog. If you have questions, please contact Dan Handman at dhandman@HKemploymentlaw.com or at 310.255.1820 or Monte Grix at mgrix@HKemploymentlaw.com or at 310.255.1827.