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Labor: Can You “Un-Hire” A Lawsuit?

The 4th Circuit recently ruled that job rescission is legal and not prohibited retaliation under the FLSA.

Your company is hiring a new employee and everything is going according to plan. The company casts a wide net for applicants, receives and reviews many great resumes and selects the best candidates for interviews. One candidate, who held the same job at another company, stands out above the others. So she is offered the job, contingent on her passing the appropriate drug test and background screening that all company employees must pass before starting work. She is excited by the offer and everyone seems happy.

During the screening before she begins with your company, however, the employee reveals that she recently filed a lawsuit against her prior employer under the Fair Labor Standards Act (FLSA) alleging that she was not paid overtime she was due. You know that this type of FLSA claim is among the fastest-growing category of litigation in recent years. Further, the position she is being hired into is one that has been the subject of claims by employees at other companies alleging unpaid overtime or misclassification as being exempt from overtime. You believe the position is properly exempt under the FLSA and not entitled to hourly pay or overtime for working more than 40 hours per week.

Still, you worry that hiring someone who, in the same job elsewhere, sued for unpaid overtime presents too great a risk of litigation for your company. So, your company rescinds the job offer and finds another candidate for the jobone who did not sue a former employer under the FLSA.

Is that legal? Can you rescind the job offer without “retaliating” against her for pursuing her rights under the FLSA (even against another company)? According to a recent decision by a federal appeals court, the answer is “yes” to both questions. The job rescission is legal and not prohibited retaliation under the FLSA.

In Dellinger v. Science Applications International Corp., the 4th Circuit in a 2-1 decision affirmed the dismissal of an employee’s FLSA retaliation claim under these circumstances. The trial court had granted the company’s motion to dismiss the lawsuit because only “employees” are entitled to bring a claim under the FLSA’s anti-retaliation provision, and the prospective employee/job applicant was not an employee.

The appeals court agreed, noting that the term “employee” in the FLSA’s anti-retaliation provision refers to the employer-employee relationship and is intended to stop employers from taking negative actions against current employees who file FLSA claims.

The 4th Circuit majority expressed sympathy for the prospective employee’s claim, which was supported by amicus briefs filed by the U.S. Department of Labor and the U.S. Equal Employment Opportunity Commission. The majority recognized the potential problem of allowing employers to weed out and not hire applicants who have filed an FLSA lawsuit in the past. But, the majority held that to rule otherwise would expand the FLSA beyond its “explicit purpose.”

The dissenting judge pointed to the U.S. Supreme Court’s 1997 ruling in Robinson v. Shell Oil Co., which permitted former employees to sue for discrimination under Title VII of the Civil Rights Act even though the language of that statute also provides rights to “employees.”

The Supreme Court held that because Title VII did not limit “employees” to current employees only, former employees could seek its protections. The dissenting judge in Dellinger would apply that same reasoning to the FLSA’s anti-retaliation provision’s use of the word “employees” and expand it to protect prospective employees as well.

Despite this dissent, the 4th Circuit’s decision stands as a basis for employers to make the same decision as the company made in Dellinger. Unless reversed by the U.S. Supreme Court, the definition of “employee” under the FLSA’s anti-retaliation provision remains limited to those with an actual employment relationship, not just a prospective one. Job applicants whose employment offer is rescinded due to their filing a prior FLSA claim are out of luck.

The ultimate question is whether the company’s decision in Dellinger was a wise one, even if it was legal. Yes, the company avoided a potential overtime lawsuit. At the same time, the company still ended up in litigation over rescinding the job offer. At least that lawsuit was limited to just her claim of retaliation, as opposed to a potential lawsuit by her and likely other employees in the same job for alleged overtime due.

Yet going forward it would be surprising, even in the face of the Dellinger decision, if others who have job offers rescinded because of prior FLSA claims would not bring retaliation claims. The Department of Labor and the EEOC would support those claims, as would many attorneys who would see the case like the dissenting judge did and welcome the opportunity to pursue the case in a different jurisdiction (or even hoping to get all the way to the Supreme Court).

So, if faced with the decision of hiring an applicant involved in prior FLSA litigation, the consideration is not just what is legal, but what type of potential litigation would you rather face? For now, the potential retaliation claim is a lesser risk. But it is an unpleasant choice for sure.

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Evan Pontz

Evan Pontz is a partner in the Labor & Employment practice of Troutman Sanders. He specializes in employment and labor law matters, including employment discrimination...

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