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Labor: The Genesis Healthcare decision and its impact on FLSA collective actions

Companies can moot plaintiffs’ claims by offering full relief

Wage-and-hour collective action lawsuits brought by current or former employees under the Fair Labor Standards Act (FLSA) have become a source of massive concern for employers over the last several years, and with good reason. These FLSA collective action lawsuits enable a single employee to file a claim on behalf of not only herself, but also all other “similarly situated” employees, thereby drastically increasing both the scope of potential liability and litigation costs for employers targeted with such claims.

Employers thus have a vested interest in nipping these types of suits in the bud, and some employers have done so (with varied success) in the past by making offers to fully remedy the named plaintiff’s alleged FLSA damages at the beginning of the litigation process in order to deprive the plaintiff of any personal stake he or she may have in the case. This result, in turn, can require the dismissal of the collective action claims in the lawsuit as being moot. Plaintiffs’ lawyers typically have objected strenuously to such a defense strategy, on the grounds that employers should not be permitted to moot collective action allegations by “picking off” the individually-named plaintiffs by way of such early-stage offers.

On April 16, in Genesis Healthcare Corp. v. Symczyk, the Supreme Court weighed in on this issue, and held that once the named plaintiff’s claim is mooted by an offer of full relief, the case is subject to dismissal, without ever reaching the sweeping collective action allegations, a decision that is sure to provide employers with increased ammunition with which to defend against such suits.

Genesis Healthcare: The Court’s Ruling

The plaintiff in Genesis Healthcare, a nurse, filed suit against her former employer on behalf of herself and all similarly situated employees at the company, claiming that Genesis had violated the FLSA by automatically deducting pay for 30-minute meal breaks, even when employees had spent those breaks performing compensable work. In response, the company promptly served an offer of judgment upon her, as permitted under Rule 68 of the Federal Rules of Civil Procedure, which provides the mechanism for defendants to tender formal settlement/judgment proposals during litigation.

Genesis’ offer of judgment would have given the plaintiff full relief, including $7,500 in compensation for her alleged unpaid wages, as well as payment of her reasonable attorneys’ fees and costs. The plaintiff failed to accept the company’s offer within the designated 10-day window, and received no money from the company as a result. Nonetheless, the company contended that because it had offered the plaintiff complete relief on her FLSA claim, she no longer possessed a personal stake in the lawsuit which might permit her to proceed with her claims. The company argued that plaintiff’s claims were thus moot, and as a result, the collective action claims which she had asserted were rendered moot—and subject to dismissal—as well.

The Supreme Court agreed. First, it pointed out that the trial and appellate courts already had found the plaintiff’s individual claim to be moot based on the unaccepted offer, and that the plaintiff had conceded that point for purposes of her case. Thus, the Supreme Court never broached the underlying issue of whether, in fact, the unaccepted offer of judgment should be deemed to moot the plaintiff’s individual FLSA claim for damages.

Building upon the assumption that the plaintiff’s own personal claim had been mooted, the court then addressed the impact on the collective action allegations which the plaintiff had asserted in the lawsuit. The court held that because the plaintiff’s individual claim was mooted, the company’s offer also had the effect of eradicating any personal interest the plaintiff had in representing others in a collective action under the FLSA. The court explained: “The mere presence of collective-action allegations in [a plaintiff’s FLSA complaint] cannot save the suit from mootness once the individual claim is satisfied.” As a result, the Supreme Court ruled that the lawsuit was properly dismissed in its entirety.

The four dissenting justices in Genesis Healthcare, however, sharply criticized the majority for issuing a ruling which should be deemed (in the dissent’s view) as inapplicable to any future cases. Specifically, the dissent argued—as plaintiffs surely will do in future cases—that a defendant-employer cannot, in fact, moot a collective action claim simply by offering relief to the individually-named plaintiff(s), particularly when that offer is not accepted.

Ramifications for Employers Faced with FLSA Collective Actions

As it stands now, the Supreme Court’s holding in Genesis Healthcare presents employers with an opportunity to avoid collective action suits brought under FLSA—a statute that has been notoriously difficult for employers to navigate, particularly with respect to its overtime and employee classification provisions—by offering individual plaintiffs full relief for their claims early on in the litigation process. Of course, the decision of whether to make such an offer will depend heavily on the specific facts of each case, including the nature of the claims, the likelihood that other individuals would “replace” the originally-named plaintiff(s) whose claims might be mooted and other such considerations. To be sure, however, companies now must continue to consider such offers as a viable option for employers, and plaintiffs’ attorneys will be hard-pressed to decline such offers, at risk of forfeiting monies that may be due to their clients, while having those claims (and attorneys’ fees) mooted in the process. While the impact of the Genesis Healthcare decision on wage-and-hour claims undoubtedly will be the subject of further dispute, the ruling serves as a positive development for employers to combat costly FLSA collective actions in their early stages. 

Contributing Author

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William J. Tarnow

William J. Tarnow II is chair of Neal, Gerber & Eisenberg’s Labor & Employment Practice Group and represents and counsels companies and management...

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Contributing Author

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Judith Kong

Judith Kong practices in Neal, Gerber & Eisenberg’s Labor & Employment Practice Group. She focuses her practice on unemployment insurance,...

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