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5-4 Supreme Court Decision in Genesis Healthcare v. Symczyk Unlikely to Snuff Out Incipient FLSA Collective Actions

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5-4 Supreme Court Decision in Genesis Healthcare v. Symczyk Unlikely to Snuff Out Incipient FLSA Collective Actions

5-4 Supreme Court Decision in Genesis Healthcare v. Symczyk Unlikely to Snuff Out Incipient FLSA Collective Actions

Today the Supreme Court issued an odd decision in Genesis Healthcare Corp. v. Symczyk, No. 11-1059, representing another effort by the Court to limit the ability of employees to bring collective actions enforcing the Fair Labor Standards Act (“FLSA”). Justice Thomas authored the 5-4 majority opinion. The dissent, by Justice Kagan, argued that the majority’s decision will have no practical effect.

The action was brought in federal district court by a registered nurse, Laura Symczyk, against her employer, Genesis Healthcare Corp., challenging the employer’s practice of automatically deducting 30 minutes of wages per employee shift for “meal breaks,” despite the fact that employees allegedly did not actually receive such breaks. Symczyk brought the case as a collective action under the FLSA on behalf of herself and similarly situated co-workers.

Attempting to snuff out the case before other employees could opt in, Genesis made an “offer of judgment” under Federal Rule of Civil Procedure 68, offering to pay Symczyk $7,500, which Genesis contended was all that Symczyk personally could hope to recover, plus such attorneys’ fees and costs as the court deemed reasonable. Rule 68 is intended to encourage early resolution of cases by imposing relatively minor litigation costs, such as photocopying charges, on a plaintiff who refuses an early offer of judgment and then ultimately recovers no more in the suit than the defendant initially offered. By its terms, Genesis’s offer expired within 10 days if not accepted. Symczyk did not respond to the offer.

Genesis thereafter moved to dismiss the case for lack of subject-matter jurisdiction, claiming that the case was “moot” because Symczyk, the only plaintiff, had been offered an amount that, the employer claimed, would make her whole for the wages of which she had been deprived. The district court granted the motion and dismissed the case. On appeal, the Third Circuit reversed, holding that the collective action was not moot, although the court agreed that Symczyk’s individual claim was moot. The Third Circuit observed that allowing the employer strategically to use Rule 68 to terminate the suit before the plaintiff could seek certification frustrated the purpose of making collective actions available to enforce the FLSA.

The Supreme Court reversed. The Court “assumed, without deciding,” that Symczyk’s case was, in fact, mooted by her decision not to accept the defendant’s Rule 68 offer of judgment, finding that Symczyk had waived her argument to the contrary. Therein lies the oddness of the decision. If this “assumption” was incorrect, then everything the majority went on to say is irrelevant. In her dissent, Justice Kagan argued that the assumption is false, and that the employer’s unaccepted Rule 68 offer did not moot the case:  “When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer leaves the matter as if no offer had ever been made” (citation omitted). Because the majority’s holding was applicable only if, in fact, the case was moot, Justice Kagan observed that “the question the majority answers should never arise—which means the analysis the majority propounds should never apply.”
So what did the majority hold? It held that, assuming (without deciding) a plaintiff’s case is mooted by an unaccepted offer of judgment under Rule 68, then so long as no other putative FLSA collective action member has opted into the case, an employer can strategically moot the case by making a Rule 68 offer of judgment to the sole plaintiff that would provide that plaintiff with full and complete relief. The majority opinion seemed to contemplate at least two circumstances in which an offer to pay damages would not render such a case moot:  when the plaintiff is seeking injunctive relief challenging ongoing conduct, and when the plaintiff is “assert[ing] any continuing economic interest in shifting attorney’s fees and costs to others.”

Rather than acknowledge the real effect of dismissing Symczyk’s suit – i.e., that an employer who allegedly deprived a class of employees of wages due under the FLSA was allowed to escape liability by quickly offering to pay off a single employee who complained – Justice Thomas observed that the registered nurses who had been deprived of their pay “remain free to vindicate their rights in their own suits.” This will be cold comfort for Symczyk’s co-workers.

But Justice Thomas’s observation does raise an interesting question: what effect will an offer of judgment, if accepted by the plaintiff, have in a subsequent case brought by others in the putative class? Will employers really be willing to accept the consequences of conceding liability? If a suit seeks injunctive relief, will the employer be willing to offer a judgment in which it agrees to reclassify its employees?  Will counsel who represents an employee offered such judgment (e.g., including reclassification) still be entitled to full fees for the class-wide relief based on the catalyst theory? Any entry of judgment is likely to invite a subsequent collective and class action by those who “remain free to vindicate their rights,” and in such an action, the employer’s liability may be a foregone conclusion as a result of the prior entry of judgment. Given that the majority did not overrule Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981), which held that FLSA rights cannot be waived, employers will not be able to manufacture a finding of mootness by making a mere settlement offer, but rather will be required to offer bona fide complete and final judgment, to be entered by the court.

To the extent that the majority’s decision has any life notwithstanding Justice Kagan’s argument and the practical risks an employer would face by conceding liability, plaintiffs should easily be able to avoid the impact of Genesis Healthcare. The case was sui generis: the plaintiff “conceded that [the employer’s] offer ‘provided complete relief on her individual claims’”; she “failed to assert any continuing economic interest in shifting attorney’s fees and costs to others”; she was a sole named plaintiff without a single opt-in; she apparently did not seek injunctive relief; and she apparently did not assert class claims under Rule 23. The absence of any of these attributes would take a case outside of Genesis Healthcare’s holding, and a garden variety FLSA collective action suit often lacks them all. In addition, the decision should have no impact on cases that include Rule 23 class claims or similar actions under state law (such as California Code of Civil Procedure § 382), because ample precedent establishes that class claims (unlike FLSA collective claims) cannot be nullified simply by offers of judgment to the named plaintiff.

If you have questions about your class action rights, contact Bryan Schwartz Law today.

Disclaimer: Nothing in the foregoing commentary is intended to provide legal advice in any particular case. The author and Bryan Schwartz Law cannot represent you unless you have a signed representation agreement with the firm.

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