U.S. Supreme Court Paves Way for Employers to Shut Down FLSA Collective Actions

The Fair Labor Standards Act (FLSA) gives employees powerful tools to recover unpaid minimum wages and overtime from their employers.  Not only can employees sue for double damages, plus attorneys’ fees, but they can sue owners personally and bring their claims as “collective actions” that notify other employees of the claims and enable them to join the lawsuit.  In Genesis Systems Corp. v. Symczyk, No. 11–1059 (Apr. 16, 2013), the United States Supreme Court ruled that employers can effectively short-circuit FLSA collective actions for unpaid minimum wages and overtime by quickly paying off plaintiff employees.  In this way, the Supreme Court has placed some limits on the drastic remedies the FLSA gives to employees.

Prior to this decision, it was unclear whether employers could shut down collective action suits by “picking off” the plaintiffs that brought them through settlement offers.  In fact, in the Symczyk case itself, the employer (a nursing home) did not even pay the plaintiff (a nurse) the overtime she claims she was owed.  Rather, using a procedure available in federal court, the employer just offered to enter a judgment in favor of the plaintiff for the full overtime alleged, plus liquidated damages and attorneys’ fees, and the plaintiff refused to accept it.  Under federal case law in that judicial circuit, the offer itself “mooted,” or fully resolved, the plaintiff’s claims.

Nevertheless, the plaintiff argued that she should be allowed to continue litigating the collective action portion of her lawsuit for other employees even if her own claims were moot.  The U.S. Court of Appeals for the Third Circuit agreed, ruling that a collective action should be allowed to continue on public policy grounds even if the plaintiff’s own claim is fully resolved.

In reversing the Third Circuit, the Supreme Court declined to rule on whether an “offer of judgment” was enough to moot or resolve a plaintiff’s claims.  That issue remains in dispute, as some federal circuits disagree with the Third Circuit and hold that an offer of judgment that is not accepted by the plaintiff cannot moot an FLSA claim.

Nevertheless, the Supreme Court held that, according to Third Circuit law, the offer of judgment mooted the claim, and that the Third Circuit was wrong in holding that the collective action portion of the claim should continue.  It held that, when the sole plaintiff in an FLSA collective action has resolved her claim, the whole collective action must end.  That does not prevent another employee from bringing the same claim later as a collective action; it simply enables employers to moot each plaintiff’s claims by settling with each one-at-a-time.  That way, the employer may never have to deal with an FLSA claim on a collective action basis.

In light of this decision, employers that have failed to pay minimum wages or overtime should speak with skilled employment counsel to discuss ways to correct the situation.