Two New Wage And Hour Cases: One Good News For Employers, One Not So Good

Two wage and hour decisions were recently issued - one by the United States Supreme Court and the other by a Court of Appeal in California - that are emblematic of the continuing onslaught of wage and hour class action litigation and the highly technical procedural and substantive issues that are still being litigated. In the U.S. Supreme Court case, Genesis Healthcare Corp. v. Symczyk, the Supreme Court ruled that offering to settle a case with a named plaintiff in a Fair Labor Standards Act (FLSA) collective action lawsuit under certain circumstances can terminate the litigation because the plaintiff's claims are moot since the plaintiff has received all he or she is personally asking for in the litigation. A California case, Gonzalez v. Downtown L.A. Motors, did not come out so well for employers and, if the decision stands, it may require many employers to make significant changes to their piece rate and potentially, even their commissioned sales compensation arrangements.

Genesis Healthcare v. Symczyk

On April 16, 2013, the United States Supreme Court issued its highly anticipated decision in Genesis Healthcare Corp. v. Symczyk, holding that a named plaintiff in a putative wage and hour collective action could not continue to pursue her collective claims after her individual claims became moot.1 Although the 5-4 decision is favorable for employers, the majority assumed without deciding the more interesting question of whether an unaccepted offer of judgment can actually moot a plaintiff's claims. As emphasized in Justice Kagan's vigorous dissent, the majority's avoidance of this question (which the dissent would have answered in the negative) is likely to limit the decision's practical application.

Procedural Background

Plaintiff Laura Symczyk was formerly employed by Genesis as a registered nurse. She sued, contending that Genesis's policy of deducting thirty minutes from each employee's shift for meal breaks - regardless of whether the employee received an uninterrupted break - violated the FLSA. Symczyk brought her lawsuit as a collective action under Section 216(b) of the FLSA on behalf of herself and all "similarly situated individuals."2Before Symczyk filed a motion for conditional certification of her collective action, and before any other individuals had joined her suit, Genesis made Symczyk an offer of judgment under Rule 68 of the Federal Rules of Civil Procedure, offering to pay her an amount she conceded would fully satisfy her individual claim. Symczyk did not accept the offer before it expired. Genesis then moved to dismiss her case for lack of subject-matter jurisdiction, contending that its offer of full satisfaction under Rule 68 divested her of a personal interest in the outcome of the suit and thus mooted the entire action. The district court agreed and dismissed the case.3

The Third Circuit reversed.4 Although the Third Circuit agreed that Genesis's Rule 68 offer fully satisfied Symczyk's individual claim and that, under its precedents, such an offer generally moots a plaintiff's claim whether or not it is accepted, it nonetheless held that Symczyk's collective action was not moot. Relying on cases involving Rule 23 class actions, the Third Circuit reasoned that calculated attempts by some defendants to "pick off" named plaintiffs with strategic Rule 68 offers before certification could short circuit the process, thereby frustrating the goals of collective actions.

The Holding

The Supreme Court reversed, finding that the district court had properly dismissed the entire action for lack of subject-matter jurisdiction. After Symczyk's individual claims had been fully satisfied, she no longer had Article III standing to pursue collective claims on behalf of other...