Tuesday, 23 April 2013 07:51
By Lee Williams
The U. S. Supreme Court recently issued a ruling which distinguished between a party’s ability to bring collective actions under the Fair Labor Standards Act (FLSA) and class actions under the Federal Rules of Civil Procedure. The decision initially assumes, without deciding, that an offer by a defendant to pay a plaintiff’s monetary claim in full, along with associated court costs and attorney fees, renders a plaintiff’s claim moot and requires the claim to be dismissed. More importantly, the decision goes on to draw several distinctions between class action precedent and the viability of applying that precedent to collective actions under the FLSA.
The lawsuit was brought by a nurse who sued her employer for unpaid wages. She claimed that during each shift the employer subtracted 30 minutes of break time even though she, and other employees, performed work-related tasks during that time. The FLSA permits an individual who brings an collective action of this nature against an employer to also bring the action on behalf of “other employees similarly situated.” The nurse in this case sought to do just that. Before she was able to seek out other similarly situated employees to join her action, however, the employer made an Offer of Judgment – essentially a settlement offer – under Federal Rule of Civil Procedure 68. By the Offer’s terms, the nurse had ten days to consider the Offer and if she did not accept the Offer, it would be “withdrawn.” The nurse ignored the offer and provided no response to the employer. After ten days had elapsed, the employer filed a motion to dismiss the nurse’s case, as well as the collective action of any “similarly situated” employees.
At trial, the district court dismissed the case holding the employer’s offer to pay a full settlement, which would provide the nurse with all possible monetary recovery she could receive, should the suit went forward, rendered her claim moot. According to the U. S. Constitution, federal courts may only hear cases in which there is a live “case” or “controversy” – meaning there must be a present, actual harm, or federal courts do not have the authority to decide a case. According to the district court, it is not possible to meet the case and controversy requirement once an offer of full settlement has been made.
On appeal, the U.S. Court of Appeals for the Third Circuit reversed the district court’s opinion holding that, although the nurse’s individual claim was moot, the collective action was not. The Third Circuit stated that allowing a defendant to “pick off” named plaintiffs with well-timed Offers of Judgment would frustrate the goals of collective actions under the FLSA. The Third Circuit sent the case back to the district court so the nurse could seek “conditional certification” and allow the case to continue. Conditional certification only requires notification to past and present employees of the collective action. If an employee chooses to join the collective action, the employee must take the additional step of opting into the collective action in writing.
The Supreme Court’s analysis
The employer appealed the Third Circuit’s decision and the U.S. Supreme Court issued a 5-4 split decision in the employer’s favor, cutting directly across the philosophical boundaries of the justices. The majority, based on the Third Circuit’s finding that the nurse’s individual claim was moot and the nurse’s admissions to the same in prior proceedings, assumed, without deciding, that the Offer of Judgment made the individual claim moot. The Court also found the collective action moot, because, at the time, no similarly situated employee had opted into the lawsuit, stating the mere allegation of collective action was not sufficient to maintain the action without willing participants.
Expanding on its denial of the nurse’s attempt to keep the collective action alive, the Court made two important distinctions between FLSA collective actions and class actions while describing them as “fundamentally different.” First, while class action participants attain independent legal status once the class is certified by the courts (i.e., the class members can continue the action regardless of what happens to the named plaintiff’s claim), the Supreme Court stated collective action members have no independent legal status, even if the collective action has been conditionally certified, until they formally opt into the suit in writing. The Court explicitly stated conditional certification under the FLSA is not tantamount to class certification in class actions.
Second, collective actions, which are generally seeking monetary damages based on the statute, are distinct from class actions seeking an injunction to stop a particular behavior. These types of class actions, those seeking an injunction, have been allowed additional leeway to attain class certification due to defendants’ ability to cease the behavior before a class action can run its course – the Supreme Court appears to have closed this door for collective actions as well.
With this decision, the Supreme Court has drawn bright lines between collective actions and class actions – specifically with regard to the effect conditional certification has on the claim. Determining if class action privileges exist for those attempting to bring FLSA collective actions has been a contentious point in recent history. Individuals and entities forced to defend collective actions will be able to use this decision to bolster their argument against extending such privileges to collective actions.
Read the case here.