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Court eliminates one strategy for ending class-action litigation

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in Compensation and Benefits,Employment Law,Human Resources

by Sean P. McDevitt and Kali T. Wellington, Esqs.

Employers continue to see more lawsuits alleging violations of the Fair Labor Standards Act (FLSA). The FLSA requires employers to pay employees a federal minimum wage, as well as pay nonexempt em­ployees time-and-a-half overtime pay for hours worked in excess of 40 per workweek.

An employee who feels that she has been deprived of overtime pay can sue in her own right, and also sue on behalf of other similarly situated employees. The “similarly situated” individuals must affirmatively opt into the lawsuit by filing with the court a written consent to join the lawsuit.

Those lawsuits are known as collective- or class-action lawsuits.

In an individual FLSA claim, the named plaintiff’s claim might involve relatively small amounts. Consequently, the financial exposure arising from the claims is typically quite manageable.

But a collective action may present a risk of hundreds, if not thousands, of plaintiffs. Thus the financial exposure to FLSA collective actions can become quite large.

Just ask Starbucks, which settled a FLSA collective action for $100 million!

Cutting down class actions

Resourceful defense attorneys have tried a few legal tactics to help em­­ployers defend against wage-and-hour class-action lawsuits.

One strategy is to “tender an offer of judgment” (under Rule 68 of the Federal Rules of Civil Procedure) to the named plaintiff before the case gets to the collective-action certification stage. If the offer is for more than what the employee could get in litigation, then the case is typically closed.

Even if the employee rejects the offer, the case theoretically is over because she had been offered ­complete compensation for the alleged wrong.

One less employer option

Unfortunately, the 3rd Circuit Court of Appeals has removed this arrow from defense counsels’ quiver.

In Symczyk v. Genesis Healthcare Corp. (No. 10-3178, 3rd Cir., 2011), Laura Symczyk, a registered nurse, brought a lawsuit against her employer on behalf of herself and other similarly situated plaintiffs, alleging that her employer violated the FLSA by implementing and subjecting employees to a break policy that automatically deducted a daily 30-minute meal period from the weekly hours worked, regardless of whether the employee performed compensable work during the meal breaks.

Lawyers for her employer offered $7,500 in alleged unpaid wages, plus attorneys’ fees, costs and expenses, as determined by the court—an amount that exceeded what Symczyk could have recovered in the lawsuit. Symczyk didn’t respond to the offer.

The employer’s lawyers then asked the court to throw out the case, since Symczyk had been offered more than she was possibly owed. The trial court dismissed the case.

The plaintiff’s appeal

Symczyk appealed to the 3rd Cir­­cuit, which reversed the district court.

The appeals court expressed concern that “[t]his equitable principle has evolved to account for calculated attempts by some defendants to short-circuit the class-action process and to prevent a putative representative from reaching the certification stage.”

The 3rd Circuit held that the district court should have employed the “relation back” doctrine to allow the plaintiff to file a motion for certification of the collective action as if it had been filed at the time the suit began.

The 3rd Circuit remanded the case to the district court to determine whether the motion for conditional certification was made without undue delay and, if so, directed the court to relate the motion for conditional certification back to the date where the plaintiff filed her initial complaint.

The court however, noted that if the motion for conditional certification is determined to be untimely or is otherwise denied, then the Rule 68 offer would moot the action. As a result of this decision, defense counsel must now go back to the drawing board armed with one less weapon in its war against FLSA collective actions.

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Authors: Sean P. McDevitt is a partner with Pepper Hamilton LLP (www.pepperlaw.com) in Philadelphia. His practice includes counseling management clients in labor relations and employment matters, representing management before administrative agencies and defending employers in state and federal courts in wrongful discharge and employment discrimination litigation. He can be reached at (610) 640-7856 or mcdevitts@pepperlaw.com.

Kali T. Wellington is an associate in the Labor and Employment Group of Pepper Hamilton LLP and concentrates her practice in counseling employers on labor and employment matters. She can be reached at (610) 640-7801 or wellingtonk@pepperlaw.com.

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