26 Jan FLSA in 2016 Just Got More Complicated
On Friday, before Snowzilla descended on Washington, DC, the Supreme Court dropped a bomb on collective actions across the board when it issued an opinion in Campbell-Ewald Co. v. Gomez. On the surface, Cambell-Ewald is a case about the Telephone Consumer Protection Act, in which Gomez received text messages from Campbell-Ewald Co. who in turn was working on a recruiting contract for the U.S. Navy. Gomez had not opted into receiving text messages on his phone (a requirement under the TCPA) and sued Campbell-Ewald under the TCPA. Early in the case, Campbell-Ewald made an offer under Rule 68 of the Federal Rules of Civil Procedure, Gomez declined the offer and the case proceeded, eventually making its way to the Supreme Court.
The question before the Court was whether an unaccepted offer in judgment under Rule 68 mooted the plaintiff’s case and therefore the entire class action.
Here is the key quote from the first page of the Court’s opinion written by Justice Ginsburg:
We hold today, in accord with Rule 68 of the Federal Rules of Civil Procedure, that an unaccepted settlement offer has no force. Like other unaccepted contract offers, it creates no lasting right or obligation. With the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists.
You may be asking, “what does the TCPA have to do with the Fair Labor Standards Act?” Nothing in substance and everything in procedure and in this case, procedure matters–a lot. TCPA allows for collective and class actions. FLSA allows for collective actions. The Campbell-Ewald case is about procedure not about substance.
Just about 3 years ago, the Supreme Court ruled in Genesis Healthcare Corp. v. Symczyk that if a defendant makes a Rule 68 offer that covers the entire claim of the plaintiff, the Rule 68 offer itself can “pick-off” the named plaintiff and moot the collective action so long as the offer comes in before collective action certification. Genesis Healthcare made the offer before class certification and although Symczyk did not formally accept the offer, Symczyk made the concession that the offer would have afforded her complete relief and would have mooted her case. . Symczyk had admitted the case was moot not once but twice in the lower courts. Because there were no other plaintiffs, the entire case itself was rendered moot. The Supreme Court in Genesis Healthercare, accepting Symczyk’s admissions of mootness, left unanswered the question of whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot.
In Campbell-Ewald, the Court ruled that defendant’s can’t pick off named plaintiffs by simply making an Rule 68 offer. Like any other contract offer, the offeree (the person receiving the offer) is not required to accept the offer. Gomez decided against the offer and so the case is not mooted. What is interesting is the next open question: What if Defendant makes a Rule 68 offer and deposits into a court account the full dollar amount to cover the plaintiff’s claim, admitting liability and paying the damages, thus no longer denying liability? It may be a few years before we learn the answer to that question.
Key Takeaway
Admittedly, this is kind of inside baseball in substance. But the key takeaway for employers is this:
FLSA collective action suits cannot be simply “bought off” by making an offer to make the name plaintiff whole. Thus, FLSA claims will not be so easy to dismiss or settle. Add to the individual risk of each suit, the number of collective action suits is on the rise and the new FLSA overtime rules for white collar workers is going to open employers up to a whole new set of possible claims.
Now is the time, before the new white collar overtime rule takes effect, to conduct a FLSA compliance audit to make sure you are compliant and to make sure you have plans in place to deal with the new overtime rule.
Give me a call if you want to take a look at your compliance efforts and plans going forward.