Labor & Employment Law

Employer?s Rule 68 offer of judgment to sole plaintiff in FLSA case may have been effective preemptive strike to collective action

Today's Employment Law Memo email contained the following report on a complex issue involving the Fair Labor Standards Act's collective action provision and Civil Procedure Rule 68:

Sandoz v. Cingular Wireless (5th Cir 12/23/2008)

Sandoz sued the employer in a purported collective action, asserting a claim for violation of the minimum wage provisions of the Fair Labor Standards Act (FLSA). The trial court denied the employer's motion to dismiss, after the employer tendered an amount satisfying Sandoz' individual claim in full prior to the time any other employees had joined her suit. The 5th Circuit vacated, and remanded for consideration of issues relating to class certification.

29 USC Section 216 of the FLSA provides that employees may proceed in an opt-in "collective action" analogous to a class action. The court described the primary issue on appeal as "the difficult question of when an employer can moot a purported collective action under the [FLSA] ..., by paying an employee's claim in full." The court noted that this question involves "the complex interplay between Federal Rule of Civil Procedure 68, which stipulates how a defendant can make an offer of judgment that would fully satisfy a plaintiff's claim, and the FLSA's provision for collective actions under Section 216(b) [of the FLSA]."

The 11th Circuit, the only other circuit to address this issue, analyzed "whether the mootness principles in the Rule 23 class action context apply to collective actions brought under Section 216(b) of the FLSA." In Cameron-Grant v. Maxim Healthcare Servs., Inc., 347 F.3d 1240 (11th Cir 2003), the 11th Circuit concluded that the FLSA's opt-in requirements for FLSA collective actions "prohibit what precisely is advanced under Rule 23 - a representative plaintiff filing an action that potentially may generate liability in favor of uninvolved class members." Based on that conclusion, the 11th Circuit held that the employer's offer of judgment satisfying all of the named plaintiff/employee's claims mooted the employee's claims.

The court concluded, "when [the employer] made its offer of judgment, Sandoz represented only herself, and the offer of judgment fully satisfied her individual claims." The court observed, "[i]f our analysis stopped there, Sandoz's case would be moot." However, the court agreed with Sandoz' argument that dismissal of her case in this manner "would provide an incentive for employers to use Rule 68 as a sword, 'picking off' representative plaintiffs and avoiding ever having to face a collective action." The court turned to the "relation back doctrine" to avoid such a result. Applying that doctrine to this context, the court held "when a FLSA plaintiff files a timely motion for certification of a collective action, that motion relates back to the date the plaintiff filed the initial complaint, particularly when one of the defendant's first actions is to make a Rule 68 offer of judgment. If the court ultimately grants the motion to certify, then the Rule 68 offer to the individual plaintiff would not fully satisfy the claims of everyone in the collective action: if the court denies the motion to certify, then the Rule 68 offer of judgment renders the individual plaintiff's claims moot." The court remanded for consideration whether Sandoz timely sought certification of her collective action.

Paul Secunda, writing at Workplace Prof Blog, had this to say about the case:

I like the innovation of the 5th Circuit approach and the ways in which avoids the pitfalls of the 11th Circuit approach. Although this sounds like an arcane issue, with the number of FLSA collective actions out there, this could turn out to be an important decisional innovation which compromises nicely the competing employer and employee interests involved.

Full post as published by Ross' Employment Law Blog on December 29, 2008 (boomark / email).