Did the Supreme Court Just Give Employers A New Tool to Fight Wage & Hour Claims?

“… [the case] demonstrates how the court system is grappling with an increasing number of wage & hour claims that threaten to overwhelm the system…” (Pullman & Comley)

Did the Supreme Court just give employers a new tool for fighting Fair Labor Standards Act class-action lawsuits? From Todd Steenson at law firm Holland & Knight:

“In its 5-4 ruling, the Court said that the mere fact that the named plaintiff in an FLSA collective action asserts her claims on behalf of other similarly situated employees ‘cannot save the suit from mootness once the individual claim is satisfied.’ The decision clarifies the fundamental differences between FLSA collective actions and Rule 23 class actions. It also may give employers a way to ‘pick off’ the named plaintiff and thereby derail the entire FLSA collective action.”

In plain English: resolving the wage and hour claims of the employee who initiated the lawsuit makes the class action go away. If the employee no longer has a claim, neither do her coworkers.

Key takeaways? Here are five:

1. The court failed to answer an important question:

“[T]he opinion unfortunately did not render a decision on the key question of whether a named plaintiff’s claim is actually mooted with a defendant’s offer of judgment of full relief. Rather, the Supreme Court assumed this to be the case. Therefore, the decision leaves open the issue of whether an employer’s use of an offer of judgment to the named plaintiff is an effective tool to quickly dispose of an asserted FLSA collective action.” (Akerman)

2. The ruling is limited in scope:

“The holding only applies to collective actions under the FLSA; the Court specifically stated it may not work with class actions governed by Federal Rule of Civil Procedure. We can expect that in states with their own wage and hour laws, FLSA plaintiffs’ lawyers will either bring ‘hybrid’ lawsuits alleging both a collective action under FLSA and a class action under state law, or will bring only state-law claims as a class action. In the first situation, the pick-off play probably would at most succeed only in ending the FLSA claims; the state law class action under state law could go on. In the second situation, the pick-off play may not work at all.” (Holland & Knight)

3. A settlement offer isn’t the solution for every situation:

“Offers of judgment, however, are still not a panacea for collective action woes. First, to make such an offer, one must agree to pay the amount of the claim and attorney fees. The amount of the claim may not be ascertainable, and with a potential three-year statute of limitations and liquidated damages, the amount in many cases may be substantial.” (BakerHostetler)

4. Quick response to claims is essential:

“[I]f you do have some potential exposure on wage & hour claims, it doesn’t make sense to wait until the claim is filed. Work with counsel to develop an approach that can reduce or ultimately eliminate that liability exposure. That approach may include re-classification of employees or an inclusion of an mandatory arbitration provision.” (Pullman & Comley)

5. The best defense? Making sure wage and hour suits aren’t filed in the first place:

“As our readers know, we often suggest that employers conduct an internal audit of their timekeeping and overtime policies to avert such lawsuits altogether. Symczyk is just another reminder of the complexities of federal and state wage and hour laws and the benefits of conducting such an audit to ensure compliance with these laws.” (Franczek Radelet)

The updates:

Find additional updates on the Fair Labor Standards Act at JD Supra Law News>>