In a case from Florida, the plaintiff filed a collective action complaint in federal court. The employer denied liability, but tendered full payment to the individual plaintiff of the amount it estimated as his backpay, liquidated damages and interest, totaling $638. The plaintiff opposed the tender, claiming that it underestimated the value of his claim, which he said was worth $3,000. Again denying liability, the employer tendered $3,000, split between backpay and liquidated damages. The plaintiff was forced to agree that his individual claim had become moot, but requested that the court award him attorney’s fees and costs, as a prevailing party. 

The district court denied that request. The Eleventh Circuit affirmed that denial, holding that under the statutory language, attorney’s fees and costs are allowed “in addition to any judgment awarded to the plaintiff or plaintiffs.” “The FLSA plainly requires that the plaintiff receive a judgment in his favor to be entitled to attorney’s fees and costs,” the court wrote. It went on, however, to hedge its ruling with a confusing footnote that seeks to limit the holding to situations in which the employee concedes that his claim should be dismissed before trial as moot. What the footnote means may be fleshed out in future rulings. For now, the lesson from this case is that it may be possible to avoid paying attorney’s fees and costs in their entirety, if the employer tenders the most the plaintiff could recover early in the case. Dionne v. Floormasters Enterprise, 2012 WL 104906 (11th Cir. Jan. 13, 2012). Of course, a tender is not a settlement agreement, and there is no possibility, under this scenario, of obtaining a confidentiality agreement from the employee.

A case from North Carolina illustrates how to fail to cut off accrual of attorney’s fees. In that case, defense counsel sent plaintiffs’ counsel offers of full relief to all plaintiffs including costs and attorneys fees to date. (The defense was not trying to avoid paying attorneys fees and costs in their entirety, but to cut off their future accrual). The offer did not specify amounts, but said that amounts would be based on affidavits to be provided by each plaintiff. The letter further stated that the offer was to enter into a settlement agreement including a confidentiality clause. The purpose of the offer was not to avoid paying attorney’s fees and costs in their entirety, but to cut off their continuing accrual.

Based on this offer, the district court dismissed the lawsuit as moot, on the grounds that the defense had offered everything that plaintiffs could possibly recover. On appeal, the Fourth Circuit reversed on several grounds. First, the defense did not offer to permit entry of a judgment, but only a contractual settlement agreement, which is more difficult to enforce than a judgment. Second, the offer was deficient because it was conditional. Instead of offering a sum certain, it offered to permit calculation of backpay and liquidated damages based on affidavits. Third, the offer was deficient because it contained a confidentiality clause. A judgment, the court wrote, would not be confidential. Simmons v. United Mortgage and Loan Investment, 634 F.3d 754 (4th Cir. Jan. 21, 2011). One lesson from this case is that if an employer wants to put an end to litigation by making an offer of full relief, it must bite the bullet and tender what the plaintiffs would receive if they won, with no strings attached.

Neither of these decisions addresses the related concern whether an offer of full relief to the named plaintiff can make a case moot, and require dismissal before the court certifies a collective action. For a discussion of how offers of judgment affect motions for collective action notice, see the September 25, 2011 posting in this blog.

Last week, the National Labor Relations Board (NLRB) ruled that an arbitration agreement signed as a condition of employment, which prohibited the filing of joint, class, or collective actions in arbitration or in court, violated the National Labor Relations Act (NLRA), and thus was unenforceable. This decision casts substantial uncertainty on the viability of class action waivers in arbitration agreements between employers and employees.

Discussion

In D.R. Horton, Inc. and Michael Cuda, 357 NLRB No. 184 (Jan. 3, 2012), a construction superintendent attempted to initiate a nationwide class arbitration on behalf of similarly situated superintendents, alleging that his employer was misclassifying its superintendents as exempt from overtime under the Fair Labor Standards Act.  The employer sought to avoid the arbitration because the arbitration agreement between the parties barred collective claims.  In response, the employee filed a claim with the NLRB alleging that the arbitration agreement violated his rights under the NLRA, which protects employees’ rights to engage in concerted action for mutual aid and protection.  An administrative law judge agreed with the employer and dismissed the claim.  However, the NLRB reversed the dismissal, holding that the mandatory waiver of any class actions violated the National Labor Relations Act.

The key determination underlying the NLRB’s holding was that employees’ ability to engage in collective and class actions qualifies as “concerted activity” under Section 7 of the NLRA. It was important in this case that the arbitration agreement did not simply bar class arbitration, but went so far as to prohibit class actions of any sort, in any forum. It is also important to note that even employees of non-unionized employers enjoy the protections of Section 7 of the NLRA.

By defining class actions as concerted activity, the NLRB was able to distinguish this case from recent federal case law that seems to compel the opposite result (and which was cited in the original decision to dismiss the complaint).  Specifically, the NLRB went to great lengths to distinguish the United States Supreme Court’s recent decision in AT&T Mobility v. Concepcion, 131 S.Ct. 1740 (2011), in which the Court ruled that a California law barring class-action waivers in arbitration agreements conflicted with the Federal Arbitration Act.  (See related E-Update here.)  In D.R. Horton, the NLRB declared that its ruling did not conflict with the Concepcion decision for several independent reasons.  For example, the NLRB reasoned that a requirement that employees’ work-related claims must be resolved through arbitration solely on an individual basis amounts to a requirement that employees forgo a right guaranteed by the NLRA, which protects employees’ rights to “engage in… concerted activities for the purpose of collective bargaining or other mutual aid or protection….”  The NLRB also opined that an arbitration agreement that violates employees’ rights under the NLRA is against public policy and therefore, unenforceable.  In addition, the Board swept aside the argument that the Federal Arbitration Act permitted class waivers in arbitration agreements, by observing that the Norris-LaGuardia Act, which is the federal law that renders unenforceable any private agreement prohibiting someone from lawfully assisting in a lawsuit arising out of a labor dispute, was passed seven years after the Federal Arbitration Act.

What This Means

This decision is an unexpected and serious complication in the law regarding the enforceability of class action waivers in arbitration agreements.  After Concepcion, employers felt empowered to include class action waivers in arbitration agreements.  It is now an open question whether class action waivers can be enforced, and employers considering whether to implement an arbitration program including a class action waiver must do so very carefully.  Several important issues still must be resolved either through judicial review of the D.R. Horton decision itself, or through continued development of these issues in other cases.  Among other things, it will be important for a federal court to consider the conflict of laws issues addressed by the NLRB, and for a court to consider whether the potential violation of the National Labor Relations Act identified in this decision can be addressed by a court in response to an attempt to compel an individual arbitration, as opposed to in an unfair labor practice proceeding brought before the NLRB.  Until these and other open issues are resolved, employers should proceed with caution in either seeking to enforce existing class arbitration limitations, or implementing a program involving arbitration agreements containing class action waivers.

Authored by Fred Plevin and Matthew Jedreski of Paul, Plevin, Sullivan & Connaughton LLP

A “service worker” under the law is an employee “primarily engaged” in a broad list of occupations as defined by the federal Bureau of Labor Statistics Standard Occupational Classification system. These occupations include, by way of example only, hotel and restaurant workers, retail salespersons, office clerks, secretaries, security guards, cashiers, nurses, social workers and health care workers. This list is not exhaustive, and a full list of professions can be found at the State of Connecticut’s website. A service worker does not include temporary workers and employees who are exempt from the overtime requirements of the Fair Labor Standards Act.

Employees are eligible for sick leave after 680 hours of employment. An employer must provide one hour of paid sick leave for every 40 hours worked, up to a maximum of 40 hours of sick leave per calendar year. Service workers are permitted to use the paid sick leave for their own illness or the illness of a child or spouse or if they are the victim of family violence or sexual assault. An employer can satisfy its obligations by offering other paid leave, such as vacation, personal days or paid time off so long as it allows employees to use the paid time off for sick leave and so long as the paid time off is granted and accrues in a manner that meets or exceeds the requirements of the law.

Service workers are entitled to carry over up to 40 hours of unused, accrued sick time from one calendar year to the next. However, service workers are not entitled to use more than 40 hours of sick time per year, regardless of how many hours they have in their sick leave bank. Unused sick leave does not need to be paid at termination, unless an employer promises otherwise. Note that, under the new law, service workers who do not average ten or more hours a week in the most recently completed calendar year are not entitled to paid sick leave.

An employer with 50 or more service employees in Connecticut must provide notice to service workers upon hire regarding their entitlement to paid sick leave. A poster in a conspicuous place will satisfy these obligations. Connecticut has issued a recommended poster, a link to which can be found here.

Jonathan Keselenko
Foley Hoag LLP

Currently, workers providing in-home care are generally exempt from the FLSA’s overtime pay and minimum wage requirements.  In this regard, Section 13(a)(15) exempts “any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).”  At issue is what is meant by “companionship services.” 

This term was hotly contested in a case which reached the Supreme Court on two occasions last decade, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007).  Coke dealt with the issue of whether domestic service employees employed by third-party agencies instead of directly by the patient’s household fell under the exemption. The Court unanimously held that they do.

The case was an attempt by the SEIU (and the DOL) to alter the manner in which these services are typically provided, and to provide the caregivers with rights to minimum wage and overtime pay under the FLSA.  (These employees are entitled to minimum wages and overtime pay under some state laws.)  By formally changing the regulations as proposed, the DOL (and the SEIU) will essentially achieve much of what they were unable to achieve in the Coke case.

Under the current regulations, “companionship services” refers to:

 [T]hose services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs. Such services may include household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes, and other similar services. They may also include the performance of general household work: Provided, however, that such work is incidental, i.e., does not exceed 20 percent of the total weekly hours worked. . . .

As announced by Secretary Solis on December 15, 2011, the DOL is proposing to change the regulation in at least two fundamental ways.  First, the types of services covered would be limited to “fellowship” and “protection”, which would only include such activities as playing cards, visiting with friends and neighbors, and taking walks.  Second, the exemption would only apply to those performing such duties who are soley and directly employed by the household of the infirmed.  Thus, the regulation would negate the outcome of Coke.

The DOL’s stated goal is to convert the exemption to only cover casual employees of households, such as babysitters.  Employees who care for the infirmed by dressing wounds, bathing, tube feeding, etc., would not be covered.  These types of services, according to the DOL, are too high level to fall under the exemption’s intended coverage.  The DOL believes that it is important to cover these employees who would otherwise be exempt since the demand for such services is growing, and higher wages would attract more workers to this industry.

Is the DOL correct?  While there may be the potential for higher wages for employees working in these jobs, there may also be some unintended consequences on the horizon should the proposed changes become law.  For instance, if employees are entitled to overtime pay, their services – which are already severely expensive for the families engaging them – could become so cost prohibitive that the demand for the services will drop.  In addition, and to avoid having to pass-through the higher costs to families, the employers could design schedules so that overtime pay never becomes due to the employees.  A consequence of this would be that the workers for whom the DOL wishes to receive more income would instead work fewer hours, and thereby net less income than under the current rules. Thus, instead of attracting more to work in the industry and providing workers with more pay, the new rules could make the opportunity for work and the level of income drop.  

The proposed rules have yet to be published and the comments have yet to be filed and considered.  Nonetheless, a battle is looming as the policymakers deal with these competing issues facing both vulnerable families and care providers.  Congressional leaders have already indicated their concern about the likely practical consequences of the proposed changes, versus the narrow economic protections desired by the DOL and the SEIU.  Perhaps a solution short of making these services unaffordable will be found.  Based on recent history in Washington, however, partisanship will likely get in the way.  Time will tell . . . .

Florida’s minimum wage surpassed the federal minimum wage of $7.25 per hour in June 2011.  Therefore, Florida’s minimum wage will continue to be the prevailing wage in the state unless and until a future adjustment to the federal minimum wage makes it greater than Florida’s minimum wage.

The minimum wage increase also impacts tipped employees who meet the eligibility requirements for the tip credit under the Fair Labor Standards Act (“FLSA”). Generally, employers are entitled to credit toward the minimum wage for tips received by eligible employees. However, the employer must pay tipped employees a direct wage, which is equal to the minimum wage minus the established tip credit. Starting on January 1, 2012, the new direct wage for tipped employees in Florida will be $4.65 per hour.

Both federal and Florida law require employers to post a minimum wage notice in a conspicuous and accessible place in each of their workplaces. Any time the minimum wage is changed employers are required to post new notices reflecting the increase. Click here to download Florida’s minimum wage poster in English and Spanish from the Florida Department of Economic Opportunity’s website.

In agreeing to hear an appeal to the Ninth Circuit’s decision in Christopher v. SmithKline Beecham Corp., the Supreme Court will decide whether the FLSA’s outside sales exemption applies to pharmaceutical sales representatives. According to the FLSA, the outside sales exemption applies to “any employee employed in the capacity of outside salesman.”  An employee employed in the capacity of outside salesman is one whose primary duty is making sales or obtaining orders or contracts for services. Sales include an exchange, contract to sell, consignment for sale, or agreement of shipment for sale. 

According to Department of Labor regulations, promotional work may or may not be considered as exempt outside sales work.  When promotional work is undertaken by a person who actually sells a product, the DOL considers the work to qualify for the outside sales exemption.  Nevertheless, where promotional work will not lead to actual sales or where it is incidental to sales made by someone else, the DOL does not consider it as exempt work.

In In re Novartis, the Second Circuit held that pharmaceutical sales reps do not meet the exemption’s requirements because they do not sell any drugs, do not obtain any orders for drugs, and can at most obtain from physicians a non-binding commitment to prescribe drugs to their patients.  The court based its decision in large part upon DOL guidance, where promotional activities designed to increase the prescription of certain drugs was not considered exempt sales work.  

The Ninth Circuit reached a very different conclusion in Christopher, the case now before the Supreme Court. Rejecting the findings of the Department of Labor and the Second Circuit, the Ninth Circuit court found that the outside sales exemption applied to pharmaceutical sales representatives.  The court pointed to the employees’ sales training and the employer’s requirement of sales experience as a condition for employment as evidence of their status as “outside salesmen.”  

In preparing for the Supreme Court’s ultimate decision, Employers in the pharmaceutical industry should take immediate steps to reduce the risk of costly litigation.   At a minimum, Employers who have not recently audited their wage and hour practices should consider whether this might be a good time to do so. 

Paul Bittner and David Campbell

Schottenstein, Zox & Dunn Co., LPA

The new law amends the California Labor Code in several important respects. Of immediate interest to employers is the new Labor Code Section 2810.5, which requires an employer to provide each new nonexempt employee with a written notice at the time of hire containing all the following information:

(A) The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable.
(B) Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.
(C) The regular payday designated by the employer in accordance with the requirements of the Labor Code.
(D) The name of the employer, including any “doing business as” names used by the employer.
(E) The physical address of the employer’s main office or principal place of business, and a mailing address, if different.
(F) The telephone number of the employer.
(G) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier
(H) Any other information the Labor Commissioner deems material and necessary.

The law requires the Labor Commissioner to prepare a template and make it available to employers who can use it to comply with the notice requirements. If an employer changes any of the required information, the employer must notify its employees of the changes within seven days, either by providing a new notice or by including the new information on a timely issued wage statement.

Although the notice requirements apply only to nonexempt employees, employers should consider providing the notice to all employees to avoid disputes over whether the notice was due in the event that employees who were classified as exempt later claim they were misclassified.

The notice requirements do not apply to public employees or to employees covered by valid collective bargaining agreements who earn at least 30% more than the state minimum wage.

In addition to the new notice requirements, the new law also contains several provisions that increase existing penalties and/or create new penalties. These include the following:

● A new Section 200.5 is added to the Labor Code increasing from one to three years the time in which the Division of Labor Standards Enforcement may commence an action for civil penalties.

● Section 1197.1 of the Labor Code is amended to provide that in addition to being subject to a civil penalty, an employer “or other person acting either individually or as an officer, agent, or employee” who causes less than the minimum wage or statutorily required overtime wages to be paid to any employee shall also be subject to paying restitution of wages to the employee.

● Section 1197.2 is added to the Labor Code making it a misdemeanor for any employer who has the ability to pay, but willfully fails to pay, a final court judgment or final order issued by the Labor Commissioner for all wages due to an employee who has been discharged or who has quit, within 90 days of the date that the judgment was entered or the order became final. Upon conviction the employer can be fined up $20,000 and imprisoned for up to one year for each offense.

Employers should take immediate steps to implement the new notice requirements for all new hires beginning January 1, 2012. In addition, employers who have not recently audited their wage and hour practices should consider whether this might be a good time to do so. Employers based outside of California that have employees working in California are reminded that California has a host of wage and hour statutes and regulations that go above and beyond the requirements of the Fair Labor Standards Act (FLSA).

Aaron Buckley and Fred Plevin – Paul, Plevin, Sullivan & Connaughton LLP – San Diego, CA

The Adams court ruled that aluminum factory workers were not entitled under the FLSA to pay for time spent putting on and taking off items of employer-provided personal protective equipment (“PPE”). In particular, employees were required to wear flame retardant shirts and pants, steel-toed boots, spats, hard hats with snoods that cover the back of the neck, and safety glasses.

The court’s decision turned on whether the donning and doffing of the PPE was “integral” and “indispensable” to the employees’ principal activity. First, the court noted that workers were not required to don and doff their PPE at the work site and, therefore, such donning and doffing was not “indispensable” to a principal activity. For that reason alone, the donning and doffing time was not compensable under the FLSA. Indeed, this ruling is consistent with the U.S. Department of Labor’s long recognized view that where employees have the option and ability to change into and out of work-related clothing and protective equipment away from their workplace, their donning and doffing activities are not compensable, even if the employee chooses to don and doff at the facility. See DOL Field Operations Handbook Section 31b13; see e.g., Bamonte v. City of Mesa, 598 F.3d 1217 (9th Cir. 2010) (donning and doffing uniforms was not integral and indispensable, and therefore not compensable under the FLSA, where the plaintiffs were free to do so away from the employer’s premises); Musticchi v. City of Little Rock, 734 F.Supp.2d 621 (E.D. Ark. 2010) (donning and doffing of uniforms and protective gear was not compensable where neither the law nor the employer requires employees to change clothes on the employer’s premises).

As a separate basis for denying compensability, the court found also that the activities were not “integral” to the employees’ principal work activity. The Second Circuit, in Gorman v. Consolidated Edison Corp., 488 F.3d 586, 594 (2d Cir. 2007), held that donning and doffing is only integral and indispensable to a principal activity when the principal activity is performed in a lethal environment. Recognizing that Gorman’s interpretation was “unusual” and that courts in other circuits have rejected it, the Adams court nevertheless found that the plaintiffs did not work in a “lethal” atmosphere and that donning the PPE was not integral to entry and immersion into that atmosphere.

Even outside the Second Circuit, though, courts have routinely held that time spent donning and doffing garden-variety clothing and standard PPE is not compensable because it is not integral and indispensable to the employee’s principal activity. E.g., See Pirant v. U.S. Postal Service, 542 F.3d 202, 208 (7th Cir. 2008) (donning and doffing uniform shirt, gloves, and work shoes is not integral and indispensable); Edwards v. City of New York, No. 08 Civ. 3134, 2011 WL 3837130, (S.D.N.Y. Aug. 29, 2011) (donning and doffing a uniform shirt, trousers, belt, socks, shoes, tie, bullet or slash resistant vest, and utility belt was not compensable); Schwartz v. Victory Security Agency, LP, No. 11cv0489, 2011 WL 2437009 (W.D. Pa. June 14, 2011) (“while Plaintiffs may have been required to wear and therefore maintain their uniforms, such actions were not integral and indispensable to Plaintiff’s principal activity, providing security”); Anderson v. Pilgrim’s Pride Corp., 147 F.Supp.2d 556 (E.D. Tex. 2001) (donning aprons, smocks, gloves, boots, hairnet, and earplugs was not compensable).

The Adams ruling thus follows an analysis adopted by many other courts to determine the compensability of off-the-clock activities that are routinely alleged in FLSA cases. Defense counsel need to be aware of these developing trends in advising and defending their clients.

by Joseph Tilson and Jeremy Glenn of Meckler Bulger Tilson Marick & Pearson LLP

Unlike a FLSA claim, a state law claim normally does not have a provision that permits filing on behalf of same or similarly situated employees.  More state law wage statutes contemplate individual filers.  However, most state law wage statute do not preclude class actions.  Thus, in federal court, where most FLSA cases are filed or removed, plaintiffs will seek class certification based on Federal Rule of Civil Procedure.  While the showing necessary for class certification is more stringent that conditional action certification, if that showing is met, the state law claims become opt-out as opposed to opt-in.  That is, as noted above, in a collective action one is not a party until they affirmatively opt-in to the case.  In a class action everyone in the class is in the case unless they affirmatively opt-out.  Plaintiffs’ lawyers know that the opt-in rate among employees and former employees is 5-30%.  When the case is a class action opt-out, very few people opt out of the case.

 In situations where there are both federal (FLSA) and state law claims defendants (employers) have argued that the federal court should not assert supplemental jurisdiction, that is, leave the state law claims in the same case as there is an inherent conflict between the two mechanisms for participating in the lawsuit.  Recently, in Shahriae et al v. Smith & Wollensky Restaurant Group, Docket No. 10-1884-cv (2d Cir. September 26, 2011), the Second Circuit Court of Appeals joined the Seventh, Ninth and District of Columbia Circuits, in holding that it is permissible for a court to allow both federal and state wage claims to proceed together in the same action.  The Third Circuit has held to the contrary.  The Court held that there was no conflict or incompatibility between the opt-in and opt-out mechanisms in the case.  One of the rationales for permitting the two action was the fear of retaliation in a FLSA case by employees making them reluctant to participate.  The court cited a few district court cases for the proposition, but no empirical studies. The court also relied on the provision in the FLSA that states: “No provision of this chapter or of any order thereunder shall excuse noncompliance with any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter…”  29 U.S.C. § 218(a) (2006).  Finally, the court reasoned that the exercise of supplemental jurisdiction over state law claims was the rule, not the exception. 

The Courts in their altruistic approach fail to realize that restoring plaintiffs pay is secondary to increasing the amount of the back pay in order for the plaintiffs’ lawyers to receive a larger amount of fees.  Until courts apply restraints to the huge attorney fee awards the onslaught of collective actions coupled with state law class actions will continue.

By Bernie Siebert, Sherman & Howard LLC, Denver, CO

            In a setback for employers concerned about the possibility of facing an FLSA collective action, the Third Circuit recently ruled that an employer’s offer of judgment to an FLSA plaintiff in the full amount of the plaintiff’s claim, prior to the plaintiff’s moving for conditional certification, does not moot the collective action.  This holding eliminates the viability of an employer’s tactic of “picking off” named FLSA plaintiffs in an attempt to foreclose pursuit of a collective action.  The case did provide, however, a small victory for employers.  Resolving a split among district courts, the Court held that a plaintiff at the conditional certification stage must make at least a “modest factual showing” that other employees are similarly situated in order to pursue a collective action.  See Symczyk v. Genesis Healthcare Corporation, 10-3178 (3d Cir., Aug. 31, 2011)    

            The plaintiff, Symczyk, brought an FLSA collective action on behalf of herself and others similarly situated.  The employers immediately made an offer of judgment under Federal Rule of Civil Procedure 68 for $7,500.00 in alleged unpaid wages plus attorneys’ fees, costs, and expenses.  Although Symczyk did not dispute the adequacy of the offer, she did not respond, allowing the offer to lapse.  The district court then scheduled a discovery period prior to the plaintiff’s moving for conditional certification.  The employer moved under Federal Rule of Civil Procedure 12(b)(1) to dismiss for lack of subject matter jurisdiction, arguing that following the rejection of the offer of judgment, Symczyk no longer had a personal stake or legally cognizable interest in the outcome of the action.  The district court found that the individual FLSA claim mooted the collective action and dismissed the case.    

            Symczyk appealed.  The Third Circuit framed the issue as “whether a collective action brought under § 216(b) of the FLSA becomes moot when, prior to moving for conditional certification and prior to any other plaintiff opting in to the suit, the putative representative receives a Rule 68 offer.”

            The Third Circuit explained that in general, where an offer of complete relief is made, whether or not it is accepted, “no justiciable controversy remains.”  It noted, however, that “conventional mootness principles do not fit neatly within the representative action paradigm.”  The Court cited its own case of Weiss v. Regal Collections, 385 F.3d 337 (3d Cir. 2004), which addressed the identical issue in the context of Rule 23 class actions.  In Weiss, the Third Circuit held that an offer of judgment in full satisfaction of the named plaintiff’s claim, prior to moving for class certification, does not moot the Rule 23 class action.  The Weiss court determined that, where a defendant makes a Rule 68 offer to an individual’s claim that has the effect of mooting possible class relief asserted in the complaint, the class certification motion “relates back” to the filing of the original complaint, and the district court retains jurisdiction over the matter.  The Symczyk court described the “relation back” doctrine as “an equitable principle” that “has evolved to account for calculated attempts by some defendants to short-circuit the class action process and … prevent a putative representative from reaching the certification stage.” 

            In Symczyk, the plaintiff cited Weiss and contended that for the purposes of the application of the “relation back” doctrine, no material distinction between Rule 23 and
§ 216(b) existed.  The employer attempted to distinguish the two doctrines.  It pointed out that unlike in a Rule 23 action, where the named plaintiff putatively represents a class as soon as the case is filed, a named plaintiff in an FLSA collective action must affirmatively “opt in.”  Thus, according to the employer, an FLSA named plaintiff “whose individual claim has been mooted by a Rule 68 offer of judgment before anyone has opted in to the action cannot purport to possess a personal stake in representing the interests of others.”  The Third Circuit rejected the employer’s position.  While conceding that the argument “has some surface appeal,” the Court found that the employer’s argument “incentivizes the undesirable strategic use of Rule 68 that prompted our holding in Weiss.”  It held that, if the mootness inquiry in the 216(b) context “were predicated inflexibly on whether any employee has opted in to an action at the moment a named plaintiff receives a Rule 68 offer, employers would have little difficulty preventing FLSA plaintiffs from attaining the ‘representative’ status necessary to render an action justiciable notwithstanding the mooting of their individual claims.”  Explaining further, the Court found that the policy of Rule 23 – allowing plaintiffs to pool claims that would be uneconomical to litigate individually – was similar to that of § 216(b), which affords plaintiffs “the advantage of lower individual costs to vindicate rights by the pooling of resources.” 

            The Court cited with approval the Fifth Circuit’s decision in Sandoz v. Cingular Wireless LLC, 553 F.3d 913 (5^th Cir. 2008), which addressed this issue and held that in enacting § 216(b), Congress did not intend to create an “anomaly” by allowing employers “to use Rule 68 as a sword, ‘picking off’ representative plaintiffs and avoiding ever having to face a collective action.”   

            As an additional justification for its holding, the Court found that the “relation back” doctrine “helps safeguard against the erosion of FLSA claims by operation of the Act’s statute of limitations.”  It pointed out that, for an opt-in plaintiff, the FLSA action commences only upon filing of a written consent.  The Court rationalized that protracted disputes over the propriety of dismissal in light of Rule 68 offers may deprive potential opt-ins whose claims are in danger of being barred by the statute of limitations. 

            The Court summarized its holding:  “Absent undue delay, when an FLSA plaintiff moves for ‘certification’ of a collective action, the appropriate course – particularly when a defendant makes a Rule 68 offer to the plaintiff that would have the possible effect of mooting the claim for collective relief asserted under § 216(b) – is for the district court to relate the motion back to the filing of the initial complaint.”

            In a small consolation for employers, the Court resolved in the employer’s favor the question of which standard a plaintiff must meet to demonstrate that potential class members are “similarly situated” at the conditional certification stage.  It noted that courts within the Third Circuit have been split over whether a plaintiff is required to make merely “substantial allegations” in the pleadings or a “modest factual showing” of similarly-situated status following limited discovery.  The Third Circuit adopted the latter standard, requiring the plaintiff to produce “some evidence, beyond pure speculation, of a factual nexus between the manner in which the employer’s policy affected her and the manner in which it affected other employees.”  The Court concluded that the “modest factual showing” standard worked in harmony with the opt-in requirement “to cabin the potentially massive size of a collective action.” 

            For an employer in the Third Circuit, Symczyk removes what was a potentially important tool in its FLSA arsenal.  The employer may no longer thwart a collective action by making an offer of judgment that would fully satisfy the demand of the named plaintiff.