Wage & Hour Insights - Guidance & Solutions for Employers

Guest Author: Lindsey Marcus

Some good news for employers. In a recent 5-4 opinion, the U.S. Supreme Court held that collective-action claims brought under the Fair Labor Standards Act (FLSA) are moot when the named plaintiff has no continuing personal interest in the outcome of the lawsuit and no motion for conditional certification has been filed.  Genesis Healthcare Corp. v. Symczyk, Case No. 11-1059.

Relevant Facts

Laura Symczyk, a registered nurse, sued her former employer, Genesis Healthcare Corp. (Genesis), for violations of the FLSA. Specifically, she alleged that Genesis violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks, even when the employees performed compensable work during those breaks. Symczyk sought damages on behalf of herself and other similarly situated individuals using the so-called “collective action” mechanism prescribed in the FLSA, though no other such individuals had consented to join the suit and no motion for conditional certification had been filed.

When Genesis answered the complaint, it offered Symczyk $7,500 plus attorney’s fees and costs, an “offer of judgment” under the Federal Rules of Civil Procedure (FRCP). After Symczyk failed to respond to the offer, Genesis moved to dismiss the complaint by arguing that since it had offered Symczyk complete relief for her individual claims, she no longer had a personal stake in the litigation. Absent a personal stake in the claim, the lawsuit was moot. Both the district court and the U.S. Court of Appeals for the Third Circuit agreed that Symczyk’s individual claims were moot in light of the offer of judgment. The Third Circuit, however, held that Symczyk’s collective action was not moot because such calculated attempts by a defendant to “short-circuit” collective actions by “picking off” named plaintiffs with strategic offers of judgment would frustrate the goals of the collective-action process. The Supreme Court reversed the Third Circuit, rejecting the idea that the purpose of the FLSA would be frustrated. 

Analysis

As an initial matter, the Court held that it could not decide whether the unaccepted offer of judgment rendered Symczyk’s case moot since she did not challenge the lower courts’ rulings and did not properly preserve the issue on appeal to the Supreme Court. The Court therefore did not decide the question of whether Symczyk’s individual claim was moot based on the unaccepted offer of judgment. Rather, the Court assumed that Symczyk’s claim was moot based on the offer of judgment in deciding the question before it, i.e., whether her collective-action claims remained in controversy after her individual claims had been mooted.

Turning to the merits, Court held that the collective-action claims did not remain in controversy for a number of reasons. First, the Court differentiated between class actions under FRCP 23 and collective actions under the FLSA. In class actions, similarly situated individuals who are not named as plaintiffs are considered part of the class—and therefore bound by the court’s judgment—unless they affirmatively opt out. In contrast, in collective actions, individuals who are similarly situated to the named plaintiffs are not part of the suit unless they affirmatively agree to join it. Consequently, when a court certifies a class under FRCP 23, the class acquires a “legal status” of its own. On the other hand, conditional certification under the FLSA merely means that notice and an opportunity to opt in to the suit are sent to the putative collective-action members. Therefore, the Court reasoned, if no one has consented to join the collective action at the time of the offer of judgment, no one has a personal interest in the outcome of the suit as required to keep the suit alive.

Second, the Court rejected Symczyk’s argument that her collective-action claims related back to the date of the complaint because Genesis’ offer of judgment made the claims “inherently transitory.” In other words, Symczyk argued that it was possible that no plaintiff would have a personal stake in the suit long enough for the litigation to run its course if the defendant could “pick off” named plaintiffs before the collective-action process was complete. This rationale, the Court explained, only applies where the challenged conduct is effectively unreviewable, not to a defendant’s litigation strategy. If putative FLSA collective-action members do not consent to join the suit before it is resolved, they remain free to bring their own lawsuits against the defendant to vindicate their rights.

Finally, the Court rejected Symczyk’s argument that the purposes of the FLSA’s collective-action mechanism would be frustrated by allowing offers of judgment to named plaintiffs to moot a collective action before the process had run its course. Distinguishing prior case law on class actions under FRCP 23, the Court found that Symczyk had not asserted that she had any continuing economic interest in the outcome of the case—such as shifting a portion of the attorney’s fees to the other putative collective-action members—and therefore could not continue to represent these individuals as the named plaintiff.

Insights for Employers

Symczyk is important for what it says about the Court’s attitude toward claims asserted on behalf of a group as well as for what it actually holds. In the past several terms, the Court has issued multiple opinions narrowing the ability of plaintiffs to bring class actions, such as its 2011 decision in Walmart Stores, Inc. v. Dukes.  As one Supreme Court observer noted, Symczyk extended this trend to FLSA collective actions. 

Conversely, this opinion may actually come back to bite employers by pushing  plaintiffs’ attorneys to move more quickly to seek opt-in consents and file a motion for conditional certification to avoid falling victim to the “pick off” strategy used in this case. Although the opinion sanctions an employer’s right to use this strategy, employers must proceed with caution when making early offers of judgment because doing so may result in having to defend multiple lawsuits. Other plaintiffs who might have opted in to the original litigation are still free to file their own lawsuit. In addition, since the Court did not decide whether an unaccepted offer of judgment moots an individual plaintiff’s claims, this issue remains the subject of a split among the Courts of Appeal.

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.

As a working mom, I am lucky to have a husband who is a stay-at-home parent.  Rarely do I have to worry about being late to work because I have to drop my child off at school, or leaving work early to take my child to an after-school activity or doctor’s appointment.  However, many of my co-workers, friends and neighbors employ nannies to watch their children while both parents work all day.  Most of the nannies I know do not live at the family’s house, but they can work long and varied hours.  Nannies are generally paid hourly or are given a weekly salary intended to cover all hours worked.  Recently, I have discovered that many of those who employ nannies do not realize that their nannies are entitled to minimum wage and overtime protection under the FLSA just like any other non-exempt employee.

While the FLSA does not use the modern term “nanny,” the regulations specifically provide that domestic services employees (housekeepers, maids, governesses, etc.) are non-exempt employees covered by the FLSA.  This definition also includes babysitters employed other than on a casual basis (i.e., a few hours or less a week).  Nannies must be paid at least minimum wage for all hours worked, and overtime compensation coverage depends on whether the nanny lives on the premises or lives outside the home.  A “live-in” nanny must receive at least minimum wage for each hour worked but need not receive overtime for hours worked over 40 in a work week.  On the other hand, a nanny who lives outside the home must receive at least the minimum wage for all hours worked and be paid overtime (time-and-a-half) for those hours worked over 40 in a workweek.  It does not matter if the nanny is paid an hourly wage or salary – if the nanny is entitled to overtime, his/her wage will need to be converted to an hourly rate to determine the proper overtime compensation.

In general, hours worked includes all time the nanny is required to be at the employer’s home, the time spent away from the home during which the nanny is performing services, and all time that the nanny is required to be “on call” in the course of his/her duties.  “Down time” will not be considered working time if the nanny is completely relieved from duty and the period is long enough for him or her to engage in personal activities.  However, it is important to note that if the nanny is required to remain on the premises during meal time or remains “on call” for school emergencies, this would likely be considered “hours worked” for overtime purposes.

The rules governing compensation of domestic services employees can be complicated, particularly for those employers who are not familiar with the FLSA requirements.  The proper compensation of domestic service employees has piqued the interest of the Department of Labor, as well as the employees themselves.  These days, employees are more knowledgeable about their right to minimum wage and overtime.  So if you employ a nanny, it might be beneficial to review your payment records to ensure that he/she is being properly compensated. 

With the New Year comes a minimum wage increase in 10 states:  Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Rhode Island, Vermont and Washington.  Each of these states has a higher minimum wage rate than the federal minimum of $7.25/hour.  Employers in these states are required to pay the higher state minimum wage.

In addition to these 10 states, 9 other states plus the District of Columbia have a higher minimum wage requirement than the federal rate.  While not law yet, several other states have been engaged in efforts to increase their minimum wages.  Democratic leaders in the House have also indicated that raising the federal minimum wage is a priority, however, no such legislation has been voted on.

This serves as a reminder to employers to check applicable state laws where they have employees to ensure that they are paying at least the proper minimum wage.

Some of the most common questions we receive from clients involve how to properly compensate non-exempt employees. Join me on Thursday, November 29, 2012, at 11:00 a.m. CST, for a two-hour live webcast entitled “Understanding FLSA’s Compensable Time Requirements for Non-Exempt Employees.”  I will be serving on a panel in which we will address the following topics:

• Compliance with FLSA's compensable time requirements
• Calculating the amount of money a non-exempt employee should receive for all hours worked
• Practical Solutions on some of the common pitfalls for employers
• Training your staff and establishing clear policies about non-exempt employees working hours
• Legal Issues involved in case errors in compliance are identified
• Recent DOL changes concerning salaried exempt employees
• And a lot more!

Thanks to The Knowledge Group for inviting me to present this program.  As a client or friend of the Firm we can offer registration for this webinar at the discounted price of $25.  Please e-mail Maryanne Adams at mca@franczek.com if you wish to register for the webcast for the $25 fee.  More information on the webcast and general registration is available through The Knowledge Group.

As mentioned in a recent FR alert, “Time Off to Vote?,” written by my colleague Sally J. Scott, Illinois requires employers to allow employees who are eligible to vote up to two hours of paid time off while polls are open (from 6:00 a.m. to 7:00 p.m.) on Election Day. For wage and hour purposes, employers should consider the following when determining whether an employee is entitled to this type of paid leave:

• Employees must request leave before Election Day, and employers can specify when employees are permitted to be absent.
• If an employee’s work day begins less than 2 hours after polls open and ends less than 2 hours before polls close, the employee must be allowed a 2-hour paid absence during working hours.
  
  
  • For example, an employee who works from 7:30 a.m. to 5:30 p.m. would be entitled to up to two hours of paid time off to vote.
• If an employee's work day begins at least 2 hours after polls open or ends at least 2 hours before polls close, the employee may be required to vote outside of working hours.
  
  
  • For example, an employee who begins work at 8:00 a.m. or ends work by 5:00 p.m. may be required to vote outside of work hours.

Employers should be sure to check the state laws in which they have employees in order to be prepared for Election Day on Tuesday, November 6.  Also, employers should check any relevant collective bargaining agreements or past practice to determine whether such leave would be considered hours worked for overtime purposes.