The U.S. Supreme Court is scheduled to hear argument on Dec. 3, in Genesis Healthcare Corp. v. Symczyk, No. 11-1059, on what appears to be a narrow issue about offers of judgment, but the case could have a very broad impact on collective action lawsuits under the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq.
FLSA lawsuits have been a steadily increasing burden on the federal court system. They are the fastest growing type of employment litigation, according to Federal Judicial Caseload Statistics. In 2011, over 7,000 such cases were filed, a 15 percent increase from 2010. Their impact is even greater because they are commonly filed as collective actions (sometimes referred to as “opt-in class actions”), brought on behalf of others “similarly situated” under 29 U.S.C. § 216(b), and they are often combined with Rule 23 class actions under state wage laws.
This rapidly growing field of complex litigation has been evolving without any procedural guidance from the Supreme Court since Hoffmann La-Roche v. Sperling, 493 U.S. 165 (1989), decided 23 years ago. The lower courts have developed procedures for such cases, but they have diverged on a number of key issues. And, while the Supreme Court recently clarified the standards for a “common” question in a Rule 23 class action in Wal-Mart Stores. v. Dukes, 131 S.Ct. 2541 (2011), it remains unclear to what extent these standards apply to FLSA collective actions.
The ever-increasing burden of FLSA litigation on the court system, the absence of clearly established procedures and several circumstances about the Genesis Healthcare case all suggest that the court may go beyond the narrow question presented and discuss FLSA collective actions more broadly, perhaps rewriting collective action procedures in the process.
FLSA Collective Action Procedures
The FLSA authorizes an employee to bring an action on behalf of “other employees similarly situated” to recover unpaid minimum wages or overtime pay. 29 U.S.C. § 216(b). However, it does not set out the process for determining whether employees are “similarly situated,” nor does it define this key term. The FLSA states one requirement clearly: employees must file a written consent in court to become part of a collective action. 29 U.S.C. § 216(b) (“No employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.”) Collective actions have been referred to as “opt-in class actions” because employees must opt to join them by filing such a consent. The “opt-in” requirement is the polar opposite of the procedure for most class actions, in which members of a certified class are included unless they opt out, or, in the words of Rule 23, request to be “excluded” from the lawsuit. See Fed.R.Civ.P. 23(b), 23(c)(2)(B)(v).
In Sperling, the Supreme Court held that district courts have the power and discretion to oversee the distribution of notices to potential plaintiffs in a putative collective action under 29 U.S.C. § 216(b). (Sperling was brought under the Age Discrimination in Employment Act, which expressly incorporates the remedial provisions of the FLSA, including § 216(b).) The court analogized to its precedents authorizing district courts to supervise communications with potential class members in a Rule 23 class action and held that “[t]he same justifications apply” to collective actions.
Justice Scalia wrote a dissenting opinion in Sperling, drawing a sharp distinction between class actions and collective actions. He noted that Rule 23 allows absent class members to be joined in a class and bound by any judgment unless they opt out, whereas, in an FLSA case, “no employee shall be a party plaintiff” or may be bound by a judgment unless the employee’s written consent is filed in court. Justice Scalia reasoned that there is no “case or controversy” with respect to any employee who has not filed a consent, so the courts lack the constitutional authority to distribute notices to such nonparties.
The Supreme Court expressly declined to lay out any procedural guidelines for collective actions. (“We confirm the existence of the trial court’s discretion, not the details of its exercise.”) “In the absence of statutory guidance or appellate precedent,” the district courts have developed what has become known as a “two-step” or “two-tiered” process for certification of collective actions. See Genesis Healthcare, 656 F.3d 189, 192 (3rd Cir. 2011); see also Myers v. Hertz Corp., 624 F.3d 537, 554-55 (2d Cir. 2010). In the first step, most courts apply a lenient or “modest” standard to determine whether the case should be “conditionally certified” for purposes of distributing notice to potential class members. Genesis Healthcare, 656 F.3d at 192. After discovery, a “less lenient” (but often amorphous) standard is used to determine whether the case should be certified for determination as a collective action. Id., at 193 and n.6.
As the Third Circuit has noted, some “divergence of authority” has evolved regarding the procedures and burdens of proof for deciding whether employees are “similarly situated.” Id., at 192. Although the majority in Sperling based its holding on the similarities between collective actions and class actions, a number of courts have held that the “similarly situated” standard for collective actions is less rigorous than the Rule 23 class certification standards. See, e.g., Myers, 624 F.3d at 555-56. District courts have disagreed about whether the standards established in Dukes for commonality in class actions apply to collective actions under § 216(b). Compare, e.g., Ruiz v. Serco, 2011 U.S. Dist. LEXIS 91215, *18-*19 (W.D. Wis. Aug. 5, 2011) (Rule 23 does not apply but Dukes “provides guidance” for collective action certification), with Creely v. HCR Manorcare, 2011 WL 3794142 (N.D. Ohio July 1, 2011) (Dukes inapplicable to collective action certification).
The Genesis Healthcare Case
At first glance, the question presented in Genesis Healthcare appears to have nothing to do with these issues, as it is narrowly focused on offers of judgment under Fed.R.Civ.P. 68: “Whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff’s claims?”
However, this issue arose in an FLSA case that was pleaded as a collective action, and the Third Circuit’s reasoning involved analogies between the purposes of class actions and collective actions, similar to the majority’s reasoning in Sperling.
The defendants in Genesis Healthcare made an offer of judgment, which the plaintiff did not dispute was sufficient to cover the full amount she was seeking on her own behalf, as well as attorneys’ fees. The plaintiff did not respond to the offer, and the defendants moved to dismiss, arguing that there was no longer a justiciable case or controversy. The district court dismissed the case because, under Fed. R. Civ. P. 68, the offer of judgment mooted the plaintiff’s claim, and no other employee had filed a consent to join the lawsuit.
The Third Circuit reversed, citing Supreme Court and Third Circuit precedents precluding the use of offers of judgment to “pick off” class representatives in Rule 23 class actions, under what is known as the “relation back doctrine.” Genesis Healthcare, 656 F.3d at 195-98 (citing Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326 (1980)). When a class representative’s claim is mooted by an offer of judgment, a class certification motion may “relate back” to the filing of the complaint, which allows the district court to decide whether to certify a class, and, if a class is certified, allows other class members to pursue the case. The Third Circuit discussed the similarities and differences between class actions and collective actions and held that the relation back doctrine should apply to both. It reasoned that both types of actions are intended to allow plaintiffs to pool resources to pursue claims that would be difficult to litigate individually, and that the opt-in requirement of § 216(b) should not “depriv[e] the parties and the court of a reasonable opportunity to deliberate” on whether a claim should proceed as a collective action.
The Potential for a Broad Ruling
Genesis Healthcare presents several of the same issues that animated the debate in Sperling, including the case or controversy requirement and the similarities and differences between collective and class actions. The continuing growth of FLSA litigation and the divergent views among the lower courts on several collective action procedural issues provide additional reasons for the court to revisit these questions and to provide guidance on collective action procedures. While the court could decide the case narrowly, it has an opportunity as well as institutional reasons to delve into these broader issues. Genesis Healthcare could turn out to be as significant a decision for FLSA litigation as Dukes was for class-action litigation. •