Ruling Urges Swiftness For FLSA 'Pick-Off' Bids
The Company's recent failed attempt to end a potential Fair Labor Standards Act collective action by offering to pay the named plaintiffs' wage claims prompted a New York federal court ruling that attorneys say demonstrates the need to act quickly — for employers looking to complete an FLSA “pick-off” as well as plaintiffs looking to avoid one.
U.S. District Judge Raymond Dearie on Oct. 9 denied the Company's motion to dismiss a putative FLSA collective action, finding that although the retailer had made an offer to pay the claims of four named plaintiffs, he was “not entirely confident” that the offer accounted for all of the remedies those plaintiffs could have recovered. And although Judge Dearie found flaws in the company's offer of judgment and denied the Company's offer in the case, attorneys say the ruling did affirm that the strategy — often known as a “pick-off” — can be a legitimate tactic for employers, even when employees don't accept the employer's offer.
“The judge essentially gives a boost to the notion that unaccepted offers of full relief can moot an action,” said Fisher Phillips partner Christine Howard, referring to the ruling by Judge Dearie, whose opening line says “sometimes surrender is the best option.”
The Company had made the offers under Federal Rule of Civil Procedure 68, hoping that satisfying Afza Anjum and other named plaintiffs' allegations that they were owed wages for work they performed off-the-clock would render the case moot and allow the retailer to avoid a potentially costly collective action. The plaintiffs turned down the retailer's offer of judgment, prompting the company to file a motion to dismiss.
Judge Dearie determined that even in cases in which an employer's offer does fully resolve the named plaintiffs' claims, the case is not moot until a court actually enters judgment, answering a question that the U.S. Supreme Court left open after its 2013 decision in Genesis HealthCare Corp. v. Symczyk, which gave employers a green light to use the pick-off strategy in FLSA actions.
Although the Company ruling's impact might be mostly limited to the Second Circuit, attorneys said Judge Dearie provided guidance on what could make for a successful pick-off attempt.
“If there's a potential for an expansive FLSA action, the offer of judgment used early and smartly can defeat a pretty expansive collective,” said Scott Rabe of Seyfarth Shaw LLP's employment practice. “The timing is key.”
Rabe explained that Judge Dearie's conclusion — that, in the context of a pick-off attempt, the named plaintiffs' claims aren't moot until judgment is actually entered — signals to employers that, if they are interested in pursuing the strategy to try to defeat a potential class action, it can be key to act quickly.
Because a case would not be moot until a judge considers a motion to dismiss and enters judgment, the idea for employers would be to swiftly offer to pay the named plaintiffs' claims and file a motion to dismiss, Rabe said.
Howard also suggested that early action can serve an employer well, even though courts in other jurisdictions have reached different conclusions from Judge Dearie's on when a case becomes moot in the context of a pick-off attempt.
“With all the court decisions that have come out after Genesis, you're still going to have situations where the offer of judgment is an excellent tactic,” Howard said. “Employers really have to look at the opportunities for these offers almost from the moment they get these lawsuits served upon them.”
Judge Dearie’s ruling also holds insight for plaintiffs’ attorneys looking to dodge a pick-off attempt. Like their counterparts on the management side, plaintiffs lawyers would also have good reason to act quickly, according to Rabe.
Taking the Company ruling as a guide, a key early focus for plaintiffs would be to seek out other employees to opt into the suit and file a motion to certify a collective action. Both strategies, done quickly, may have the effect of keeping the employer's offers of judgment to the original plaintiffs from rendering the case moot, attorneys said.
“An employer will likely want to move as quickly as possible. A plaintiff will want to add opt-ins,” said Rabe. “The Anjum [v. the Company] decision laid out very well what each party's tactics would be.”
Of course, the adequacy of any timely offer also must pass muster with the court, according to attorneys on both sides of the employment bar. Judge Dearie pointed to a handful of potential flaws in The Company's offer to the named plaintiffs — including the damages period the company used in calculating the offer, failing to offer a separate award for pre-judgment interest and not fully accounting for potential damages under New York labor law — that, he said, raised “doubts about the adequacy of the offer.”
“I am not entirely confident that the Company afforded all of the remedy to which the named plaintiffs are entitled. The court's preliminary conclusion is that the offer affords everything plaintiffs could recover under the FLSA, but falls short under the NYLL,” the judge said. “The mere existence of these issues and the consequent need for court adjudication of the maximum value of each plaintiff’s stake in the lawsuit forecloses the possibility that the Rule 68 offer extinguished this controversy at the time the Company made the offer.”
Matthew Helland, a partner with Nichols Kaster PLLP, who represents employees, said that when employers attempt to use a pick-off strategy in an FLSA case, plaintiffs' attorneys often have room to argue that the employer's offer of judgment was deficient in some way, or wouldn't fully cover the employees' wage claims.
“It's difficult in an FLSA case to compute and actually pay full relief,” said Helland.
The potential pitfalls of not making an adequate offer can, in turn, put the employer in the position of offering the employees an amount that is “greater than full relief” — which, Helland said, is something a plaintiffs' firm can then advertise in the hopes that other employees will be convinced to pursue their own wage claims.
“In that scenario, we use that as a launching point for the second case, a tag-along case," he said.
Despite the downsides of paying more than an employee is actually owed — and the threat of plaintiffs’ lawyers using an offer of judgment as a way of advertising a case — management-side attorneys suggested adding a little extra into an offer of judgment, since it can be a way of anticipating the types of flaws Judge Dearie found with the Company's offers.
Baker & McKenzie LLP employment partner Douglas Darch went even further. In his view, not only should an employer offer to cover the named plaintiffs' allegedly unpaid wages, plus a “sweetener,” but it also should actually “write a generous check and send it.”
“If you actually send it to them, they can't say, 'You still owe me the money,'” said Darch. “The offer to pay it is not the same as paying it.”
The case is Afza Anjum et al. v. the Company. et al., case number 1:13-cv-00460, in the U.S. District Court for the Eastern District of New York.
This article appeared in Law 360 on October 24, 2014.