The Fate of Collective Actions in the Hands of the Supreme Court

This week, the Supreme Court agreed to hear the appeal of Symczyk v. Genesis HealthCare Corp next term. For a variety of reasons, this decision could well determine the fate of collective, and maybe even class, actions. This case has so far not gotten nearly as much attention as it deserves. Should the Court overturn the decision, it may well become virtually impossible for employees — especially low-income employees–  to sue for wage and hour violations.

The federal minimum wage and overtime law (the FLSA) allows people to bring what are called “collective action” lawsuits. This is similar to a class action lawsuit, where one person brings suit on behalf of everyone else who is “similarly situated.”

Class and collective actions allow people to pool their resources. Litigation is extremely expensive. Plaintiffs lawyers (like me) are often paid on a contingency basis — if their clients win, they get a portion (usually 1/3). Alternatively, some laws (like the FLSA) allow the prevailing party to win “reasonable attorneys fees.” However, calculating such fees is never easy, and can be more complex and time-consuming than the litigation itself.

Class and collective actions also allow the courts to avoid the time and expense of litigating multiple identical claims over and over. For example, let’s say employer McWendy’s King never pays its employees overtime, no matter what. Every employee is paid the same way, their hours are tracked the same way, and they were paid “straight time” for every hour they worked. Every employee who works at every McWendy’s King, except management, is entitled to time-and-a-half for overtime hours (hours worked in excess of 40 in one week). Should each of the potentially thousands of employees all bring their own suits, spending countless hours on litigation, exchanging the same documents over and over to prove the same thing time and again? Or should one lawsuit be able to determine the relatively simple proposition that paying employees straight time for overtime hours is illegal? What if there’s a complicated legal question that applies to everyone equally — like an exemption? Should each potentially exempt employee make the same arguments in front of different judges, resulting in possibly differing outcomes? Or should the whole thing be consolidated into one action, briefed once and decided once?

The way these cases are brought involves usually one or two people filing a lawsuit on behalf of “themselves and all others similarly situated.” Later in the litigation, the employee asks the court for permission to send out a “notice” to all the other employees, who can then sign up to be a part of the class (this is the difference between collective and class actions, collective actions are opt-in actions, class actions are opt-out). Until this happens, none of the other employees know about the suit, and none of them are represented by it.

But what happens if the employer offers the employee the amount of money owed just to him, before anyone else has been notified of the suit?

Let’s say the McWendy’s King employee, who makes $10 an hour, is owed $5,000 in overtime. $5,000 means a lot to that employee. He’s also concerned that everyone else he knows also isn’t being paid overtime, so he brought a collective action case with his attorney. Let’s say that roughly 500 other McWendy’s King employees are owed at least $5,000 in overtime each. That is, there’s good reason to believe McWendy’s King cheated 501 employees out of over $2.5 million in overtime. If the lawyer wins her Notice motion, the court will send a notice to all 500 employees, giving them a chance to be a part of the lawsuit without having to get their own lawyer or bring their own suit.

But then, let’s say that McWendy’s King makes a Rule 68 offer of judgment for the $5,000 originally owed to the one employee, plus the costs and attorneys fees related to that employee’s claim — i.e., not including the amount of time and effort the lawyer has spent preparing for her Notice motion to prove that other employees are “similarly situated.”

Let’s say that the employee doesn’t want to take this offer — the proof is good, he thinks he can win at court, and he wants to win on behalf of as many of the other 500 employees owed money as he can. So he says “no, you can’t bribe me with $5,000 to settle the total $2,505,000 you owe people in overtime.” After all, when he agreed to bring the suit as a class action suit, he affirmatively agreed to look out, not just for himself and his own interests, but for everyone else.

But what if the Court then decides that the case is moot, i.e., the outcome of the case is now irrelevant because the original plaintiff is being offered every single cent he’s actually owed? Court’s can’t take cases if there’s no actual “controversy” between the parties. What if the court decides that, because the other employees haven’t had a chance to agree to the suit yet (in fact, they don’t even know about the suit yet), that they therefore don’t have a “real” controversy? If the court decides there’s no controversy, the court throws out the case.

Then, the original employee walks away with $5,000. The plaintiff’s attorney has probably lost out on all the time she spent preparing for the Notice motion, unpaid. The other 5,000 employees, who have never been notified of the lawsuit, and may well be unaware that they are owed anything at all, have to fend for themselves.

In this scenario, what’s the reasonably likelihood that any of these employees will ever receive a dime? What are the chances that this lawyer, or any other plaintiff’s lawyer, is going to bother to ever try to bring a collective action case ever again? McWendy’s King, however, must be thrilled — they managed to dispose of the entire case, worth potentially $2,505,000, at a time of their own choosing, for a mere $5,000.

Well, that’s precisely what’s happening in courts around the country, including in New York. However, appellate courts are, rightly, fighting back — the whole point of collective actions is to prevent this kind of thing from happening. If an employer can buy off an entire case at the last minute with pocket change, then every single employee owed anything is going to have to bring their own separate lawsuit. If they don’t, then employers are getting away with screwing over their already poorly paid employees. If they do, the courts are clogged with constant, overlapping, identical lawsuits (as is happening with the Wal-Mart cases in the wake of the Dukes decision). Everyone loses.

Let’s hope the Supreme Court agrees with the Third Circuit, and upholds the existing law on collective actions and Rule 68 offers of judgment. Otherwise, you can expect the already dismal conditions of America’s low-wage employees to get worse. Buying off class actions for pocket change will just become the cost of doing business — and trust me, it’s a lot cheaper for employers to treat everyone like garbage and pay off the lone individual willing to fight back, than to actually follow the law and pay people for the work they do.

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