Supreme Court decision impacts “pick off” strategy in FLSA cases

Employers that face unpaid overtime collective actions sometimes attempt to utilize what is known as a “pick off” strategy.  In such a scenario, the employer will make an offer of judgment under Federal Rule of Civil Procedure 68 to pay all of the named plaintiff’s damages plus attorney’s fees, then argue that the case must be dismissed because it is moot, as the named plaintiff has been offered all relief he or she was seeking.  If such an argument is successful, the employer can head off a collective action which could involve hundreds or thousands of employees (and potentially hundreds of thousands of dollars in unpaid overtime, if not more) just by paying a small amount to the named plaintiff.  Courts have struggled to determine whether such a strategy should be allowed to effectively kill off a collective action under the Fair Labor Standards Act.

Rule 68 provides in pertinent part:

(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.

This pick off strategy was dealt a major blow in a recent decision by the United States Supreme Court.  In Campbell-Edwald Co. v. Gomez, the Supreme Court had granted certiorari to resolve a disagreement among the Courts of Appeals over whether an unaccepted offer can moot a plaintiff’s claim, thereby depriving federal courts of Article III jurisdiction. On January 20, 2016, the Court announced its decision, with the majority holding that it did not, stating: “When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect.”

The defendant’s settlement bid and Rule 68 offer of judgment, “once rejected, had no continuing efficacy.”  The offer remained “only a proposal,” binding neither the defendant nor the plaintiff; the parties remained adverse and “retained the same stake in the litigation they had at the outset.”  “[A]n unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case, so the district court retained jurisdiction to adjudicate [plaintiff’s] complaint.” Campbell-Edwald was not a FLSA case, but its reasoning applies equally to such cases, as demonstrated by a decision issued by a federal magistrate in Florida in an unpaid overtime case.  Applying Campbell-Edwald in an FLSA case, the Honorable David Baker held that Defendants’ unaccepted offer of judgment did not moot Plaintiff’s individual or collective action claims, and the Court retains jurisdiction over the Complaint, thus recommending that the district court deny the defendants’ motion to dismiss and allow the collective action lawsuit to move forward.  The next logical question after Campbell-Edwald will be whether complete payment to the named plaintiff would moot his or her claims.  However, it is this practitioner’s experience that cases in which an FLSA plaintiff’s damages can be undisputedly calculated down to the exact dollar (which is necessary for the defendant to argue that the plaintiff has been paid in full) are exceedingly rare.  Thus, by and large the pick off strategy in the FLSA context is effectively dead.

About the author: Josh Borsellino is a Fair Labor Standards Act attorney in Fort Worth, Texas.  Josh handles unpaid overtime cases throughout Texas.  Josh may be reached at 817.908.9861 or by using this contact form.

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