Yesterday, April 16, 2013, the United States Supreme Court rendered a significant decision within the FLSA arena that will surely change the strategy of many employers facing potential collective action claims.

For the three hundred or so of our readers who attended our HR Law & Solutions Seminar last month at the Sanibel Harbour Resort, you may recall a case Bob Shearman briefed in the case law update portion of our seminar, Genesis HealthCare Corp. v. Symczyk. The case was in the “on the horizon” portion of our presentation, as it was on appeal to the U.S. Supreme Court and oral argument had occurred in December 2012, but no decision had yet been rendered. That decision is now in, and it’s a rare breath of fresh air to employers, who do not very often hear “good news” and “FLSA” in the same sentence.

Case Background

As a recap, Symczyk sued under the FLSA on behalf of herself and all others similarly situated. This was a Section 216(b) collective action. Prior to any additional plaintiffs opting into the suit, Genesis extended an offer of judgment to Symczyk under Federal Rule of Civil Procedure 68, in full satisfaction of her alleged damages, fees, and costs and did so prior to other potential plaintiffs opting in.

After tendering the offer and Symczyk not accepting it within the window provided, Genesis moved to dismiss the claim, arguing that since Symczyk was being offered everything she demanded in her complaint, there was not lawful reason why she should be able to continue her case. Over the objection of Symczyk, who arguedthe suit should continue since the offer of judgment did not also offer to pay all the claims of those potential opt-in plaintiffs who are similarly situated, the U.S. District Court dismissed the lawsuit.

The Supreme Court’s Decision

Although the Third Circuit Court of Appeals reversed the trial court’s decision, the U.S. Supreme Court held the trial court got it right. Specifically, the Court held that with total relief being offered to Symczyk and no other individuals having joined the suit as of that time, Symczyk no longer had an interest in the outcome of the lawsuit. Accordingly, since the dispute was rendered moot, the trial court no longer had jurisdiction to hear the claim and necessitated its dismissal.

Why You Should Care

As most of you know, the FLSA requires an award of reasonable attorneys’ fees to the plaintiff(s), if they are successful. As we advised a client earlier this week (and as we have many times before), litigating an FLSA claim is about determining at the earliest possible moment whether a violation has occurred. If we are certain it has not, then we strategize the fight. If, however, a violation has occurred and even $1 of minimum wage or overtime is due, the best strategy is settling as soon as possible, since entrenched fighting will only result in the employer paying thousands of dollars in attorneys’ fees to its counsel and also to plaintiff’s counsel, in addition to the wages claimed.

Collective actions obviously increase the potential amount of damages at issue, as well as the recovery of attorneys’ fees. The Supreme Court’s decision in this case allows employers faced with FLSA collective action claims a strategic opportunity to resolve the claims early in the life of the lawsuit, before attorneys’ fees begin to rise exponentially. So, if you have the misfortune of being on the receiving end of a collective action suit and an internal determination of liability has been made, you should strongly consider making a quick offer of settlement for all claims of the representative plaintiff, before the plaintiff obtains the right to send notice of the suit to all “similarly situated” employees, soliciting them to join in the action. Doing so could save you tens or hundreds of thousands of dollars or more.

Be mindful, however, that while these potential opt-in plaintiffs will not be provided formal notice of the settled suit or be permitted to join it, the settlement of this case does not foreclose those potential opt-ins from later bringing their own lawsuits (or do nothing at all). This being the case, it will also be incumbent upon us to, simultaneously with the settlement of the case, cure whatever deficiencies created the liability, so that the statute of limitations begins to run on the claims of those similarly situated. Thereafter, each month that passes without suit from any (or all) of those similarly situated is money staying in the bank of the employer.

If you have any questions, feel free to contact me or your regular employment lawyer with Henderson Franklin.