When Is an FLSA Collective Action Mooted by an Employer Paying an Employee's Claim in Full?

The Fifth Circuit Considers the Subject

The FLSA permits plaintiffs to bring purported collective actions on behalf of other similarly situated employees under its Section 216(b), and the federal rules of civil procedure allow a defendant to make an offer of judgment that would fully satisfy a plaintiff's claim under Rule 68. Under Article III, Section 2of the United States Constitution, federal jurisdiction is limited to "cases" and "controversies", those involving actual disputes not hypothetical or moot cases. According to Black's Law Dictionary, a case is said to be "moot" when "the matter in dispute has already been resolved and hence, one not entitled to judicial intervention unless the issue is a recurring one and likely to be raised again between the parties." This question was presented to and answered by the Fifth Circuit in recent opinion issued in Sandoz v. Cingular Wireless LLC, case number 08-30769.

Plaintiff Sandoz filed her complaint as an opt-in collective action in state court, but defendant Cingular removed the case to federal court and soon made an offer of judgment for $1,000 plus reasonable attorneys' fees. The offer of judgment was not accepted by Sandoz and the parties filed motions to strike the reference to the offer of judgment (Sandoz) and to dismiss the complaint (Cingular). The district court denied all motions, but certified Cingular's interlocutory appeal to the Fifth Circuit on the issue of mooting.

The Fifth Circuit noted only the Eleventh Circuit has address a similar scenario, with the Eleventh Circuit holding that a named plaintiff has no right to represent similarly-situated employees until they opt-in, which is when the action becomes "collective." The district court hearing the Cingular and Sandoz arguments was concerned that a defendant could "pick off" a named plaintiff through an offer of judgment that would "frustrate" the objectives of the FLSA and improperly minimize the use of judicially economical collective actions in favor of individual lawsuits. The Fifth Circuit held that, "when a FLSA plaintiff files a timely motion for certification of a collective action, that motion relates back to the date the plaintiff filed the initial complaint, particularly when one of the defendant's first actions is to make a Rule 68 offer of judgment." According to the Fifth Circuit, the principle of "relation back" ensures that defendants could not "pick off" collection action representatives and thwart plaintiff's access to FLSA collective actions. Thus, while the Fifth Circuit agreed in general with the district court's concerns, it attempted to balance the competing interests of a employer defendant when timely motions to certify were filed. Sandoz had filed the motion to certify 13 months after her complaint, while Cingular made its offer of judgment a month after service of the complaint. On remand, the district court will determine whether the plaintiff timely filed her motion to certify and if necessary, the merits of the motion to certify.

The mooting issue will be one to watch in future (and current) FLSA cases. If an employer can moot an employee's claims under a purported class action early before significant litigation costs have been incurred, we may see more offers of judgment being made.

Family Dollar Has a Holiday Headache

The $35.6 million award - a $19.2 million jury verdict which the court cut to $17.8 million, and an equal amount for liquidated damages based on willfulness - in the Alabama-based nationwide collective action against Family Dollar Stores has been affirmed by the US Court of Appeals for the Eleventh Circuit in a 106-page opinion. The back pay and liquidated damages will be spread among 1424 retail store managers who were found not to be exempt "executives" because they spent a majority of their time on manual work; hundreds of depositions were taken from a pool deemed representative of the nearly 2500 managers who had opted into the case, which arose out of claims made before the FLSA white-collar regulations were amended in 2004. Morgan v. Family Dollar Stores, Inc.

Meanwhile, back in the checkout line, the company is engaged in another huge battle in the Western District of North Carolina, In re Family Dollar Stores, Inc. Wage and Hour Employment Practices Litigation, No. 3:08-CV-01932-GCM. Although that case was stayed while settlement negotiations have been ongoing, additional plaintiffs continue to queue up for this post-2004 attack on the company's compensation and classification system. It remains to be seen whether Family Dollar seeks further review of the Alabama matter, as well as what effect the new regulations, which don't require a specific percentage of exempt work in order to alleviate overtime requirements, may have on the settlement talks in Round 2.

And, by the way, please note that there has been no award of attorneys' fees reported in the Morgan case, so the employer has yet more opportunities to dig deep. What a way to end a year!

U.S. Supreme Court Declines To Review Decision Holding That Paramedics Are Entitled To Overtime

On December 15, the United States Supreme Court declined to take on an appeal by the City of Philadelphia from a ruling that paramedics employed by the fire department were not exempt from overtime under the FLSA’s “firefighter exemption.” Philadelphia had petitioned the Supreme Court to review the opinion of the Third Circuit Court of Appeals in Lawrence v. Philadelphia, which can be found here. The Third Circuit had ruled that the paramedics were not exempt from overtime because they were not cross-trained as firefighters, had no responsibility for “fire suppression activities,” and therefore did not meet the exemption. The Supreme Court’s refusal to hear the case lets stand the Third Circuit’s opinion.

Family Online Safety Institute (FOSI) Releases Online Safety Proposals

The Family Online Safety Institute ("FOSI") released its report Making Wise Choices Online in which it provides a survey of ongoing initiatives to ensure the safety of children using the Internet as well as four policy proposals for the coming Administration to consider. The release coincides with the Second Annual FOSI Conference, held today in Washington, D.C., themed "Safe At Any Speed: Rules, Tools & Public Policies to Keep Kids Safe Online."

Womble Carlyle is pleased to have sponsored the FOSI Conference and to have forged a friendship with this organization.

Click here to learn more about FOSI's Internet safety proposals.

Grilling Your Employer

New York City's Saigon Grill, with two (formerly three) locations in Manhattan, is in hot water with wage-hour cases. Last October, a federal judge ordered the restaurant's owners, Simon (Chang S.) and Michelle (Pei Ying) Nget, to pay $4.6 million in back pay and liquidated damages to 35 delivery employees who worked 6 or 7 days, between 70 and 80 hours, per week, for around $1.70 per hour; while they received tips, the litigation was hampered by the employer's inability or unwillingness to produce pay and tip records, thereby allowing the plaintiffs to estimate how long they worked and what they were paid. Plaintiffs were represented by the venerable Wall Street firm of Davis, Polk & Wardwell along with the Asian-American Legal Defense and Education Fund. The National Labor Relations Board, in a separate proceeding, ordered Saigon Grill to rehire terminated employees.

Now the situation has become even more serious: On December 3, the Ngets were arrested on state criminal charges including criminal wage violations, paying illegal kickbacks and falsifying business records; the New York Attorney General's office claims that workers had to cash their paychecks with the company, which then gave them significantly less to keep. The charges, a mix of felonies and misdemeanors, total more than 400. In a press release, AG Andrew Cuomo said, "Like so many restaurants across New York City, Saigon Grill was run on the backs of its workers." How's that for a warm holiday message?

The cases are Ke v. Saigon Grill Inc., 1:07-CV-2329 (S.D.N.Y.); Saigon Grill, Inc., No. 2-CA- (NLRB); and State v. Nget.

The moral of the story, lest it not be obvious, is that compliance with the law is far less expensive than getting caught. While the presumption of innocence is still firmly in place, the Ngets have lots of explaining to do.

Click here to read more...

Air Pressure

American Airlines pilots represented by the Allied Pilots Association have been in litigation with their employer since August 1, triggered by American's plans to place up to 200 pilots on furlough. In addition to bringing suit, the APA asked the pilots not to make known their availability for voluntary overtime - in other words, trying to maximize jobs by having their members forgo additional pay. American countered by claiming that the union's tactics violated the Railway Labor Act, since the parties are in contract negotiations and neither can upset the status quo.

Last month the union filed a motion in federal court in the District of Columbia claiming the campaign is legal, in spite of two earlier injunctions the company obtained against the APA in 1990 and 1999 to stop the same sort of tactics. Now American has replied, saying the union's actions risk grounding planes and jeopardizing its ability to operate. The company further argued that Delta was granted a similar injunction to bar a no-overtime effort by the APA. The union insists the Delta situation was different and that there's no impact on commerce.

For our readers, the point is that working overtime can be either voluntary or compelled, unless there's a contractual commitment preventing or limiting extra work. The twist here is that the union wants some of its members to give up premium payments in the interest of making work available for others (or, more simply, to force the company to make concessions). Watch this blog for further developments in Allied Pilots Assn. v. American Airlines Inc., 1:08-CV-01335 (D.D.C.)