Minnesota Employment Law Report - Observations on labor and employment law from FLFV

In Genesis HealthCare Corp. v. Symczyk, No. 11-1059 (April 16, 2013), the U.S. Supreme Court ruled that an employee could not continue pursuing her Fair Labor Standards Act (“FLSA”) collective action after her employer made an “offer of judgment” (a type of settlement offer) that would pay her entire claim.

Factual Background

In 2009, RN Laura Symczyk filed a lawsuit on behalf of herself and "all other persons similarly situated" claiming that her employer violated the FLSA by automatically deducting a 30-minute meal break from her daily pay.  In response, the employer made an offer of judgment under Federal Rule of Civil Procedure 68, which provides that if the offer is not accepted, and if the ultimate judgment in the case does not exceed the offer, the party rejecting the offer must pay all the subsequent costs incurred by the other side. The employer’s offer in this instance was $7,500 for alleged unpaid wages as well as "such reasonable attorneys' fees, costs, and expenses . . . as the Court may determine.”

Symczyk failed to respond to the offer one way or the other, so the employer asked the court to dismiss the case. The employer argued that the claim was now moot because the employer offered Symczyk complete relief on her individual damages claim. The trial judge agreed, noting that since no other individuals had actually joined the suit, the employer’s offer of judgment fully satisfied Symczyk's claim. The judge felt that Symczyk should not be allowed to continue litigating when she was already being offered everything she was seeking.

The Third Circuit Court of Appeals disagreed, however, noting that while Symczyk's claim might have been moot, the claims of the proposed class were not completely satisfied. The Appeals Court concluded that a defendant is not permitted to use an offer of judgment to "short-circuit the class action process." This might seem a bit odd since there were no other members of the class, but under the terms of the court’s previous rulings, there was still time for other people to “opt in” to the litigation. Therefore, technically not all of the claims were resolved by the offer of judgment.

Supreme Court Decision

The case was appealed to the U.S. Supreme Court, who agreed with the original ruling that dismissed the case. They ruled that since Symczyk’s individual case became moot, she no longer was an adequate representative of the class of persons harmed by the challenged employment practice. With nobody else able to step up and fill that role, the case had to be dismissed.

One of the questions that the Supreme Court left open was whether an offer of judgment that is not accepted by the other side should be allowed to end the litigation. It seems reasonable to say that if the lead claimant is offered everything she is seeking, she shouldn’t be allowed to reject the offer and keep suing. On the other hand, should employers be able to short circuit the entire action simply by satisfying the lead claimant's claim? Courts differ on this issue, and the Eighth Circuit (in which Minnesota sits) has not yet weighed in.

Bottom Line

The employer’s approach in this case might be useful in some instances to avoid protracted litigation. However, it is not certain whether the federal courts in Minnesota would approve such a tactic, and it is very possible that employers would not want to make such offers because they could be seen as tacit admissions that they did in fact violate the FLSA.

The next time you receive a charge notice from the EEOC, you have a new reason to fret. According to the Eighth Circuit Court of Appeals, the circuit that includes Minnesota, North Dakota and South Dakota, the EEOC is permitted to seek information related to company-wide promotion practices when investigating an individual charge of discrimination.

In EEOC v. Schwan’s Home Services, No. 10-3022 (8th Cir. July 13, 2011), a female employee filed a charge of discrimination with the EEOC in 2007 alleging she was harassed, demoted, and ultimately lost her job because of her gender. Specifically, she claimed that she was not promoted to Local General Manager because of her gender, even though she had completed the required General Manager Development Program.

The EEOC commenced an investigation into Schwan’s. In the course of its investigation, the EEOC subpoenaed information from Schwan’s on how many women are local managers, as well as the selection process and graduation rates for the company’s manager training program. The employer refused to comply with the subpoena because the employee had not alleged any class claims and, even if she did, the statute of limitations had lapsed.

The Eighth Circuit disagreed with the employer.  According to the court, once the EEOC presents a valid charge of discrimination, it has to show only that the subpoena requests information that “relates to” unlawful employment practices covered by Title VII and “is relevant to the charge under investigation.” While an EEOC subpoena cannot wander into wholly unrelated areas, the “relevancy” requirement is “not especially constraining” and includes any evidence that “might cast light on the allegations.”

The court found the information sought in the subpoena within the scope of the EEOC's investigatory authority, citing the employee’s allegation that if she had completed the company’s manager training program, she would have been one of only two female local managers out of 500 such managers nationwide. The employee had also claimed Schwan’s had rejected one female applicant for management because she had children at home.

Bottom Line

The EEOC has broad power to subpoena information from an employer under investigation. The EEOC can subpoena information relevant to systemic discrimination even absent a valid systemic charge, whenever an investigation into a charge of individual discrimination reveals potential companywide discrimination.

It’s been in all the newspapers - the United States Supreme Court has agreed to decide a key issue in a sex discrimination lawsuit potentially affecting 1.5 million former and current female Wal-Mart employees.  While the media blitz has focused on how large the class is, many legal experts do not expect the Supreme Court to address that issue.  Instead, they anticipate that the justices want to focus on whether claims for monetary damages can be certified for class action status using the federal procedural standards applicable to class claims for injunctive and non-monetary remedies.  These standards have typically been easier to meet than those that have been applied to wage-based claims.

The lower court decision by the Ninth Circuit Court of Appeals in California is believed to have forged a new standard for wage-based class claims that the other federal appeals courts have not followed.  The Supreme Court often seeks to resolve interpretive differences between the various appellate courts, and this issue seems particularly worthy of their attention since the Ninth Circuit case was decided by a 6-5 vote.  By ruling one way or the other, the Supreme Court may clear up the confusion over which standard is to be applied.

The Supreme Court also wants to address how the ordinary threshold requirements for a class action are applied in this case.  Typically, class actions require a sufficiently large group of litigants with similar claims in order to justify treating the litigants as one big class.  In this instance, the Supreme Court will want to examine whether the use of subjective decision-making policies supports a class type of claim.  Wal-Mart has argued that it does not since store managers at their almost 3,400 United States stores make individualized hiring and promotional decisions that have to be decided on their unique facts.  In other words, there is no overriding policy or practice being applied – just localized decisions seeking to distinguish between small groups of candidates for particular jobs.

Bottom Line

The eventual decision could have momentous consequences.  A decision in favor of the applicants and employees could pave the way for many more wage-based class actions in the courts.  On the other hand, a decision for Wal-Mart could signal the end of this litigation for the company, and the death knell for wage-based class action cases in general.