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Supreme Court (sort of) approves “picking off” strategy in FLSA collective action cases

May 03, 2013

Supreme CourtIf you have ever received a complaint alleging minimum wage or overtime violations from one of your employees, the United States Department of Labor’s Wage and Hour Division, or a similar state agency (in Wisconsin, the Labor Standards Bureau of the Equal Rights Division), you have probably considered the possibility that other employees might raise similar claims. Depending on the size of your workforce, this single-employee headache could quickly evolve into a class action or collective action migraine.

Under the Fair Labor Standards Act (FLSA), a single employee may file a wage and hour lawsuit on behalf of himself and other “similarly situated” employees. The FLSA’s collective action mechanism requires potential plaintiffs to opt into the lawsuit, meaning that individuals must choose to participate in the case. This mechanism differs from a class action lawsuit because individuals covered by a class certified by the court must opt out of the case. In other words, in a class action, an individual covered by a certified class must choose to not participate in the case.

Defense counsel have typically attempted to protect employers from prolonged and costly collective action litigation by “picking off” the named plaintiff(s) in lawsuits filed under the FLSA. This “picking off” strategy refers to Rule 68 of the Federal Rules of Civil Procedure, which allows a defendant to make an offer of judgment to the plaintiff. An offer of judgment amounts to giving the plaintiff the full relief requested in the complaint and costs accrued by the plaintiff. A plaintiff’s acceptance of a Rule 68 offer of judgment moots (i.e., a dispute no longer exists) the case as to the plaintiff, thereby depriving the court of jurisdiction.

In the collective action context, however, employers have had mixed results on the issue of whether acceptance of a Rule 68 offer by the named plaintiff(s) also moots the claims of the potential collective group of affected employees.  The question also remained:  what happens when the named plaintiff(s) rejects the Rule 68 offer of judgment?

On Tuesday, April 16, 2013, the United States Supreme Court issued a decision, Genesis Healthcare Corp. v. Symczyk, that attempted to answer this question. In this case, the employer, Genesis, made a Rule 68 offer of judgment to the plaintiff, Symczyk, while simultaneously answering the complaint and prior to Symczyk moving for conditional certification. By its terms, the offer automatically expired after ten days. Symczyk did not accept the offer, and Genesis moved for judgment in its favor, arguing that its offer of judgment mooted Symczyk’s claim and the potential collective action. Symczyk did not contest Genesis’ argument that the offer fully satisfied her claim. The district court agreed with Genesis and dismissed the case for lack of subject-matter jurisdiction.

The Court of Appeals for the Third Circuit agreed with the district court that Genesis’ Rule 68 offer mooted Symczyk’s claim, but it disagreed about the effect the offer had on the potential collective action. The court of appeals held that allowing a defendant to “pick off” named plaintiffs for the purpose of avoiding the certification of a collective action would run contrary to the purpose of the collective action mechanism permitted by the FLSA.

On appeal, the Supreme Court held that a plaintiff “has no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness.” According to the Supreme Court, a Rule 68 offer of judgment that renders the claims of the named plaintiff(s) moot also eliminates the plaintiff’s interest in the collective action. More importantly, the Supreme Court held that a collective action under the FLSA, even if “conditionally certified” by a court, does not give the “class” of potential plaintiffs “an independent legal status.” A “conditional certification” simply results in “the sending of court-approved written notice to employees[.]” Thus, the Supreme Court has given some legitimacy to the strategy of “picking off” named plaintiffs by offering them full relief through a Rule 68 offer of judgment.

Note, however, that the Supreme Court did not hold that an unaccepted Rule 68 offer renders a claim (the named plaintiff’s or the collective action claim) moot.  Because Symczyk waived these arguments in the lower courts, the Supreme Court simply assumed, without deciding, that the unaccepted Rule 68 offer rendered her claim moot.

While, at first blush, the decision seems like a great win for employers, it has potential limitations, many of which Justice Elena Kagan points out in her dissent, including the following:

  1. Symczyk waived several important arguments throughout the litigation, including the argument that the unaccepted Rule 68 offer in fact did not moot her individual claim.
  2. The Genesis case addresses a scenario in which no other plaintiffs had yet joined the collective action (due in part to the timing of Genesis’ offer to Symczyk and her failure to move for certificaiton).
  3. The Court simply ignored the limitations of a Rule 68 offer of judgment, including that Rule 68 only gives courts authority to enter judgment when the plaintiff accepts the offer and that “[e]vidence of an unaccepted offer is not admissible except in a proceeding to determine costs.”

Despite the limitations of the Genesis decision, employers can take comfort in the Court’s indication of its leanings regarding collective actions. addition to the Court’s holding regarding the mootness issue, employers can also point to the Court’s statements calling into question the legitimacy of applying class action rules and precedent to collective actions under the FLSA.

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