E.D.N.Y. Finds Retailer Cannot “Pick-off” FLSA Plaintiffs With Incomplete Rule 68 Offer of Judgment

Anjum v. J.C. Penney Co., Inc., No. 13-CV-0460 (E.D.N.Y. Oct. 9, 2014): The Eastern District of New York held that a group of opt-in plaintiffs could pursue their Fair Labor Standards Act (FLSA) collective action even though they individually consented to join the action only after the named plaintiffs rejected the defendant’s Rule 68 offer of judgment.

Four named plaintiffs filed an FLSA collective action against J.C. Penney alleging that the company failed to pay them for work regularly performed before and after their scheduled shifts and during lunch breaks. Specifically, the plaintiffs highlighted two alleged practices that were impermissible: (1) the company’s “rounding policy,” which allegedly incrementally cut into an employee’s hours by rounding down clocked time; and (2) the company’s “lunch deduction” practice, which allegedly deducts meal times when the employees were working.

In response, J.C. Penney extended offers of judgment under Federal Rule of Civil Procedure 68 in what the court described as an effort to “pick-off” the plaintiffs. In reliance on the Supreme Court of the United States’ recent Genesis Healthcare Corp. et al. v. Symczyk decision, the court noted that some employers use Rule 68 offers in an effort to render the case moot and divest the district court of subject matter jurisdiction.

Despite Genesis Healthcare and consistent with Second Circuit precedent, the court concluded that an offer of judgment affording complete relief does not extinguish the live controversy unless and until the court actually enters judgment over the plaintiffs’ objections. While the court determined that J.C. Penney’s methodology for calculating proposed damages was “basically sound,” the court agreed with the plaintiffs that there were flaws with the damages calculation, including: the period that J.C. Penney used to calculate its offer; providing one liquidated damages award for both FLSA and state law claims; and lacking a separate award for pre-judgment interest. The court therefore ruled that issues existed concerning whether J.C. Penney’s offer afforded each plaintiff complete relief, which foreclosed the possibility that J.C. Penney’s Rule 68 offer of judgment extinguished the controversy at the time the offers were made.

Employers looking to “pick-off” costly collective actions should therefore be aware that a court may resist entering an order dismissing a case, particularly when the plaintiffs argue that the offer does not provide complete relief. Employers seeking to engage in Rule 68 offers in wage and hour cases should therefore ensure that their offer affords complete relief and that any objections to the offer are immediately challenged and resolved.