J.C. Penney’s failed attempt to pick-off FLSA plaintiffs provides guidance to employers seeking to avoid costly collective action

Earlier this month, the Eastern District of New York denied J.C. Penney Co. Inc.’s attempt to end a putative collective action under the Fair Labor Standards Act (“FLSA”) by offering to pay the named plaintiffs’ claims – but left open the possibility that if an employer acts fast enough, and generously, such a move could be successful.

The named plaintiffs in Afza Anjum et al. v. J.C. Penney Co. Inc. et al. refused to accept the employer’s offer of judgment, which appears to have included the maximum amount the plaintiffs could recover under the FLSA. Last year, in Genesis Healthcare v. Symczyk, the Supreme Court gave the green light to employers to use this pick-off strategy in FLSA collective actions, however, left open the question of whether an unaccepted offer can work to dismiss a case.

The Eastern District of New York answered this question in part, stating that an offer of judgment does not render a case moot “unless and until the court actually enters judgment over the plaintiffs’ objections.” In this case, the Court found that the offer did not appear to cover all relief the named plaintiffs could recover – such as damages under the New York State Labor Law and an award for post-judgment interest. The court found that the existence of these issues and need for adjudication of the maximum value of each plaintiff’s stake “foreclose[d] the possibility that the . . . offer extinguished the controversy at the time J.C. Penney made the offer.” After the offer was made, the plaintiffs’ attorneys found approximately 50 other employees who have sought to opt-in to the litigation.

The lesson from this case is that employers must act decisively, quickly, and robustly to foreclose the possibility of an FLSA collective action. Not only must employers provide an offer of judgment that covers all possible relief (including interest and state law claims), but they must offer it quickly and simultaneously move to dismiss. Because an offer of judgment does not moot a case until the court enters judgment, it is imperative to put the issue before the judge prior to the joinder of additional plaintiffs. While the strategy may not be a “one size fits all” policy for collective actions because tag-along suits by other employees are possible, this decision offers hope to employers in the Second Circuit that an unaccepted offer may still avoid costly litigation.