Judge: NCAA athletes are not employees, so no minimum wage

Student athletes at an NCAA university are not employees. Therefore, they are not entitled to be paid minimum wage under the Fair Labor Standards Act. So says a federal judge in the Southern District of Indiana. Berger v. National Collegiate Athletic Association (02/16/2016).Three plaintiffs are current or past members of the women's track and field team at the University of Pennsylvania. They tried to assert a class action on behalf of all student athletes (men and women, all sports) against Penn, the NCAA, and 122 other NCAA Division I schools.

The plaintiffs argued that their status was governed by a 2010 U.S. Department of Labor "fact sheet" for determining whether certain internships qualify as employment under the FLSA. Two big problems with that argument:

  1. The Intern Fact Sheet is not intended to apply to student athletes. It has to do with students who are out in a traditional employment setting, not in an educational setting.
  2. Courts have refused to apply the test contained in the Intern Fact Sheet even to interns. Courts see the Intern Fact Sheet as being too rigid, and prefer a more flexible approach.

The District Court applied a flexible "economic realities" test, trying to capture the "true nature of the relationship" between the student athletes and the university. Part of this is the "revered tradition of amateurism in college sports." Also, "generations of Penn students have vied for the opportunity to be part of that revered tradition with no thought of any compensation," because it is a benefit to them without any monetary compensation. Finally, the U.S. Department of Labor, Wage and Hour Division, Field Operations Handbook § 10b03(e) says:

"[a]s part of their overall educational program, public or private schools and institutions of higher learning may permit or require students to engage in activities in connection with dramatics, student publications, glee clubs, bands, choirs, debating teams, radio stations, intramural and interscholastic athletics and other similar endeavors. Activities of students in such programs, conducted primarily for the benefit of the participants as part of the educational opportunities provided to the students by the school or institution, are not "work" [under the FLSA] and do not result in an employee-employer relationship between the student and the school or institution. Also, the fact that a student may receive minimal payment for participation in such activities would not necessarily create an employment relationship."

Thus, the court ruled that the student athletes were not "employees" of the University of Pennsylvania.

As for the NCAA and all schools other than Penn, the judge let them off the hook. The plaintiffs alleged that they were employees of Penn, not employees of any of the other defendants, so the plaintiffs lacked standing to sue those other defendants.

Hat tip: Robin Shea at Constangy, Brooks, Smith & Prophete, LLP's Employment & Labor Insider.

Judge: NCAA athletes are not employees, so no minimum wage

Student athletes at an NCAA university are not employees. Therefore, they are not entitled to be paid minimum wage under the Fair Labor Standards Act. So says a federal judge in the Southern District of Indiana. Berger v. National Collegiate Athletic Association (02/16/2016). Three plaintiffs are current or past members of the women's track and field team at the University of Pennsylvania. They tried to assert a class action on behalf of all student athletes (men and women, all sports) against Penn, the NCAA, and 122 other NCAA Division I schools.

The plaintiffs argued that their status was governed by a 2010 U.S. Department of Labor "fact sheet" for determining whether certain internships qualify as employment under the FLSA. Two big problems with that argument:

  1. The Intern Fact Sheet is not intended to apply to student athletes. It has to do with students who are out in a traditional employment setting, not in an educational setting.
  2. Courts have refused to apply the test contained in the Intern Fact Sheet even to interns. Courts see the Intern Fact Sheet as being too rigid, and prefer a more flexible approach.

The District Court applied a flexible "economic realities" test, trying to capture the "true nature of the relationship" between the student athletes and the university. Part of this is the "revered tradition of amateurism in college sports." Also, "generations of Penn students have vied for the opportunity to be part of that revered tradition with no thought of any compensation," because it is a benefit to them without any monetary compensation. Finally, the U.S. Department of Labor, Wage and Hour Division, Field Operations Handbook § 10b03(e) says:

"[a]s part of their overall educational program, public or private schools and institutions of higher learning may permit or require students to engage in activities in connection with dramatics, student publications, glee clubs, bands, choirs, debating teams, radio stations, intramural and interscholastic athletics and other similar endeavors. Activities of students in such programs, conducted primarily for the benefit of the participants as part of the educational opportunities provided to the students by the school or institution, are not "work" [under the FLSA] and do not result in an employee-employer relationship between the student and the school or institution. Also, the fact that a student may receive minimal payment for participation in such activities would not necessarily create an employment relationship."

Thus, the court ruled that the student athletes were not "employees" of the University of Pennsylvania.

As for the NCAA and all schools other than Penn, the judge let them off the hook. The plaintiffs alleged that they were employees of Penn, not employees of any of the other defendants, so the plaintiffs lacked standing to sue those other defendants.

Hat tip: Robin Shea at Constangy, Brooks, Smith & Prophete, LLP's Employment & Labor Insider

SCOTUS: Unaccepted Rule 68 offer does not moot class action

Campbell-Ewald Co v. Gomez (US Supreme Court 01/20/2016) is an important victory for class action plaintiffs in employment and consumer cases. In class action suits a defendant will often attempt to "pick off" the lead plaintiff by offering to that person a judgment in full satisfaction of that individual's claim. The defendant's idea is that complete satisfaction of the plaintiff's claim renders the case "moot" because there is no longer any legal dispute between the two. Under Article III of the constitution, federal courts have no jurisdiction over situations in which there's really no dispute between the litigating parties.

Defendants rely upon Federal Rule 68:

“(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

“(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs."

What happens if the defendant makes the Rule 68 offer, but the plaintiff simply does nothing in response?

Every first year law student should know the answer to this question. If an offer is made, and the offeree does not accept the offer, then there has been no change in the legal relationship between the two parties. An unaccepted offer simply lapses, and the unaccepted offer is a legal nullity.

Justice Kagan once wrote (Genesis HealthCare Corp v. Symczyk, 569 U. S. ___ (US Supreme Court 2012):

“When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer— like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.’ Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U. S. 149, 151 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that ‘[a]n unaccepted offer is considered withdrawn.’ Fed. Rule Civ. Proc. 68(b). So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.”

In Campbell-Ewald Co v. Gomez (US Supreme Court 01/20/2016) the Supreme Court (splitting 6-3) adopted Justice Kagan's pithy explanation.

Gomez sued claiming that Campbell-Ewald Co had violated the Telephone Consumer Protection Act by using any automatic dialing system to send a text message to his cell phone, without his prior express consent. This was a class action claim. Before the deadline for Gomez to file a motion for class certification, Campbell-Ewald proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule.

Campbell-Ewald argued that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell-Ewald urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well. Both the district court (805 F. Supp. 2d 923 (CD Cal. 2011)) and the 9th Circuit (768 F3d 871 (9th Cir 2014)) ruled that the case did not become moot, and the US Supreme Court agreed.

Dissenting for himself and two others, Chief Justice Roberts said:

"When a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III. After all, if the defendant is willing to remedy the plaintiff ’s injury without forcing him to litigate, the plaintiff cannot demonstrate an injury in need of redress by the court, and the defendant’s interests are not adverse to the plaintiff."

Some pundits will exclaim that this case is a left-leaning pro-consumer, pro-employee decision (and the line-up of votes supports this), yet it really is the natural result of the text of Rule 68 and well-accepted rules of the common law of contracts.

SCOTUS: Unaccepted Rule 68 offer does not moot class action

Campbell-Ewald Co v. Gomez (US Supreme Court 01/20/2016) is an important victory for class action plaintiffs in employment and consumer cases. In class action suits a defendant will often attempt to "pick off" the lead plaintiff by offering to that person a judgment in full satisfaction of that individual's claim. The defendant's idea is that complete satisfaction of the plaintiff's claim renders the case "moot" because there is no longer any legal dispute between the two. Under Article III of the constitution, federal courts have no jurisdiction over situations in which there's really no dispute between the litigating parties.

Defendants rely upon Federal Rule 68:

“(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

“(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs."

What happens if the defendant makes the Rule 68 offer, but the plaintiff simply does nothing in response?

Every first year law student should know the answer to this question. If an offer is made, and the offeree does not accept the offer, then there has been no change in the legal relationship between the two parties. An unaccepted offer simply lapses, and the unaccepted offer is a legal nullity.

Justice Kagan once wrote (Genesis HealthCare Corp v. Symczyk, 569 U. S. ___ (US Supreme Court 2012):

“When a plaintiff rejects such an offer—however good the terms—her interest in the lawsuit remains just what it was before. And so too does the court’s ability to grant her relief. An unaccepted settlement offer— like any unaccepted contract offer—is a legal nullity, with no operative effect. As every first-year law student learns, the recipient’s rejection of an offer ‘leaves the matter as if no offer had ever been made.’ Minneapolis & St. Louis R. Co. v. Columbus Rolling Mill, 119 U. S. 149, 151 (1886). Nothing in Rule 68 alters that basic principle; to the contrary, that rule specifies that ‘[a]n unaccepted offer is considered withdrawn.’ Fed. Rule Civ. Proc. 68(b). So assuming the case was live before—because the plaintiff had a stake and the court could grant relief—the litigation carries on, unmooted.”

In Campbell-Ewald Co v. Gomez (US Supreme Court 01/20/2016) the Supreme Court (splitting 6-3) adopted Justice Kagan's pithy explanation.

Gomez sued claiming that Campbell-Ewald Co had violated the Telephone Consumer Protection Act by using any automatic dialing system to send a text message to his cell phone, without his prior express consent. This was a class action claim. Before the deadline for Gomez to file a motion for class certification, Campbell-Ewald proposed to settle Gomez’s individual claim and filed an offer of judgment pursuant to Federal Rule of Civil Procedure 68. Gomez did not accept the offer and allowed the Rule 68 submission to lapse on expiration of the time (14 days) specified in the Rule.

Campbell-Ewald argued that its offer mooted Gomez’s individual claim by providing him with complete relief. Next, Campbell-Ewald urged that Gomez’s failure to move for class certification before his individual claim became moot caused the putative class claims to become moot as well. Both the district court (805 F. Supp. 2d 923 (CD Cal. 2011)) and the 9th Circuit (768 F3d 871 (9th Cir 2014)) ruled that the case did not become moot, and the US Supreme Court agreed.

Dissenting for himself and two others, Chief Justice Roberts said:

"When a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III. After all, if the defendant is willing to remedy the plaintiff ’s injury without forcing him to litigate, the plaintiff cannot demonstrate an injury in need of redress by the court, and the defendant’s interests are not adverse to the plaintiff."

Some pundits will exclaim that this case is a left-leaning pro-consumer, pro-employee decision (and the line-up of votes supports this), yet it really is the natural result of the text of Rule 68 and well-accepted rules of the common law of contracts.

SCOTUS takes another class action case

How can you have a "class" when individuals' facts are so different? Hourly workers at Tyson's pork processing plant filed a class action claiming unpaid overtime for time spent donning and doffing personal protective equipment. The trial court certified a class, and a jury brought back a verdict for $2,892,378.70. Liquidated damages raised the judgment to $5,785,757.40. The 8th Circuit affirmed in Tyson Foods v. Bouaphakeo (8th Cir 08/25/2014).

The US Supreme Court granted certiorari to review the 8th Circuit's judgment. Tyson Foods v. Bouaphakeo (Certiorari granted 06/08/2015).

I expect a reversal because individuals' amounts of overtime varied greatly, the trial court used an "average" based on a sample and applied it to all class members, and hundreds of class members worked no overtime at all.

The certiorari petition raises these two questions:

(1) Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and

(2) whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.