This practice note will help you navigate whether and how to make an offer of judgment in employment cases. Federal Rule of Civil Procedure 68 provides defendants with this tool to pressure plaintiffs to settle. Most states have their own offer of judgment analogue.

This practice note addresses, specifically in the employment context, the following Rule 68 issues:

  • Purpose and procedure and potential benefit to the defendant
  • Does the governing statute include attorney's fees in its definition of "costs?"
  • Potential disadvantages of Rule 68 offers in single-plaintiff cases
  • Factors to consider when deciding whether to make an offer of judgment
  • Drafting the offer
  • State law offers of judgment and the interplay of federal and state claims
  • Offers of judgment and the mootness doctrine (including class/collective actions)

Lexis Practice Advisor's Employment Litigation topic contains a Rule 68 Offer of Judgment with drafting notes and alternate and optional clauses as well as a checklist on making Rule 68 offers of judgment.

Purpose and Procedure and Potential Benefit to the Defendant

The purpose of Rule 68 is to "prompt both parties to a suit to evaluate the risks and costs of litigation, and to balance them against the likelihood of success upon trial on the merits." Marek v. Chesny, 473 U.S. 1, 5 (1985). The rule permits defendants, at least 14 days prior to the date set for trial, to make an offer to the plaintiff which, if accepted, requires an entry of judgment against the defendant, on the terms provided for in the offer. Alternatively, if the plaintiff rejects or does not respond to the offer within 14 days and subsequently receives a less favorable judgment at trial, the plaintiff must pay the defendant's post-offer costs and is not entitled to its own post-offer costs to which it might otherwise be entitled under several employment law statutes.

These statutes include Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-5(k); The Fair Labor Standards Act of 1938, 29 U.S.C. § 216(b); The Americans with Disabilities Act of 1990, 42 U.S.C. § 12205; The Age Discrimination and Employment Act of 1967, 29 U.S.C. § 626(b); and The Reconstruction Civil Rights Act, 42 U.S.C. § 1983 (§ 1983).

In addition, as explained in more detail below, under Title VII and § 1983, the defendant may also potentially block the plaintiff from obtaining his or her post-offer attorney's fees through a successful Rule 68 offer. Note that in all cases if the defendant wins on the merits, then Rule 68 does not apply. The defendant is therefore not entitled to payment from the plaintiff for its post-offer costs. Delta Air Lines v. August, 450 U.S. 346, 351-52 (1981).

Does the Governing Statute Include Attorney's Fees in Its Definition of "Costs?"

Depending on the statute governing the action, "costs" may include attorney's fees. In Marek v. Chesny, 473 U.S. 1 (1985), the U.S. Supreme Court explained that "where the underlying statute defines costs to include attorney's fees ... such fees are to be included as costs for the purposes of Rule 68." 473 U.S. at 9. In contrast, when the underlying statute defines attorney's fees separately from costs, attorney's fees are not included as costs for purposes of Rule 68.

Title VII and § 1983

For example, Title VII defines "costs" to include attorney's fees by stating that a court may allow the prevailing party "a reasonable attorney's fee (including expert fees) as part of the costs." 42 U.S.C. § 2000e-5(k) (emphasis added). Section 1983 also includes attorney's fees as a part of costs. 42 U.S.C. § 1988(b). Fee-shifting statutes in the employment discrimination context only provide for the prevailing plaintiff to obtain attorney's fees. See, e.g., Stanczyk v. City of New York, 752 F.3d 273, 280-82 (2d Cir. 2014) (§ 1983 case); 42 U.S.C. § 2000e-5(k). Thus, when a plaintiff rejects a defendant's Rule 68 offer, and then obtains less than that offer at trial, Rule 68 will not permit a prevailing defendant to obtain payment from the plaintiff for defendant's attorney's fees. See, e.g., Tai Van Le v. University of Pennsylvania, 321 F.3d 403, 411 (3rd Cir. 2003) (defendant not entitled to its own attorney's fees in Title VII case when plaintiff received a less favorable judgment than defendant's Rule 68 offer). However, the defendant may be entitled to have the plaintiff pay the defendant's post-offer costs.

  • Hypothetical Case: Early in a Title VII case, the defendant determines that the plaintiff's attorney's fees accrued up until that point are $2,000. The defendant determines that the plaintiff will likely accrue attorney's fees up to $10,000 to prosecute the entire action. Also, the defendant determines that the plaintiff's damages are calculable with certainty and are no more than $5,000. This may be a good case to consider an offer of judgment because under a fee-shifting statute, after trial a losing defendant may owe up to $15,000 — the plaintiff's total amount of attorney's fees and damages.

In this scenario, assume the defendant makes a Rule 68 offer of judgment for $5,100, inclusive of attorney's fees and costs incurred as of the date of the offer. If the plaintiff accepts the offer, the defendant will owe $5,100 — the amount of the offer. Further, the defendant will cease having to pay its own lawyer to litigate the case. If the plaintiff does not accept the offer, assume the plaintiff is the prevailing party but only obtains $3,000 in damages at trial. The defendant will only be liable for $5,000 — the sum of (1) the damages plaintiff obtained at trial — $3,000, and (2) the amount of the plaintiff's attorney's fees that accrued up until the time the defendant made the Rule 68 offer — $2,000.

FLSA, ADA and ADEA

In contrast, the FLSA does not define costs as including attorney's fees by stating courts shall "allow a reasonable attorney's fee to be paid by the defendant, and costs of the action" (emphasis added). 29 U.S.C. § 216(b). The ADA and ADEA also do not include attorney's fees as a part of costs. 42 U.S.C. § 12205 (ADA); 29 U.S.C. § 626 (ADEA — incorporating fee-shifting provisions from the FLSA).

Therefore, the use of an offer of judgment in a FLSA, ADA or ADEA case will not stop the accrual of the plaintiff's attorney's fees at the time of the offer. It will stop the accrual of other costs. If the plaintiff prevails at trial — regardless of whether the defendant made a Rule 68 offer — the plaintiff will be entitled to its full attorney's fees under the FLSA, ADA or ADEA. See, e.g., Fegley v. Higgins, 19 F.3d 1126, 1134-35 (6th Cir. 1994); Brandt v. Magnificent Quality Florals Corp., 2011 U.S. Dist. LEXIS 113195, at *17-21 (S.D. Fla. Sept. 30, 2011); Nhan Tran v. Tran Thai, 2011 U.S. Dist. LEXIS 17504, at *4-5 (S.D. Tex. Feb. 23, 2011); Grochowski v. Ajet Construction Corp., 2002 U.S. Dist. LEXIS 5031, at *6 (S.D.N.Y. March 27, 2002).

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Previously published by Law360.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.