Is Court or DOL Approval Required for Settlements of Claims under the FLSA?
Maybe not – two recent cases cast doubt on the longstanding assumption that settlements under the Fair Labor Standards Act (FLSA) require approval by either a court or the Department of Labor (DOL) to be enforceable.
The leading case holding that court or DOL approval is necessary for FLSA settlements is Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982). In that case, the Eleventh Circuit Court of Appeals explained that:
Recognizing that there are often great inequalities in bargaining power between employers and employees, Congress made the FLSA’s provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employees.
The court further explained that:
FLSA rights cannot be abridged by contract or otherwise waived because this would “nullify the purposes” of the statute and thwart the legislative policies it was designed to effectuate.
Accordingly, the court in Lynn’s Food Stores, Inc. held that either court or DOL approval was required for an FLSA settlement to be enforceable. The court explained that when a court reviews a proposed settlement under the FLSA, it must ensure that the settlement is “a fair and reasonable resolution of a bona fide dispute over FLSA provisions.”
Two recent decisions have suggested that court approval is not always required for an FLSA settlement to be enforceable. First, the Fifth Circuit Court of Appeals held that a private settlement of FLSA claims may be enforceable without court or DOL approval when there exists a “bona fide dispute to liability” and the plaintiff-employees are represented by legal counsel. See Martin v. Spring Break ’83 Productions, L.L.C., 688 F.3d 247, 255–56 (5th Cir. 2012), cert. denied, 133 S.Ct. 795 (Dec. 10, 2012).
More recently, the Eastern District of New York held that court approval was not required for an FLSA settlement if the litigation had already commenced and the plaintiff-employees were represented by counsel. In that case, the judge explained that:
[A]lthough I have ruled to the contrary in the past, I have come around to the view that the procedure of a court requiring approval before it permits parties to voluntarily dismiss an FLSA action is incorrect. It runs afoul of Fed. R. Civ. P. 41, which gives the plaintiff, at the early stage of the case, or the parties jointly, at a later stage in the case, free reign to discontinue for any reason.
Picerni v. Bilingual SEIT & Preschool Inc., No. 12 Civ. 4938 (BMC) (E.D.N.Y., Feb. 22, 2013). The judge stated that “I believe the parties can voluntarily dismiss an FLSA case without judicial approval —if the defendant is willing to undertake the risk of doing so.”
Takeaways: The trend against a strict requirement for court or DOL approval of FLSA settlements is favorable for employers. However, the law in this area remains unsettled. Therefore, if certainty is desired, employers may still want to obtain court or DOL approval of a settlement under the FLSA out of an abundance of caution.