Some of you may be surprised to learn that conventional wisdom was that claims arising under the Fair Labor Standards Act (the federal law requiring the payment of minimum wage and overtime to most employees) cannot be released or waived without court or Department of Labor supervision. I certainly thought that until several years ago when I had to some in-depth research to enforce a settlement agreement releasing FLSA claims an employer entered with an employee. I learned then that the law was nearly as clearly developed nor black and white as I had initially thought.
Because of the uncertainty about the enforceability of the release of FLSA claims, employers wanting to settle threatened or pending FLSA claims have had to consider whether they wanted to seek DOL or court approval of the settlement. I have been told that some local offices of the DOL will not review or supervisor private settlement agreements between litigants and I have seen at least one court that likewise refused to do so. While Texas employers have had some limited judicial authority supporting enforcement of these private settlement agreements when bona fide disputes over wages existed (i.e,. one reported case), it was risky to seek the release of significant FLSA claims without seeking out and obtaining court approval of those settlements.
A recent case from the Fifth Circuit provides the parties some comfort in recognizing that where there is a bona fide dispute over the hours worked or compensation due, private settlements of FLSA claims do not required DOL or court supervision.
In Martin, union employees involved in the production of movie filmed in Louisiana filed a grievance with the union claiming that they had not been paid all contracted wages by the employer for the work they performed. The union investigated the employees’ grievance and concluded that it was impossible to determine whether the workers had worked on the days they claimed to work. The company and union negotiated a settlement of the disputed hours and the union entered the agreement on behalf of its members releasing the company for claims related to the disputed hours. The beneficiaries of the settlement received the contracted payments and cashed the checks for the disputed wages. Thereafter, some of the union members sued for additional wages they claimed they were owed. The Fifth Circuit, in a case of first impression, held that where there is a bona fide dispute over the hours worked or compensation owed, private settlement agreements releasing FLSA claims are enforceable and the parties need not seek DOL or court supervision for those releases to be valid.
You can download a copy of the opinion here.
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