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By: Brad Adler
Wage and hour lawsuits continue to be some of the fastest growing civil suits in our court system. In Georgia alone, FLSA lawsuits increased 40 percent in 2012, outpacing the approximately 13 percent increase nationwide by a significant margin.
Mirroring this increase in suits is an increase in significant decisions interpreting various aspects of the FLSA. For instance, the settlement of FLSA cases is an area that continues to be ripe for debate. Traditionally, courts have held that FLSA lawsuits cannot be settled unless the court reviews and approves the parties’ settlement agreement. Lynn’s Food Stores, Inc. v. U.S. Dept. of Labor, 679 F.2d 1350, 1353 (11th Cir. 1982).
A recent ruling from the Eastern District of New York, however, challenges this notion. In Picerni v. Bilingual SEIT & Preschool, Inc., the court concluded that private settlements of FLSA cases generally do not require court approval. The court distinguished the Lynn ruling as applying only in cases where there are atypical facts, such as pro se plaintiffs or where the defendant settles to avoid a Department of Labor investigation. While this case provides hope that a new trend may be established allowing settlement of FLSA cases without court approval, the Eleventh Circuit precedent set in the Lynn’s case continues to control wage and hour claims brought in federal courts in the states of Georgia, Florida and Alabama.
The requirement that courts review and approve FLSA settlements can be significant for employers, because it creates a potential public relations problem since most employers want settlement agreements to remain confidential. In non-FLSA cases, employers avoid this issue by including a confidentiality clause in the settlement agreement. The inclusion of such a clause in a typical employment claim is expected (and lawful), but there is a growing trend among federal judges to reject settlement agreements in FLSA claims that contain confidentiality provisions.
A recent case in the U.S. District Court for the Northern District of Georgia highlights this trend. The parties (both represented by counsel) submitted a proposed settlement agreement, which contained a confidentiality provision, for review and approval. The Court rejected the agreement due to the confidentiality provision, stating “[a] confidentiality provision furthers resolution of no bona fide dispute between the parties; rather, compelled silence unreasonably frustrates implementation of the ‘private-public’ rights granted by the FLSA and thwarts Congress’s intent to insure widespread compliance with the statute.” The Court also found that sealing the settlement agreement “thwarts Congress’s intent both to advance employees’ awareness of their rights and to ensure pervasive implementation of the FLSA in the workplace.”
This case represents a growing trend among federal courts around the country. As such, companies wishing to settle FLSA lawsuits likely will continue to find it increasingly difficult to ensure that such settlements are confidential. Of course, an employer and plaintiff are free to settle a wage and hour matter privately and the plaintiff may file a stipulation of dismissal. However, without court approval of the settlement, the release is not binding on any future claim by the plaintiff, and the employer runs the risk (albeit a low one) that the employee may re-file their action and seek additional compensation for any amount allegedly not paid as part of the resolution.