Are private and confidential FLSA settlements enforceable?12.06.17
Fair or not, when the general public learns that an employer has settled a lawsuit brought by one of its employees, the settlement is often viewed an admission of liability by the employer. Avoiding this type of negative publicity is why private and confidential settlements can be so valuable, and employers facing a potential discrimination lawsuit pursue these types of settlements on a regular basis.
But, if the employer is facing a potential lawsuit for unpaid overtime or other wage-and-hour claims, are the benefits of confidentiality still present? Unless you live in Louisiana, Mississippi, Texas, or (maybe) Washington, D.C., the short answer is “no.”
Why is that?
Because under the FLSA privately negotiated and confidential settlements of wage-and-hour claims are not enforceable. Virtually every federal court[i] that has looked at this issue, with a couple exceptions, has held or otherwise asserted that private settlements of FLSA claims must be reviewed and approved by either the U.S. Department of Labor or a federal district court to be enforceable and/or that an FLSA settlement agreement’s confidentiality provision is unenforceable. The FLSA is unique in this regard; none of the federal anti-discrimination statutes -- the ADA, ADEA, FMLA, or Title VII -- impose these requirements. . For employers who value the intangible benefits of private and confidential settlements that are enforceable, this unique aspect of the FLSA can be a significant factor when deciding whether to fight or settle a case.
As for the exceptions mentioned above, where can those be found? The Fifth Circuit, which encompasses Louisiana, Mississippi, and Texas, as well as Washington, D.C. (maybe). A few years ago, in Martin v. Spring Break ’83 Productions, LLC, 688 F.3d 247 (5th Cir. 2012), the Fifth Circuit broke with practically every other federal court and held that private settlements under the FLSA did not need approval from the U.S. Department of Labor or a federal district court to be enforceable.
Unfortunately, Martin did not foreshadow a change in the legal status quo. Federal courts have continued to find private and confidential FLSA settlements unenforceable, even after Martin was decided. The D.C. District Court is the only federal court anywhere outside the Fifth Circuit to adopt the rationale set forth in Martin. See Sarceno v. Choi, 66 F. Supp. 3d 157 (D.D.C. 2014) (“The Court concurs with the reasoning of the Fifth Circuit in Martin that a private settlement of FLSA claims may be enforceable . . . but only when the agreement resolves a bona fide dispute between the parties and the terms of the settlement are fair and reasonable.”)
Moreover, the Fifth Circuit has since limited the scope of its holding in Martin in Bodle v. TXL Mortgage Corp., 788 F.3d 159 (5th Cir. 2015). In Bodle, the plaintiffs filed an FLSA action against their former employer even though the parties previously entered into a private settlement agreement containing a broad, generic release of all claims – including claims arising under the FLSA. Relying on this release, the former employer sought to have the FLSA action dismissed. The Fifth Circuit, however, found the release to be unenforceable because private settlements of FLSA claims were only enforceable when there was a “bona fide dispute as to the amount of hours worked or compensation due.” Thus, releases of FLSA claims through private settlements are not enforceable unless they are limited in this manner.
In sum, private and confidential settlements of FLSA claims are unenforceable everywhere except the Fifth Circuit and (maybe) Washington, D.C. And, even when such settlements are allowed, they are only enforceable in limited circumstances. Of course, there is nothing stopping an employer from settling FLSA claims privately and confidentially anyway, but it should be aware of the risks it faces should it choose to do so.
[i]See, e.g., Singleton v. AT&T Mobility Servs., LLC, 146 F. Supp. 3d 258 (D. Mass. 2015); Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. Aug. 2015); Kraus v. PA Fit II, LLC, 155 F. Supp. 3d 516 (E.D. Pa. 2016); Simmons v. United Mortg. & Loan Inv., LLC, 634 F.3d 754 (4th Cir. 2011); Steele v. Staffmark Invs., LLC, 172 F. Supp. 3d 1024 (W.D. Tenn. Mar. 2016); Walton v. United Consumers Club, 786 F.2d 303 (7th Cir. 1986); Blevins v. Corporate Bus. Sys., 2014 U.S. Dist. LEXIS 2477 (W.D. Mo. Jan. 9, 2014); Selk v. Pioneers Mem. Healthcare Dist., 159 F. Supp. 3d 1164 (S.D. Cal. 2016); Koehler v. Freightquote.com, Inc., 2016 U.S. Dist. LEXIS 48597 (D. Kan. Apr. 11, 2016); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982).