Is judicial approval of an overtime settlement required?
Traditionally, courts subscribed to the idea that judicial approval was necessary for any FLSA settlement. Prior to 1945, the majority of court decisions had determined that employers and employees could not reach private settlements as to unpaid wages or overtime compensation so as to waive the liquidated damages claim under the Act. See, e.g., Fleming v. Post, 146 F.2d 441 (2d Cir.1944); Seneca Coal & Coke Co. v. Lofton, 136 F.2d 359 (10th Cir.1943). The ability to settle claims in cases involving bona fide disputes was less certain, however. See Atlantic Co. v. Broughton, 146 F.2d 480 (5th Cir.1944) (“If … the payments in settlement were made under such circumstances as would create an agreement of accord and satisfaction, the claim for liquidated damages upon the amounts given in settlement was extinguished. If not, such claims continue to be valid obligations enforceable….”). However, since then the law has evolved, such that courts are split on the issue of whether judicial approval of an FLSA settlement is required or not. Four federal appellate courts have weighed in on the issue, with mixed results:
- In Lynn’s Food Stores, Inc. v. United States, the Eleventh Circuit held that an agreement between an employer and employees to compensate them far below the amount the DOL had determined they were owed was invalid because it “violated the provisions and purposes of the FLSA.” 679 F.2d 1350, 1354 (11th Cir. 1982).
- The Fifth Circuit held Martin v. Spring Break ’83 Productions, L.L.C. that a payment to employees pursuant to a private settlement agreement with their employer was “an enforceable resolution of those FLSA claims predicated on a bona fide dispute about time worked and not as a compromise of guaranteed FLSA substantive rights themselves.” 688 F.3d 247, 255 (5th Cir. 2012).
- In Cheeks v. Freeport Pancake House, Inc., the Second Circuit held that stipulated dismissals settling FLSA claims with prejudice require the approval of the district court or the DOL to take effect. 796 F.3d 199 (2d Cir. 2015).
- The Eighth Circuit has not decided whether 29 U.S.C. § 216 requires judicial approval of all FLSA settlements, although it has held that any authority for judicial approval does not extend to review of settled attorney fees. Barbee v. Big River Steel, LLC, 927 F.3d 1024, 1027 (8th Cir. 2019).
Federal district court decisions in circuits that have not spoken on this issue are likewise a mixed bag, however the trend is toward not requiring court approval of FLSA settlements. In Ruiz v. Act Fast Delivery of Colorado, Inc., the District of Colorado held after a thorough discussion that “absent special circumstances, FLSA settlements do not require court approval.” No. 14-cv-00870-MSK-NYW, ECF No. 132 (D. Colo. Jan. 9, 2017), (unpublished); see also Serna v. Bd. of Cty. Comm’rs of Rio Arriba Cty, No. 17cv196-RB-KBM, 2018 WL 4773361 (D.N.M. Oct. 3, 2018) (absent special circumstances, FLSA settlements do not require court approval); Lawson v. Procare CRS, Inc., No. 18-CV-00248-TCK-JFJ, 2019 WL 112781 (N.D. Okla. Jan. 4, 2019) (noting that the majority of districts have held that court approval is not necessary).
A district court in New Mexico was recently asked to approve a FLSA settlement. Reviewing this caselaw, Judge Johnson discussed the legal landscape on this issue and determined that, at least in the 10th Circuit, judicial approval of an FLSA settlement was not necessary. Hawthorn v. Fieesta Flooring, LLC, No. 1:19-CV-00019 WJ/SCY (D.N.M., June 10, 2020).
In this author’s opinion, the Hawthorn decision is correct. The notion that a plaintiff represented by counsel would still need a court’s blessing in order to settle an FLSA claim is an outdated and unreasonable one. The plaintiff’s counsel is in the best position to evaluate whether a settlement of an FLSA claim is fair and reasonable.
Josh Borsellino is a Texas attorney who represents workers suing for unpaid overtime. If you have an overtime question, call Josh at 817.908.9861 or email him here for a free evaluation of your overtime claim.