In a lot of civil cases, settling the matter is pretty straightforward. The parties will work out mutually agreeable terms, someone will prepare a written settlement agreement, and barring exceptional circumstances, the court will accept the settlement and dismiss the case. FLSA cases — and settlements — are a bit different and somewhat more complicated. There is a wider array of situations where, even if the parties have genuinely agreed, the court may reject a settlement. Working with a knowledgeable Atlanta wage and hour lawyer can enhance your odds of avoiding this kind of money and time-consuming situation.
When parties to a FLSA case filed in a federal court in Georgia, Florida, or Alabama seek to settle, they must comply with what the 11th Circuit Court of Appeals wrote in the 1982 case of Lynn’s Food Stores, Inc. v. United States. The Lynn’s Food ruling says that any acceptable settlement must be a “fair and reasonable resolution of a bona fide dispute over FLSA issues.”
One example of a settlement executed correctly comes from the federal court in Orlando, Florida. The employee was a handyman who worked for a local social services organization for two years and two months. During that time, the handyman allegedly worked more than 40 hours a week on several occasions. Despite this, the employer never paid him overtime compensation, according to his complaint.
As a result, the handyman sued in late November 2022. Six months later, the employer and employee ironed out a negotiated settlement.
The court’s analysis of a FLSA settlement proceeds on two fronts. One is ensuring that the settlement is reasonable and fair to the worker (what the law calls “internal factors.”) The other is making sure the settlement doesn’t “frustrate the purpose of the FLSA (what the law calls “external factors.”)
The settlement in the Orlando case cleared both hurdles. The plaintiff initially alleged that the employer owed him over $24,000 in overtime pay. The magistrate judge, considering the evidence, determined that the $8,000 ($4,000 in unpaid wages and $4,000 in liquidated damages) to which the parties agreed was fair and reasonable.
How Release Agreements May Derail Settlement Approval
An area where settlements can (and often do) go astray is release agreements. In the Orlando case, the agreement released only FLSA claims by the handyman against the agency, meaning it did not require the handyman to give up a broad range of unknown claims unconnected to the FLSA or wage and hour issues. As a result, it was acceptable to the court.
We can contrast that with another FLSA case from the same federal court. The minimum wage case pitted fast-food workers against their fast-food franchisee employer. The release provision in the sides’ settlement agreement was much broader than the one in the handyman’s case. This release said that “the parties agree to settle, release and waive any and all claims each has or may have against the other.”
That caused multiple problems. For one thing, it created the possibility that the workers were giving up unknown claims unrelated to the FLSA and/or minimum wage law. Additionally, the release was so expansive that it extended to parties that were not part of the case. The court explained that the “Release runs afoul of the FLSA because it attempts to release claims unrelated to those presented by Plaintiff’s Complaint without justification or a specified amount of additional compensation.” Those defects required the court to reject the settlement.
Another way settlement agreements can go astray is if they do not clearly delineate how much of the settlement sum covers unpaid wages and how much is for liquidated damages. For example, a settlement agreement from another Orlando overtime case passed muster because the parties’ settlement clearly called for the worker to receive $2,019,60 in unpaid wages and $2,019,60 in liquidated damages.
By contrast, a settlement in an FLSA case from Miami failed because it simply called for the worker to receive $10,000, without indicating how much of that $10,000 was for unpaid wages and how much for liquidated damages. The agreement also didn’t indicate whether the $10,000 was inclusive or exclusive of attorney’s fees, another flaw that prevented the court from determining whether the agreement was fair and reasonable.
As these cases demonstrate, settling your FLSA case is no basic matter. It requires someone who not only has a strong grasp on what is (or is not) fair and reasonable but also has in-depth knowledge of all the requirements of a settlement agreement that will garner court approval. The diligent Atlanta wage and hour attorneys at the law firm of Parks, Chesin & Walbert are here to help. Our team has the experience and the knowledge necessary to help you reach a fair settlement (when advisable,) and then get court approval of that agreement. Contact us through this website or at 404-873-8048 to schedule a consultation today.