Many litigants in FLSA cases find practical obstacles in settling the matters, particularly when there are disputes regarding what exactly has happened or when the underlying claim turns out to be very small.
This process is made more difficult by the judicial interpretation of the FLSA's enforcement provision, section 16, which permits the Department of Labor to supervise settlements. Courts have reached different conclusions regarding the interpretation of this power and whether it means that FLSA settlements can be reached only with DOL or judicial approval. The parties may wish to avoid obtaining approval for any number of reasons that may include the cost of doing so, the time delay in seeking approval or a desire for confidentiality. Can the parties, as they do with virtually every other kind of employment case, find a means of settling their matters without having to seek review?
The Fifth Circuit in 2012 distinguished between disputed and undisputed claims. In Martin v. Spring Break '83 Productions, L.L.C., that court held that parties could resolve disputed claims without judicial or DOL supervision. We blogged that decision here. The court contrasted the resolution of a genuine dispute with an instance where there was no dispute that the employer owed the overtime or minimum wage claimed, but was using some undue force to coerce a lesser settlement. Unfortunately, as that case has not gained universal acceptance, it leaves unsupervised releases in doubt, at least outside of the Fifth Circuit.
In Yu v. Hasaki Restaurant, Inc., Case No. 17-3388-cv (2d Cir. Dec. 6, 2019), the Second Circuit approved a different route, this one through Rule 68. The Yu case involved a sushi chef who sought to pursue a collective action against his restaurant employer on his own behalf and that of other restaurant employees. The employer responded with a Rule 68 offer of judgment of $20,000 plus reasonable attorney fees and costs. The offer was accepted, but the district court sua sponte ordered that the settlement agreement be presented for review or, alternatively, that they explain why such review was unnecessary. The district court eventually determined that review was necessary, but given questions about the issue certified the matter for interlocutory appeal.
In a 2:1 decision, the Second Circuit found, in essence, that Rule 68 trumped any requirement of judicial review and thus that court approval of the settlement was unnecessary. The court carefully reviewed the meaning and purpose of both Rule 68 and the FLSA and found that on balance the parties, represented by counsel, should be able to make their own decisions about settlement through the Rule 68 vehicle. The dissent, which described itself as "emphatic" equally carefully reviewed the various lines of authority, found that judicial approval was needed, Rule 68 or not, and invited Supreme Court review.
All of this leaves the parties in a quandary. They can always seek judicial review, but courts vary greatly in how they view various settlement provisions in attorney fees, and some courts in particular give special attention to attorney fee provisions that the plaintiffs' counsel does not desire. If the matter is disputed, and they are in the Fifth Circuit, it appears that approval is not needed. For now, at least, Rule 68 will work in the Second Circuit. Although the dissent called for the Supreme Court to address the issue, since neither of the parties wanted review in the first place, it does not appear that either side will seek it.
The need for review is a vestige of decades ago when the fear was that overreaching employers, and employees concerned with their jobs, would undermine the nationwide minimum wage and overtime standards. In an age when literally thousands of individual, class, and collective wage and hour standards are filed each year, the case for treating these claims differently from the vast majority of other employment claims seems less compelling.
The bottom line: Some courts are permitting various vehicles to permit FLSA settlements without court approval, but the law in this area remains highly uncertain.
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