For years, the conventional wisdom among FLSA practitioners has been that waiver of FLSA claims requires “supervision,” either from a court or the federal Department of Labor. This supervision requirement dates back to the seminal appellate case on the subject, Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982). Since Lynn’s Food was decided 30 years ago, district courts have largely concluded, based on its analysis, that their supervision of any “compromise” of an alleged FLSA claim is necessary, or the claim is not released. Id.; Tuan Le v. SITA Info. Networking Computing USA, Inc., 2008 U.S. Dist. LEXIS 46174 (E.D.N.Y. June 12, 2008). In a new opinion, the Fifth Circuit has declined to read Lynn’s Food to require supervision in all instances, finding that settlement and waiver of FLSA claims can be effectuated without court supervision under certain circumstances. Martin v. Spring Break '83 Prods., LLC, 2012 U.S. App. LEXIS 15285 (5th Cir. July 24, 2012).
In Martin, the plaintiffs, unionized employees who worked as grips on the set of the film “Spring Break ‘83” in Louisiana, filed a grievance through their union regarding alleged unpaid hours worked. Plaintiffs also filed a lawsuit in California state court against the production company and the individual film executives, alleging violations of the FLSA and other claims, which Defendants promptly removed to federal court and transferred to Louisiana. Shortly after the litigation was filed, Plaintiffs reached a settlement through their union, and signed a settlement agreement waiving all claims. Defendants moved for summary judgment based on the settlement agreement. In a lengthy opinion, a district judge in Louisiana ruled that that settlement agreement properly waived their claims. Plaintiffs appealed, arguing that the absence of court scrutiny for fairness rendered the FLSA waiver unenforceable.
The Fifth Circuit, while acknowledging Lynn’s Food and its impact on this analysis in a lengthy footnote, ultimately concluded the supervision was unnecessary, and affirmed the district judge’s dismissal of the claims. The court observed that the Plaintiffs “were already benefitting from legal counsel before the Settlement Agreement was signed in November 2009. In fact, [Plaintiffs] knew about their rights under the FLSA and had retained attorneys at least by July 9, 2009, the date that [Plaintiffs’] attorneys signed their first amended complaint, filed with the Superior Court of California for the County of Los Angeles, for, among other things, ‘overtime under the FLSA.’ The money [Plaintiffs] received and accepted, pursuant to the Settlement Agreement, for settlement of their bona fide dispute did not occur outside the context of a lawsuit, hence the concerns that the Eleventh Circuit expressed in Lynn's Food Stores are not implicated.” The Court also rejected Plaintiffs’ argument, based on Barrentine v. Arkansas-Best Freight Sys., 450 U.S. 728 (1981), that because a union cannot waive a member’s FLSA rights in a collective bargaining agreement (CBA), Plaintiffs could not waive them “through the Union-facilitated grievance procedure laid out in the CBA.”
Martin constitutes a watershed departure from the current legal landscape regarding judicial supervision of FLSA settlements. Where an FLSA claimant is represented by counsel, and an adversary process had clearly been instituted to prosecute and protect his or her claims, a subsequent settlement and release of those claims may constitute a valid release, particularly in Fifth Circuit courts (those within Texas, Louisiana and Mississippi). In this area of wage/hour law, as most others, state law rules governing supervised waiver of state claims must be considered, where applicable. Lewis v. Giordano's Enters., 397 Ill. App. 3d 581 (Ill. App. Ct. 1st Dist. 2009)(supervision required under Illinois state law).