As we recently discussed, the Court of Appeals for the Fifth Circuit called into question the FLSA’s long-standing judicial supervision requirement, creating a split of authority between its decision rejecting the supervision requirement where other indicia of fairness are present, and the Eleventh Circuit’s 1982 decision relied on by courts which requires supervision (Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982)). In a recent decision, a federal court in Arizona joined the Fifth Circuit’s camp, questioning whether supervision of an FLSA settlement was necessary. Smith v. Tri-City Transmission Serv., 2012 U.S. Dist. LEXIS 119428 (D. Ariz. Aug. 23, 2012).
In Smith, the parties presented their settlement for approval by joint motion, based on an apparent abundance of caution and in light of the prevailing view in Ninth Circuit district courts that, under Lynn’s Food, such supervision was required. See, e.g., Dowling v. Emadco Disposal Serv., 2011 U.S. Dist. LEXIS 53351 (E.D. Cal. May 17, 2011). Approving the parties settlement as a bona fide dispute over plaintiff’s exempt status, Judge Frederick J. Martone observed that “The parties settled their disagreements within the context of a pending lawsuit. Following the logic of [the Fifth Circuit], such a settlement agreement could reasonably be found binding upon the parties even without court approval.”
FLSA defendants discussing or actively seeking resolution must consider the settlement options available to them in their jurisdiction, and attendant risks, in light of this new line of judicial decisions.