For years, the seminal case on the non-enforceability of private settlements of claims under the Fair Labor Standards Act has been Lynn's Food Stores, Inc. v. United States, which held that FLSA claims may not be settled without approval by a court or the U.S. Department of Labor. Of course, this also means that it can be very difficult to keep FLSA settlements confidential, as courts are increasingly rejecting requests to review and approve settlements under seal.
What many retail employers may not know is that private settlements may be permissible when there is a genuine dispute about liability, at least within the Fifth Circuit, which hears appeals from federal courts in Louisiana, Mississippi, and Texas.
The Fifth Circuit has recently upheld a private settlement of FLSA claims. In Martin, et al. v. Spring Break '83 Productions, LLC, et al., a group of union workers who had been working on a movie set filed a grievance alleging that they had not been paid wages for work that they performed. After an investigation, a union representative concluded that it would be impossible to determine what hours the workers had worked without pay. Accordingly, the parties entered into a settlement agreement regarding the number of hours in dispute.
Before the settlement was signed, the workers filed suit over the disputed hours. A district court granted summary judgment to the employer based on the settlement agreement, following Martinez v. Bohls Bearing Equip. Co., that a private compromise of claims under the FLSA is permissible where there exists a bona fide dispute as to liability. The Fifth Circuit affirmed.
The Martin and Martinez cases could be very helpful to retail employers attempting to settle with finality unverifiable "off-clock-work" claims. Caution should be exercised, however, because there remains a significant amount of case law holding that private waivers and releases of FLSA claims, without approval from a court or the U.S. Department of Labor, are unenforceable.