Do you remember the movie “Spring Break ’83”?  We don’t either, but it has spawned what may be the most significant Fair Labor Standards Act case this year.

The FLSA has traditionally been read to preclude private releases of claims for minimum wages or overtime.  The genesis of this requirement is the fear that employers will force employees to waive valid claims, or that employees seeking employment will too readily agree to waive their rights to overtime pay.  A release of FLSA claims has often been seen to require approval either by the United States Department of Labor or a court.  The Department of Labor, in fact, has a form, the WH-58, designed for supervised releases.  But this view may have been too strict.

The plaintiffs in Martin v. Spring Break ’83 Productions, L.L.C., Case No. 11-30671 (5th Cir. July 24, 2012), were sound and lighting technicians (“grips” in the trade) who had worked on the movie Spring Break ’83 in Louisiana in 2007.  During their employment on the set, they were represented by the International Alliance of Theatrical Stage Employees (“IATSE”) and several of its locals.  Toward the end of the movie’s production, they and others filed grievances with the union, contending that they were not paid wages for all of the time they had worked.  The union investigated the claims and, after finding no documentary proof that the workers had worked the hours they claimed, settled the grievances with the employer.  The settlement contained broad release language that included claims by the individual members.  It was not, however, approved by either a court or the DOL.

Before the settlement was signed, however, four of the covered employees filed suit for their claimed overtime pay in California against the entities involved in the movie’s production as well as four individual defendants.  The defendants successfully moved to transfer the claims back to Louisiana, and the district court there eventually granted summary judgment on the employers’ behalf.

The Fifth Circuit first dealt with issues relating to the individual defendants and ultimately concluded that they could not properly be considered “employers” under the FLSA.  After disposing of that issue, it turned to the issue of the release.

The court first reviewed prior authority relating to the enforceability of unsupervised releases.  It distinguished cases that had held that such releases were not enforceable, finding that they frequently involved cases in which there was no valid dispute over time or the employer took particular advantage of the employees involved.  Finding that an unsupervised release of bona fide FLSA claims will be enforced, it affirmed the district court’s grant of summary judgment.

Depending on how future courts interpret it, Martin may have a substantial impact in FLSA collective action litigation, as well as FLSA litigation generally.  For example, FLSA litigation often arises in the wake of employment actions such as reductions in force.  If the class members have signed waivers of claims, employers may have an argument that their FLSA claims (apart from clear-cut minimum wage or overtime claims) may be waived.  As a minimum, the existence of such releases may suggest that the class members’ claims are not similar, thus making certification inappropriate.  We are likely to see a raft of cases in the months ahead either accepting or rejecting Martin and giving more guidance on its coverage and potential limitations.

The Bottom Line:  Under the right circumstances, at least one Circuit Court has found that an unsupervised release of FLSA claims is enforceable.