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The Employer Handbook Blog
How do you make a wage-and-hour lawsuit go away?
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Nope. Try again.
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You need court approval.
The Fair Labor Standards Act sets minimum wage and overtime pay requirements for the vast majority of employees across the country. If an employee files an FLSA lawsuit for unpaid wages, there’s one way to get rid of it: bury the body with the approval of the court. That is, you reach a settlement agreement, file the agreement with the Court (where it’s publicly accessible), with a motion to approve the agreement.
According to this recent appellate court decision, a private settlement agreement — without making it publicly available — won’t cut it. Neither will stipulating to dismiss the case with prejudice under Rule 41 of the Federal Rules of Civil Procedure. This is because the purpose of the FLSA is to make sure that employees get paid what’s owed to them. (And something about private settlements creating the potential for unscrupulous employers taking advantage by lowballing employees into taking pennies on the dollar).
(Note: The court left open the possibility of a dismissal without prejudice in lieu of obtaining court approval of the FLSA settlement).
Or DOL approval.
If the employer and employee want to settle an FLSA dispute before a lawsuit is filed, they can do so. Technically, however, most courts agree (with this decision) that a private FLSA settlement agreement requires approval by the Department of Labor.
Still, will some employers “roll the dice” and settle pre-litigation FLSA claims privately without the DOL involvement? Sure. Indeed, there may be some language that can go into the private settlement agreement to deter an employee, with second thoughts, from using the settlement proceeds to fund a subsequent FLSA lawsuit.
Whatever path you decide to take, be sure to consult an employment lawyer.