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Settlement of FLSA Claim Not Possible Without Court or DOL Supervision

On Monday, the Eleventh Circuit ruled that an employer’s settlement of a Fair Labor Standards Act (FLSA) claim directly with a former employee, without supervision from the court or the Department of Labor, was invalid.

A former employee brought a lawsuit against the company and its owner, claiming that she was not paid overtime in violation of the FLSA. The owner called the plaintiff about settling her lawsuit and the two of them agreed to meet without attorneys present. The owner offered her a couple thousand dollars to sign a voluntary dismissal of her complaint and a letter to her attorney notifying him that the case had been settled.

After the dismissal document was filed, the court issued an order stating that because the plaintiff’s complaint had been filed by an attorney and she had not received permission to appear without that attorney, her pro se voluntary dismissal had no effect. Shortly thereafter, the company hired a lawyer to represent it and the owner, and the lawyer filed a motion to enforce the settlement agreement. Despite the plaintiff’s attorney’s objection, the judge approved the settlement and dismissed the case.

On appeal, the Eleventh Circuit reversed, and found that FLSA claims with former employees, in addition to current employees, can only be settled: (1) by a court-supervised settlement that results in a “stipulated judgment”; or (2) with approval from the Department of Labor. Therefore, the court vacated the judgment and remanded the case.

Employers should always hire a lawyer when a lawsuit is brought against them under the FLSA. Additionally, if a plaintiff is represented by an attorney, an employer should not be tempted to negotiate a settlement directly with the plaintiff, because that attorney will fight for his or her fees when he or she discovers what has transpired. As the Eleventh Circuit stated in its decision: “The case . . . demonstrates how a few dollars saved can lead to a lot more dollars spent.”

If you have any questions regarding this, or any other legal issue, please feel free to contact a member of Bingham Greenebaum Doll LLP’s Labor and Employment Practice Group.

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