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Can Private Parties Settle Wage-and-Hour Disputes Without Supervision?

Yes, according to Martin v. Spring Break ’83 Productions, LLC, a Fifth Circuit Court decision dated July 24, 2012, private Fair Labor Standards Act (“FLSA”) settlements may be allowed without the approval of either the Department of Labor (“DOL”) or the court.  If followed, this is a major advancement for employers who want to quietly resolve wage-and-hour disputes.

The employees were film-industry technicians working on the filming of a movie, Spring Break ’83, who were members of the International Alliance of Theatrical Stage Employees, Local 478 (“Union”).  The Union entered into a Collective Bargaining Agreement (“CBA”) with the employer, a production company, at the start of filming.  The employees claimed they were not paid for hours allegedly worked.  In response, a union representative investigated the merits of the claims and concluded it would be impossible to determine if the employees worked the hours they alleged.  The Union and the employer entered into a settlement agreement acknowledging the existence of the dispute but calling for payments to the employees based on a compromised amount of time.  Before the settlement was signed, the employees filed suit.

The Court held the employees were bound by the terms of settlement, despite not having personally signed the agreement, because the agreement and the CBA stated that the Union was the authorized representative, and the employees accepted and cashed their settlement checks.

The Court was persuaded that the private resolution was based on a “bona fide dispute” revolving around the amount of time worked, and was not a compromise of the employees’ guaranteed FLSA substantive rights.  The Court did not feel there was unequal bargaining power affecting the settlement because the employees were represented by a union and settlement occurred during the course of litigation.  Further, even though courts have generally held that all FLSA settlements must be approved by the DOL or the court, this case did not fit under that proposition because the plaintiffs knew their FLSA rights, had counsel, and accepted their compensation in the context of litigation.

Courts have long held private settlement agreements could not be made without the approval of the DOL or the court to ensure employers do not pressure employees into giving up their rights under the FLSA.  In the seminal case, the employees did not speak English, had not consulted an attorney, were unaware of a DOL investigation and determination of wages owed, were generally unaware of their rights under the FLSA, and the agreement was made outside of the context of litigation.  See Lynn’s Food Stores, Inc. v. United States.  Those facts are very different from the Martin facts.

This case gives employers support for signing a private settlement of bona fide FLSA issues, especially cases involving time allegedly worked, without supervision.  It remains to be seen if other courts will adopt this holding.  If you want to try a private settlement, be sure to use counsel that can help you craft a settlement agreement that will maximize the likelihood that Martin will apply.

Brody and Associates regularly advises management on the FLSA and wage and hour issues.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.