The Fifth Circuit Court of Appeals recently held that a private settlement under the Fair Labor Standards Act (FLSA) is valid. This ruling marked the first time a federal appellate court enforced a private FLSA settlement. Historically, Federal district and appellate courts have refused to enforce settlements and/or waivers of FLSA rights without Department of Labor (DOL) or court approval.
In Martin et al. v. Spring Break ’83 Productions, L.L.C. et al.; No. 11-30671 (July 24, 2012), the four plaintiffs were employed by Spring Beak as lighting and rigging technicians on the movie “Spring Break ’83.” All four plaintiffs were members of the International Alliance of Theatrical Stage Employees Local 478 Union. When the film completed, the four plaintiffs filed a grievance claiming they were not paid for all the hours they had worked. After an investigation, the Union concluded that trying to determine what days and for how long the four plaintiffs had worked was impossible. Subsequently, the Union (as exclusive representative of the employees in the bargaining unit) and Spring Break entered into a settlement agreement concerning the disputed hours worked and the settlement payments owed the four plaintiffs. In exchange for the settlement payments, the four plaintiffs agreed to waive their right to file any complaints or lawsuits against Spring Break.
Before the settlement agreement was signed by the Union, the four plaintiffs filed a lawsuit against Spring Break and several other individual and corporate defendants to recover their unpaid wages. Spring Break and the remaining defendants asked the district court for a summary judgment, asserting under the settlement agreement, the four plaintiffs waived the right to file any lawsuit. In response, the four plaintiffs argued that they had not agreed to waive their right to file any complaint or lawsuit for their unpaid wages because the settlement agreement had not been signed, or approved by the DOL or by a court of competent jurisdiction.
Adopting the holding and logic of Martinez v. Bhols Bearing Equip. Co., 361 F. Supp. 2d 608 (W.D. Tex. 2005), the district court granted the summary judgment to the defendants. The district court noted there was no binding precedent that addressed whether parties may privately settle disputes regarding unpaid waged under the FLSA. Furthermore, where there is a bona fide dispute as to the amount of hours worked or wages due, a release or waiver under such circumstances is enforceable.
On appeal, the Fifth Circuit Court of Appeals followed the district court, adopted the holding and reasoning in Martinez, and found that the payments offered to and accepted by the four plaintiffs under the settlement agreement, was “an enforceable resolution of those FLSA claims predicated on a bona fide dispute about time worked and not as a compromise of guaranteed FLSA substantive rights themselves.” The Court of Appeals noted that the settlement payments the four plaintiffs received and accepted occurred within the context of a lawsuit (because the four plaintiffs had already filed suit when the settlement agreement was executed). There was thus little danger of the employees being disadvantaged by unequal bargaining power.
In reaching its decision, the Fifth Circuit also analyzed and reject the four plaintiffs’ argument that the Supreme Court’s decision in Barrentine v. Arkansas-Best Freight Sys., 450 U.S. 728 (1981) invalidated the settlement agreement. The Fifth Circuit rejected this argument stating that in Barrentine, “the four plaintiffs’ grievances based on the FLSA were submitted by the union to a joint grievance committee that rejected them without explanation, a final and binding decision pursuant to the collective bargaining agreement.” But in Martin, the Fifth Circuit noted, the plaintiffs “accepted and cashed settlement payments–[plaintiffs’] FLSA rights were adhered to and addressed through the Settlement Agreement, not waived or bargained away.” Thus, the Supreme Court’s concern in Barrentine that FLSA substantive rights would be bargained away are not implicated in this case. As the Fifth Circuit explained in Martin, “FLSA rights were not waived, but instead, validated through settlement of a bona fide dispute, which [plaintiffs] accepted and were compensated for.”
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