For over 30 years, the federal courts in Florida (and in other states) have required that settlements of minimum wage and overtime claims under the Fair Labor Standards Act (“FLSA”) be reviewed and approved either by a court or the US Department of Labor. Now, one court, the Fifth Circuit Court Of Appeals, the federal appeals court for Texas, Mississippi and Louisiana, has carved out an exception to this rule. The appeals court held that where there is a bona fide dispute as to the amount of hours worked by the employee, such review and approval is not necessary.
In Martin v. Spring Break ’83 Productions, the plaintiffs, a group of lighting and rigging technicians working on a movie in Louisiana, filed a grievance through their union claiming that they had not been paid wages for the work they performed. The union representative conducted an investigation and concluded that it would be impossible to determine whether the plaintiffs had indeed performed the work on the days they alleged they had. Consequently, the movie production company and the union reached a settlement over the disputed hours. Prior to the union signing off on the settlement, the plaintiffs filed a lawsuit in California seeking the unpaid wages. The case was transferred to Louisiana where the trial court granted summary judgment for the movie production company. The trial court based its ruling on a Texas ruling from 2005, Martinez v. Bohis Bearing Equipment Co., holding that parties may reach private compromises on FLSA claims where there is a bona fide dispute as to the amount of hours worked or compensation due. The plaintiffs appealed.
On appeal, the plaintiffs argued that the releases in the settlement were not valid because individuals may not privately settle FLSA claims without DOL or court approval. The Fifth Circuit rejected the argument and, instead, agreed with the reasoning in Martinez:
The Settlement Agreement was a way to resolve a bona fide dispute as to the number of hours worked…and though, Appellants contend they are yet not satisfied, they received agreed-upon compensation for the disputed number of hours worked.
It is important to understand that under the Fifth Circuit’s holding, not all private settlements are enforceable, only those where there is a bona fide dispute as to the amount of hours worked. For example, an agreement releasing or waiving FLSA coverage issues or other substantive FLSA rights would not be enforceable without court or US Department of Labor review and approval.
As of now, the ruling applies only to federal courts in Texas, Mississippi and Louisiana. However, the decision presents the possibility that other circuits, including the Eleventh, may move towards permitting private FLSA settlements under similar circumstances