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Employer Law Report

Stick a Fork in It: Supreme Court Declines Review and Allows Fifth Circuit’s Ruling Approving Private Settlements in FLSA Cases to Stand

Posted in Wage & Hour

We have kept you up to speed on Martin v. Spring Break ’83 Productions, L.L.C., here and then here, a Fifth Circuit case in which the Fifth Circuit approved a private settlement of employees’ claims for unpaid overtime under the Fair Labor Standards Act ("FLSA"). More specifically, the court held that parties could privately settle and release wage claims, under the right circumstances, and that doing so would not compromise employee rights guaranteed by the FLSA. The plaintiffs asked the Supreme Court to review the case arguing that the decision creates a split among the circuits, which it does. Martin is in direct conflict with Lynn’s Food Stores, Inc. v. United States, an Eleventh Circuit case dating back to 1982 that held that FLSA claims could only be settled with the approval of the Department of Labor or the courts.

Despite the inherent conflict between the two jurisdictions, the United States Supreme Court has declined to take up the issue and settle the split. With the Supreme Court’s move comes with good news and bad news. The bad news first, there will not be a resolution to this issue, at least not in the near future. Now the good, employers in the Fifth Circuit, which includes Texas, Louisiana, and Mississippi, can privately settle disputed claims under the FLSA in circumstances that are similar to those in Martin. So, for any such private settlement to be arguably valid under Martin, the following facts must be present in the case: (1) a genuine dispute regarding the compensation owed to the employee; (2) the employee must be aware of his or her rights under the FLSA; and (3) there the employee might be disadvantaged by unequal bargaining power. In addition, employers in other jurisdictions outside the Eleventh (the Eleventh Circuit governs Florida, Georgia and Alabama) have case law authority to argue that a private settlement of employee FLSA claims is enforceable. Of course, the question will be whether or not Martin or Lynn’s Foods should control, but that will be for the courts in jurisdictions where Martin is argued to decide. And who knows, the more courts that side with Martin, the more likely it will get up to the Supreme Court who may decide to hear the issue.,

Fin.