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Can the Court Block My Wage Claim Settlement?

Posted by David P. Martin | Dec 28, 2022 | 0 Comments

Mr. Duggan filed a lawsuit when he felt his employer was failing to pay overtime wages, and then for retaliated against him when he complained about it. He worked for Dura-Line, a company that makes pathways or conduits for connections for the telecom industry and the natural gas industry. Mr. Duggan claimed alleged violations of the Fair Labor Standards Act (FLSA) 29 U.S.C. § 201 et seq. Counsel for the employer and Mr. Duggan worked out what they thought was a fair resolution to settle all claims, and this was agreeable to Mr. Duggan because he was ready to obtain some compensation for his losses. However, settlements of FLSA claims must be approved by the court, and while judges certainly like to move cases along, they also are charged with following the law. Mr. Duggan was surprised when the judge in the Middle District of Georgia would not approve the settlement.

In Duggan v. Dura-Line LLC, Civil Action 5:22-cv-00313-TES, at *1 (M.D. Ga. Oct. 12, 2022) the court reminded all parties that under 29 U.S.C. § 216(b) that 11th Circuit FLSA actions can't be settled privately.  Either the Department of Labor oversees payment of back wages, “… or a court must enter a stipulated judgment after it has determined that the proposed settlement is ‘a fair and reasonable [resolution] of a bona fide dispute over FLSA provisions.'” Citing Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1355 (11th Cir. 1982).

The court also must review the reasonableness of attorneys' fees.  Counsel is to be “fairly and adequately compensated”, and the court must examine whether a “… conflict of interest affects the amount the plaintiff-employee recovers under the agreement”, quoting Silva v. Miller, 307 Fed.Appx. 349, 351 (11th Cir. 2009) (per curiam). Here, despite the fact that Mr. Duggan would like to see some compensation sooner than later, the court would not approve the settlement.

The court's review noted that the release was too broad and included claims that Mr. Duggan had not asserted.  It also claimed to release past, present, and future claims. Many broad general releases include such all-encompassing language, but courts will not approve such claims in an FLSA case because it provides the employer uncompensated, unevaluated, and an unfair added benefit. This release specifically gave up claims arising from ERISA, FMLA, and the Fair Credit Reporting Act, all of which could be in place at some point in the future.

The court also did not like the non-disparagement clause, which prohibited Mr. Duggan from saying anything bad about the company. Courts typically find that these claims infringe on an employee's free-speech rights, and particularly as to statements pertaining to his FLSA claim. Courts typically will not approve a settlement with this clause in it.

Next, there was no mention in the release as to the amount of attorney's fees, and costs in the settlement agreement release.  That precluded the court from evaluating whether the attorney's fees costs were reasonable or not. In this instance, there was no evidence provided to the court as to the hours worked, and Mr. Duggan's counsel's hourly rate. The court had nothing to go on and so it refused to approve the settlement for the third reason as well.

The court did invite the parties, however, to provide a more proper release for approval, and information relating to the negotiation of the attorney's fees in the amount in evidence for the court to evaluate on that issue as well. The court gave the parties 14 days to fix these problems and indicate an intention to move forward. Mr. Duggan will have to wait just a little bit longer.

The same issues can pop up in many different types of cases, but the FLSA is a little bit different. Either the Department of Labor or a court must approve any settlement of a wage and hour claim. The same issues may be involved in other cases as well, however, the law does not generally require such approval in every type of case. It is good to be cautious and make sure every claim released is not a claim that exists, but it unasserted.

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David P. Martin

Senior & Managing Attorney

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