Federal Judge Says Judicial Approval for Individual FLSA Actions Increases Litigation Costs, Makes Settlement More Difficult and is Not Required
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- Plaintiffs in Alcantara v. Duran Landscaping alleged that their former employer violated the Fair Labor Standards Act (FLSA) and Pennsylvania Minimum Wage Act because it failed to pay overtime premiums.
Plaintiffs in Alcantara v. Duran Landscaping alleged that their former employer violated the Fair Labor Standards Act (FLSA) and Pennsylvania Minimum Wage Act because it failed to pay overtime premiums. Less than a year after filing suit, the parties notified the court that they resolved the claims and requested a phone call with the court to seek approval of the agreed upon settlement without having to spend the money on a formal motion. In response to the parties' request, the court, sua sponte, raised the question of whether it actually had to approve settlement and invited briefs on the topic.
Both parties took the position that judicial approval was not necessary. At the request of the court, the U.S. Department of Labor (DOL) also weighed in, taking the position that based on the text of Federal Rule of Civil Procedure (FRCP) 41 and judicial precedent "FLSA rights cannot be waived or compromised without supervision by the [DOL] or approval by a court." The DOL's letter brief to the court is available here.
After reviewing the submissions, U.S. District Judge Joshua Wolson concluded that neither FRCP 41 nor the FLSA require "a court to approve a settlement between an individual plaintiff and an employer." The court opined that the settlement approval process is applied under the guise of helping the plaintiff-employees, but in reality, they are represented by counsel and are "equipped to make that decision for themselves." It reasoned that there is "no support in the FLSA's text" for judicial approval, describing it as a "judge-made rule that makes litigation slower and more expensive and is at odds with the text of Rule 41." The court explained that the facts in Lynn's Food Stores Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982), which is often cited in support of the need for judicial approval of FLSA settlements, are unique because, in that matter, plaintiffs were not represented by counsel and raised concerns that are not present where there are individual (as opposed to class or collective action) claims and the plaintiff is represented by counsel.
The court acknowledged concerns about unfair settlements between employers and employees, but found that public policy weighs against requiring approval of FLSA settlements. In effect, it said that the court's assistance ultimately "drives up litigation costs in small-value cases, makes settlement more difficult, and delays the disbursement of unpaid wages to FLSA plaintiffs."
If Judge Wolson's opinion in Alcantara garners support in other jurisdictions, it may enable parties in FLSA litigation to reach settlement more quickly and reduce the overall cost of litigation. It also raises the possibility that FLSA claims could be resolved without the filing of litigation, which is generally not the case under the prevailing view that release of FLSA claims requires approval of a court or supervision by the DOL. This would make it much easier and cheaper to resolve FLSA claims without the need for any litigation.
The full decision is available here.
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