McKeen-Chaplin v. Franklin American Mortg. Co.
While not a groundbreaking decision, this case serves as a reminder of how much the FLSA settlement approval process can vary from court to court and judge to judge. While many courts have broadened the circumstances under which parties may resolve an FLSA claim (e.g. those within the Fifth Circit), others continue to carefully track the remedial purposes of the FLSA, in recognition that the statute seeks to protect the rights of employees, who typically lack any real bargaining power with regard to their employers (or former employers). As highlighted here, the court joined a growing number of courts from around the country to reject a general release contained within a settlement agreement regarding FLSA (and other wage and hour claims), when the employer provides no additional compensation for such release.
Discussing this issue, the court reasoned:
The Court also has concerns with the scope of the general release provision contained in the settlement agreements signed by Plaintiffs, which provides that each Plaintiff “fully” and “completely” releases Defendant and others from “any and all claims … whether known or unknown, arising from, relating to, or in any way connected with [Plaintiff's] employment with or termination of employment from [Defendant]….” Schug Decl., Exh. A ¶ 3. Courts have found that overly broad release provisions, which release a Defendant from all claims to settle their wage claims, including claims that are unrelated to the claims asserted in the complaint, are improper in FLSA and class action settlements. See Moreno v. Regions Bank, 729 F.Supp.2d 1346, 1347, 1350–1352 (M.D.Fla.2010) (FLSA settlement); Hogan v. Allstate Beverage Co., Inc., 821 F.Supp.2d 1274, 1284 (M.D.Ala.2011) (same); Gambrell v. Weber Carpet, Inc., 2012 WL 5306273, at *2, 5 (D.Kan.2012) (same); see also Bond. v. Ferguson Enterprises, Inc., 2011 WL 284962, at *7 (E.D.Cal.2011) (finding release overbroad in class action where release did not track the extent and breadth of Plaintiffs’ allegations and released unrelated claims of any kind or nature up to the date of the agreement); Kakani v. Oracle Corp., 2007 WL 1793774, at *2–3 (N.D.Cal.2007) (rejecting a settlement in part because of the “draconian scope” of the proposed release, which, among other things, released and forever discharged the defendant from any and all claims that were asserted or could have been asserted in the complaint whether known or unknown).
The Court finds that the parties have failed to demonstrate that it would be fair and reasonable for the Court to enforce the broad general release provision contained in the settlement agreements. The provision does not track the breadth of the allegations in this action and releases unrelated claims, whether known or unknown, that the Plaintiffs may have against Defendant. See Collins v. Cargill Meat Solutions Corp., 274 F.R.D. 294, 303 (E.D.Cal.2011) (finding release proper and not overly broad because the “released claims appropriately track the breadth of Plaintiffs’ allegations in the action and the settlement does not release unrelated claims that class members may have against defendants”); Vasquez v. Coast Valley Roofing, Inc., 670 F.Supp.2d 1114, 1126 (E.D.Cal.2009) (finding release proper because the “released claims appropriately track the breadth of Plaintiffs’ allegations in the action and the settlement does not release unrelated claims that class members may have against defendants.”). The parties have not explained why the release of “any and all claims … whether known or unknown, arising from, relating to, or in any way connected with [Plaintiff's] employment with or termination of employment from [Defendant]” is fair and reasonable. There has been no showing that Plaintiffs have been independently compensated for the broad release of claims unrelated to any dispute regarding FLSA coverage or wages due, including, among others, claims for discrimination under Title VII, intentional infliction of emotional distress, and “outrageous conduct.” See Moreno, 729 F.Supp.2d at 1351 (“[A]n employer is not entitled to use an FLSA claim (a matter arising from the employer’s failing to comply with the FLSA) to leverage a release from liability unconnected to the FLSA.”). Nor has there been a showing that the Plaintiffs have a full understanding of what they are releasing in exchange for a settlement payment. There is no evidence that Plaintiffs have being fully informed of the consequences of the release provision.
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