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5th Cir.: Where Employees Were Represented in Grievance Process By Their Union and Its Attorneys, Private Settlement of a Bona Fide Dispute Enforceable
Martin v. Spring Break ’83 Productions, L.L.C.
Following the entry of summary judgment on behalf of the defendants, the plaintiffs appealed. As discussed here, plaintiffs challenged the trial court’s holding that the private settlement reached between their union and one of their alleged employers was binding and enforceable. Specifically, the plaintiffs argued that absent: (1) court approval, (2) DOL supervision, or (3) a showing that they had been paid their wages in full without compromise, the settlement previously reached was not binding and/or enforceable. Affirming the decision below, the Fifth Circuit held that the settlement agreement was binding and enforceable notwithstanding the lack of court or DOL supervision, because it was a resolution of a bona fide dispute. While it is not entirely clear, it appears that the Fifth Circuit reasoned that the agreement, at least arguably could be said to be “without compromise,” thus making it binding and enforceable.
The case concerned grips and other movie production employees who worked on the set of a movie. Laying out the relevant procedural/factual background, the Fifth Circuit explained:
The plaintiffs “filed a grievance against Spring Break Louisiana alleging that they had not been paid wages for work they performed. The Union sent a representative to investigate the merits of the claims. After his investigation, the representative concluded that it would be impossible to determine whether or not Appellants worked on the days they alleged they had worked. The Union and Spring Break Louisiana entered into a Settlement Agreement pertaining to the disputed hours allegedly worked by Appellants.”
Discussing the issue of whether the private settlement here was binding and enforceable the Fifth Circuit reasoned:
The district court concluded that the plain language of the Settlement Agreement “is binding upon the [Appellants] in their individual capacities and prohibits those individuals from pursuing future legal action against Spring Break Louisiana after receiving their settlement payments.” We agree. The Settlement Agreement, in relevant part, states:
The Union on its own behalf and on behalf of the IATSE Employees agrees and acknowledges that the Union has not and will not file any complaints, charges or other proceedings against Producer, its successors, licenses and/or assignees, with any agency, court, administrative body, or in any forum, on condition that payment in full is made pursuant to the terms of this Settlement Agreement.
The Settlement Agreement also states that the Union “has the full power and authority to enter into this Settlement Agreement on behalf of IATSE Employees and bind them in accordance with the terms hereof.” By this plain language, the Appellants, who were IATSE Employees, were bound by its terms. Appellants contend, however, that the Settlement Agreement is unenforceable because they never signed it or agreed to it—instead, the Settlement Agreement was signed by Union representatives. However, Appellants do not dispute that they received full payment for their claims pursuant the terms of the Settlement Agreement. Nor do Appellants dispute that they cashed the Settlement Agreement payment checks they received. The Appellants were members of the Union and, under the CBA, Spring Break Louisiana recognized “the Union as exclusive representative of the employees in the bargaining unit.” Considering that Appellants, who were members of the Union, received and accepted full payment for their FLSA claims under the Settlement Agreement, the fact that Appellants did not themselves personally sign the Settlement Agreement does not render it unenforceable. See N.L.R.B. v. Allis–Chalmers Mfg. Co., 388 U.S. 175, 180, 87 S.Ct. 2001, 18 L.Ed.2d 1123 (1967) (“The employee may disagree with many of the union decisions but is bound by them.”).
On appeal, the plaintiffs argued that the settlement agreement was not binding and enforceable, because generally individuals may not privately settle FLSA claims. In response the defendants argued that that a private compromise of claims under the FLSA is permissible where there exists a bona fide dispute as to liability (and as to the amount of appropriate damages). After a discussion of the relevant Fifth Circuit precedent, the court agreed with the Defendants and held the settlement agreement at issue to be enforceable.
Significantly the court reasoned:
[H]ere, there is a bona fide dispute between Appellants and Spring Break Louisiana over the number of hours for which they are owed their set rate of pay. In fact, the Union representative conducted an investigation into the dispute and received conflicting information from various sources, ultimately concluding that it would be impossible to determine whether or not Appellants worked on the days they claimed they had worked in their grievance. Approving of this rationale, we hold that the payment offered to and accepted by Appellants, pursuant to the Settlement Agreement, is an enforceable resolution of those FLSA claims predicated on a bona fide dispute about time worked and not as a compromise of guaranteed FLSA substantive rights themselves. See Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 714, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (“Our decision … has not necessitated a determination of what limitation, if any, Section 16(b) of the [FLSA] places on the validity of agreements between an employer and employee to settle claims arising under the Act if the settlement is made as the result of a bona fide dispute between the two parties, in consideration of a bona fide compromise and settlement.”); see also D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 114–15, 66 S.Ct. 925, 90 L.Ed. 1114 (1946) (“Nor do we need to consider here the possibility of compromises in other situation which may arise, such as a dispute over the number of hours worked or the regular rate of employment.”); 29 U.S.C. § 253(a).
Apparently the court also believed that the settlement at issue here could arguably be said to be “without compromise” such that the third permissible basis for an enforceable private settlement was met:
Notably, in Thomas v. Louisiana, 534 F.2d 613 (5th Cir.1976), we held that a private settlement of FLSA claims was binding and enforceable where the settlement gave employees “everything to which they are entitled under the FLSA at the time the agreement is reached.” Id. at 615. We explained that, “[a]lthough no court ever approved this settlement agreement, the same reason for enforcing a court-approved agreement i.e., little danger of employees being disadvantaged by unequal bargaining power[,] applies here.” Id. Here, Spring Break Louisiana and the Union agreed in the Settlement Agreement that the payments Appellants were paid pursuant to that agreement were the “amounts due and owing” for the disputed number of hours they claimed they had worked and not been paid for. The Settlement Agreement was a way to resolve a bona fide dispute as to the number of hours worked—not the rate at which Appellants would be paid for those hours—and though Appellants contend they are yet not satisfied, they received agreed-upon compensation for the disputed number of hours worked.
Lastly, the court distinguished a settlement privately negotiated by a union and its attorneys from a situation where a labor union purports to waive an employees’ rights under the FLSA through a collective bargaining agreement, a longstanding no-no under well-established FLSA jurisprudence:
Finally, Appellants contend, citing Barrentine v. Arkansas–Best Freight Sys., 450 U.S. 728, 745, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981), that because the Supreme Court has held that a union cannot waive employees’ rights under the FLSA through a collective bargaining agreement, they cannot have settled their FLSA claims in the Settlement Agreement, which was arrived at through the Union-facilitated grievance procedure laid out in the CBA. See Barrentine, 450 U.S. at 745, 101 S.Ct. 1437 (“FLSA rights … are independent of the collective-bargaining process. They devolve on petitioners as individual workers, not as members of a collective organization. They are not waivable.”). Although the terms and conditions of Appellants’ employment with Spring Break Louisiana were covered by a collective bargaining agreement, Barrentine is distinguishable. In Barrentine, the plaintiffs’ grievances based on rights under the FLSA were submitted by the union to a joint grievance committee that rejected them without explanation, a final and binding decision pursuant to the collective bargaining agreement. 450 U.S. at 731, 101 S.Ct. 1437. Here, Appellants accepted and cashed settlement payments—Appellants’ FLSA rights were adhered to and addressed through the Settlement Agreement, not waived or bargained away. The concerns the Court in Barrentine expressed, that FLSA substantive rights would be bargained away, see id. at 740, 101 S.Ct. 1437 (“This Court’s decisions interpreting the FLSA have frequently emphasized the nonwaivable nature of an individual employee’s right to a minimum wage and to overtime pay under the Act. Thus, we have held that FLSA rights cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”), are not implicated by the situation here where Appellants’ Union did not waive FLSA claims, but instead Appellants, with counsel, personally received and accepted compensation for the disputed hours. We reiterate that FLSA substantive rights may not be waived in the collective bargaining process, however, here, FLSA rights were not waived, but instead, validated through a settlement of a bona fide dispute, which Appellants accepted and were compensated for. Therefore, the district court did not err by finding an enforceable release resolving this wage dispute.
Given, the somewhat unique facts of this case, it remains to be seen whether the Fifth Circuit’s decision while trigger a change in longstanding FLSA jurisprudence regarding the enforceability of privately-negotiated settlements, or whether this case will remain an outlier, largely limited to its facts. For example, it is not clear whether the settlement would have been enforced absent the fact that plaintiffs were represented by both their union and attorneys in the negotiations, or if this was a “straight time” case where there was demonstrative evidence of the precise number of hours at issue. Stay tuned, for what’s likely to be an influx of cases where defendant-employers seek to expand this case’s holding while plaintiff-employees seek to limit the holding to the facts at bar (which are not likely to be oft-repeated).
Click Martin v. Spring Break ’83 Productions, L.L.C. to read the entire Decision. For an excellent historical overview of more typical decisions regarding the enforceability of private settlements of FLSA claims click here to read an outline from the folks at Outten & Golden.