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E.D.N.Y.: In the Context of Litigation, Where Plaintiff Represented by Counsel, Court Approval of Accepted OJ Not Required
Picerni v. Bilingual Seit & Preschool Inc.
This case was before the Court on the Plaintiff’s motion to approve settlement, following his acceptance of an offer of judgment tendered by defendant pursuant to Rule 68. Although the plaintiff brought the case as a putative collective action, the accepted offer of judgment purported to resolve the case on an individual basis. Prior to the defendant having answered or appeared in the case, the plaintiff filed a notice of acceptance of an offer of judgment that defendant had made under Fed.R.Civ.P. 68. The offer of judgment provided that the case would be settled on an individual basis (not as a collective or class action) for $5000 payable to plaintiff, plus attorney’s fees of $4590, “which represents 7.65 hours at $600 an hour.” The court initially declined to enter judgment under Rule 68, instead issuing an order requiring the parties to seek the court’s approval of the settlement. Subsequently, the plaintiff complied with the October 19th Order, and filed a motion in an effort to explain that the settlement and his attorney’s fees had a reasonable basis. Upon consideration of the motion it had initially required however, the court essentially reversed itself, and in a lengthy opinion held that under the circumstances of the case- where the employee had filed a lawsuit and was represented by counsel- the parties’ private settlement of the claims did not require judicial approval.
Initially, the court discussed longstanding United States Supreme Court jurisprudence holding that employees cannot enter binding settlements waiving their rights under the FLSA, absent a showing there was a “bona fide dispute.”
Comparing the case before it the court reasoned the situation was not that contemplated by the Supreme Court, because the plaintiff had filed a lawsuit and was represented by counsel:
Curiously, however, none of the cases expressly consider the issue presented in this case, and that is presented in many others before me—settlement of a claim after the FLSA case has been commenced, i.e., a “private” settlement occurring in the context of a public lawsuit, where neither side invites, and in some cases, one or both sides actually resist, the Court’s determination of whether the settlement is fair and reasonable.
When an employer chooses to resolve an FLSA claim without pending litigation, or merely “under threat of suit” as opposed to actual suit, it is obviously taking a reasoned gamble. If the employee later sues notwithstanding the release, the employer may find itself in front of a court that simply disregards the release because it was not previously approved by a court or the Department of Labor. There are at least several reasons why an employer might take this risk: (1) it may be confident that it had a bona fide dispute with the employee; that the release fairly compromises that dispute; and that it will therefore be upheld; or (2) the employer may conclude that as a practical matter, the risk of the settling employee bringing a subsequent suit is small enough in relation to the amount paid as to warrant the settlement; or (3) the employer may not want the settlement publicized among other employees who may well want the same remedial treatment, and therefore may take the risk of subsequent litigation with the settling employee to reduce the likelihood of suit by other employees. The case law cited above, for the most part, involves employers who made these kinds of judgment calls, and when the releases have been subsequently challenged, the courts have either approved them or not.
In the cases before this Court, an employer rarely makes a different analysis just because the case is pending. In other words, the factors that compel parties to settle before litigation is commenced, notwithstanding the possibility that a release that an employer receives will be ineffective, often seem to be equally compelling in reaching a settlement once the litigation is commenced. Except in the less frequent context of a settled class action under the state supplemental claims or a collective action with a substantial number of opt-in plaintiffs, I have never had an employer ask me to conduct a fairness hearing so that it has the protection of a court-approved release. To the contrary, the usual context is the one I am seeing here—no participation by the employer at all, not even an appearance. In the usual case, I merely receive advice from plaintiff’s counsel that the case is over, either by a notice of voluntary dismissal under Rule 41 or a letter saying the same thing (often received the day before the scheduled initial status conference). I have then, following past practice, set the case down for a fairness hearing.
The instant case is somewhat different, but I think not materially so in terms of what steps, if any, this Court needs to take next—plaintiff has simply filed an acceptance of a Rule 68 offer of judgment. I would not even know who the attorney for the employer is but for the signature on the offer of judgment, which has been filed by plaintiff, not defendant. The employer seems quite content to have judgment entered against it, which presumably the employer will satisfy. Perhaps it views a satisfaction of judgment as more protective than a noncourt-approved release, and perhaps, with at least the possibility that a judgment will have res judicata effect where a release might not, it is. But until some court determines that there was a bona fide dispute as to how much plaintiff was owed in wages, and that the offer of judgment fairly compromises it, the employer has not eliminated its risk.
Initially the court concluded that FLSA cases are not exempt from FRCP 41, which permits parties to stipulate to dismissal:
I cannot agree with the largely unstated assumption in the cases that refuse to allow voluntary dismissals that the FLSA falls within the “applicable federal statute” exception to the Rule. Nothing in Brooklyn Savings, Gangi, or any of their reasoned progeny expressly holds that the FLSA is one of those Rule 41–exempted statutes. For it is one thing to say that a release given to an employer in a private settlement will not, under certain circumstances, be enforced in subsequent litigation—that is the holding of Brooklyn Savings and Gangi—it is quite another to say that even if the parties want to take their chances that their settlement will not be effective, the Court will not permit them to do so.
The court then went on to examine Lynn’s Food and distinguished the case from the facts before it:
I believe Lynn’s Food should be confined to its rather egregious facts. Not only did the employer settle on the cheap with unsophisticated employees, but it circumvented the DOL’s investigation in doing so, and then had the audacity to seek a judicial imprimatur validating its aggressive strategy. A narrower reading of Lynn’s Food would be that if the proposed settlement would never have been approved if presented in the context of a pending litigation, then it cannot be approved in a subsequent litigation. In contrast, had the employer paid 100% of the maximum to which the employees might have been entitled plus liquidated damages in a bona fide dispute, the broad language used by the Eleventh Circuit might well have been unnecessary. Indeed, the Eleventh Circuit has recently expressed a similar view. See Dionne v. Floormasters Enterprises, Inc., 667 F.3d 1199 (11th Cir.2012) (if the employer tenders 100% of the unpaid wages claimed by the employee, plus liquidated damages, even while denying liability, the case is moot and no fairness hearing is necessary, nor is the employee a prevailing party entitled to an attorney’s fee). It is hard to conceive of any reason why, if a court is presented with an eminently reasonable, albeit after-the-fact, settlement, it is precluded from giving it legal effect. That is essentially what the Fifth Circuit held recently in upholding a private settlement, distinguishing Lynn’s Food because of its one-sided facts. See Martin v. Spring Break ’83 Productions, L.L .C., 688 F.3d 247, 253–256 & n. 10 (5th Cir.2012).
More importantly, Lynn’s Food does not expressly address the issue of whether parties can voluntarily withdraw a case under Rule 41. It does not preclude the plaintiff or the parties from proceeding unilaterally or bilaterally, depending on the timing, from withdrawing a case and taking their, principally the employer’s, chances in effectuating a settlement without court approval. It simply says, like all of the cases in this area, that the courts will not recognize an unreasonable FLSA settlement, whether the settlement is asserted by the employer as a defense in the settling employee’s subsequent suit, or, as in Lynn’s Food, as the basis for declaratory relief in an action that the employer has brought. Lynn’s Food thus does not dispose of the issue of whether parties in a pending action can voluntarily dismiss the case without any judicial assurances if that is what they want to do.
Recognizing the risks of unsupervised settlements of FLSA cases, the court said:
This is not to say that there is an absence of arguably undesirable consequences in allowing private settlements of FLSA litigation without court oversight. As noted above, in the typical cases I have, like this one, where private resolutions are reached and judicial scrutiny is neither sought nor desired, the case is brought as a collective action but resolved before a collective action notice has gone out to other employees. Although one employee, the named plaintiff, has presumably benefitted to at least some extent from the private resolution, other similarly situated employees will likely not even know about it, and to the extent they have not received their minimum wages or overtime, they will be no better off. Indeed, in at least one case, I have had the employer’s attorney candidly tell me that the reason he wished to avoid a fairness hearing was to prevent other employees from learning of the settlement and seeking the same relief.
I am not suggesting that plaintiff in the instant case or his attorney, who is an experienced and well-regarded practitioner in this Court, have committed any impropriety. But the scenario is conducive to a dynamic that allows both a plaintiff and his employer—not to mention the plaintiff’s attorney, who frequently receives a fee that greatly exceeds the plaintiff’s recovery—to leverage a comparatively cheap settlement on the backs of the plaintiff’s co-employees. This obviously runs contrary to the intent of Congress in enacting the FLSA and in particular to its creation of the collective action mechanism. Using the potential of a collective action as a Sword of Damocles to extract a small settlement and a large, but still comparatively small in relation to the exposure the employer would face in a true collective action, attorney’s fee could not have been what Congress had in mind in authorizing collective actions.
The court went on to discuss issues of confidentiality (the body of law that says there should be no confidential settlements of FLSA cases because same flies in the face of the remedial nature of the statute) and dismiss the typical argument against non-supervised settlements (the threat that they may end up being settled on the cheap), ultimately recognizing that the defendant is the one that is taking a risk often where there is no approval, rather than vice versa:
The problem of non judicially approved confidentiality provisions in private settlements is resolved by the same allocation of employer risk as is the case with private settlements of FLSA claims generally—if a settling employee subsequently breaches the confidentiality provision, then the employer is going to have to try to enforce it, or seek rescission or damages for its violation. At that point, under the authorities cited above, the courts may well hold it unenforceable.
Unlike the recent Fifth Circuit case discussed here, this case does not seem to signal any significant change in longstanding jurisprudence, prohibiting (binding and enforceable) private settlements of FLSA cases. Rather, here the court simply confirmed that the parties to an FLSA case can resolve the case and circumvent the court’s approval, leaving open the question of whether such settlements are enforceable.
Click Picerni v. Bilingual Seit & Preschool Inc. to read the entire Memorandum Decision and Order.
N.D.Cal.: Broad General Release of All Claims in the Context of FLSA Claim Rejected By Another Court
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.
Click McKeen-Chaplin v. Franklin American Mortg. Co. to read the entire Order.
M.D.Fla.: Approval of Settlement Agreement That Hinged on Results of Lie Detector Test Denied
Brooke v. Administrative Maintenance Services, LLC
Generally, we post cases here that feature issues that are likely to come up in other cases. Other times we post cases simply because they involve interesting fact patterns or scenarios. This case falls in the latter category. Here, the case was before the court on the parties’ joint motion to approve their settlement. However, this was no ordinary settlement. Instead, based on concerns pertaining to plaintiff’s credibility, regarding the number of improperly compensated overtime hours claimed by plaintiff, and the defendants’ assertions that they were due various offsets based on unrelated transactions between the parties, the parties entered into a unique settlement agreement, following mediation.
In order to resolve the various issues, largely involving the credibility of the parties, the parties agreed that the plaintiff would submit to a lie detector case, the results of which would dictate what, if any, amounts of damages plaintiff would recover under the settlement.
As described by the court:
“The parties… agreed that Mr. Brooke will be asked, in a format crafted by the operator of the lie detector, whether he worked five, ten, and, finally, fifteen hours per week, on average, of overtime. If the operator concludes Mr. Brooke worked no overtime, Mr. Brooke will dismiss his case and reimburse the Defendants one-half of the lie detector administrator’s fee to the Defendants. If the operator concludes Mr. Brooke did work overtime in the brackets described above, he will be paid the greatest number of average weekly overtime he credibly answers about, per week, times $12.00 (one-half his base rate of $12.00 per hour and an equal amount in liquidated damages), times the eighty one weeks he was employed by the Defendants. If the result is inconclusive, the Defendants will pay a total of $10,000.00, including fees and costs.”
While the court noted the settlement might be fair, depending on the amounts ultimately payable to plaintiff under the agreement, the court declined to approve the settlement citing the contingency nature of the settlement and the fact that it was unclear how much plaintiff would receive. The court reasoned:
“The Court does not quarrel with the parties’ contention that this approach is quicker and cheaper than a jury. The same can be said, however, as dueling and coin flips. The standard is not whether a resolution is quick and cheap, but whether it is fair and reasonable. There is no showing here that conditioning an award based on the ability to pass a lie detector test is either of those things.
To be clear, the Court is not finding that settlement in the amounts suggested would not be fair. If the parties had presented an agreement for Defendant to pay $10,000, for example, the Court could evaluate that sum in view of all of the pertinent considerations supporting a settlement, and could issue a recommendation on same. As long as there was an agreement as to an amount rationally related to the claim, and the Court found the settlement to be voluntary and objectively fair and reasonable, it would not matter if the actual numbers were reached via lie detector test, rock-paper-scissors, or drawing straws. Here, however, the parties are not asking the Court to approve a settlement—they are asking the Court to approve a method of reaching a settlement. This is beyond the scope of the fairness finding duties set forth in Lynn’s Food.
For these reasons, it is respectfully recommended that the Court deny the motion, without prejudice to renewal, if appropriate, upon clarification of the status of the corporate Defendants and upon a presentation of terms that are consistent with the principles discussed herein.”
Click Brooke v. Administrative Maintenance Services, LLC to read the entire Report and Recommendation, which was ultimately adopted in full by the presiding District Court Judge.
M.D.Fla.: Approval of Settlement Agreement Rejected, Where “Pervasive” General Release Makes Evaluation For Fairness “Elusive”
Moreno v. Regions Bank
As reported here several months ago, Judge Steven Merryday, in the Middle District of Florida rejected FLSA settlement agreements containing confidentiality provisions, as well as those containing non-disparagement agreements, in a set of well-reasoned opinions, discussing their conflict with the remedial purposes behind the Fair Labor Standards Act. Continuing his critique of what, for better or worse had largely become common practice in the resolution of FLSA cases, he has rejected a recent Motion for Approval, because the Settlement Agreement contained a “pervasive” general release of all claims known and unknown, without the exchange of any value for same, thus making an evaluation of the agreement for fairness “elusive” in his words.
The settlement agreement contained the following general release:
“In exchange for the Consideration, as set forth in Paragraph 2 . . ., Plaintiff for himself, attorneys, heirs, executors, administrators, successors and assigns hereby waives and releases, knowingly and willingly, Defendant, its heirs, executors, administrators, legal representatives, parent corporations, predecessor companies, insurers, past, present and future divisions, subsidiaries, affiliates and related companies and their successors and assigns and all past, present and future directors, officers, employees and agents of these entities, personally and as directors, officers, employees and agents, (“Released Parties”) from any and all claims of any nature whatsoever Plaintiff has arising out of his employment with Defendant, known or unknown, including but not limited to, any claims Plaintiff may have under federal, state or local employment, labor, or anti-discrimination laws, statutes and case and law and specifically claims including, but not limited to, any claims or allegations contained in or relating to the Lawsuit, arising under the federal Age Discrimination in Employment Act, The Older Worker Benefit Protections Act, the Civil Rights Acts of 1866 and 1964, as amended, the Americans with Disabilities Act, the Employment Retirement Income Security Act of 1974 (“ERISA”), the Family and Medical Leave Act, the Rehabilitation Act of 1973, the Fair Labor Standards Act, the Labor-Management Relations Act, the Equal Pay Act and the Worker Adjustment Restraining and Notification Act, the Florida Civil Rights Act, the Florida AIDS Act, the Florida Equal Pay Law, the Florida Wage Discrimination Law, the Florida Law Prohibiting Discrimination on the Basis of Sickle Cell Trait, the Florida Constitution, Florida common law and any and all other applicable state, federal, county or local ordinances, statutes or regulations, including claims for attorneys’ fees. Furthermore, if any charge of discrimination is brought on Plaintiff’s behalf, Plaintiff dismisses any claim to any benefits as a result of such charge. Plaintiff agrees that he will not apply for any positions with any of the Released Parties at any rime. Plaintiff has been fully compensated for his claims under the Fair Labor Standards Act. Plaintiff also represents and certifies that he has received full payment for all hours worked while employed by Defendant, including overtime hours, bonuses and vacation pay, and has received all benefits and leaves available or requested under the Family Medical Leave Act. Finally, Plaintiff has not suffered any workplace injuries while working for Defendant.”
Holding that such a “pervasive” general release in an FLSA compromise is, as a matter of law, unfair to the Plaintiff-employee, the Court reasoned:
“In the typical settled case, the parties (especially the defendant) design for a complete disengagement from each other, and a comprehensive settlement coupled with a general release usually accomplishes the intended effect. The district judge often remains unaware of the terms of the compromise, and the post-settlement dismissal of the action implies neither approval nor disapproval of any aspect of the parties’ settlement agreement. In these cases, the reciprocal, general release remains an accepted and common litigation practice. Although this disengagement almost uniformly accompanies the settlement of the typical civil action, settlement of an FLSA action requires judicial approval. A pervasive release in an FLSA settlement introduces a troubling imponderable into the calculus of fairness and full compensation.
In nearly every case, the pervasive release confers no benefit on the employer because the employee has no other claim. In the typical case, the release is valueless—the employer receives nothing of monetary value, and the employee relinquishes nothing of monetary value. The general release is usually an instrument to ensure peace of mind to the employer’s otherwise worried mind. In the occasional case, however, an unknown claim accrues to the employee. For example, suppose an employee of a widget factory sues the employer for unpaid wages, the parties settle for $500.00, and the employee agrees to a pervasive release. Years later, the employee discovers that a chemical used to manufacture widgets has caused serious injury. In this instance, the employee’s release of the unknown claim (if effective) both confers an undeserved and disproportionate benefit on the employer and effects an unanticipated, devastating, and unfair deprivation on the employee. The release absolves the employer of an ominous contingent liability in exchange for $500.00 (which, in any event, the employer unconditionally owed to the employee).
An employee who executes a broad release effectively gambles, exchanging unknown rights for a few hundred or a few thousand dollars to which he is otherwise unconditionally entitled. In effect, the employer requests a pervasive release in order to transfer to the employee the risk of extinguishing an unknown claim. In the language of Hydradry, a pervasive release is a “side deal”4 in which the employer extracts a gratuitous (although usually valueless) release of all claims in exchange for money unconditionally owed to the employee. (If an employee signs a pervasive release as part of a “side deal” and later discovers a valuable but released claim, the employee perhaps looks for compensation from the attorney who advise the employee to grant the release.) Although inconsequential in the typical civil case (for which settlement requires no judicial review), an 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.
Lynn’s Food’s imposition of the duty to scrutinize an FLSA compromise necessarily implies the court’s duty to scrutinize the claims and the defenses presented by the pleadings. An employee seeking to vindicate his FLSA rights often desperately needs his wages, and both the employee and the employer want promptly to resolve the matter. In a claim for unpaid wages, each party estimates the number of hours worked and the plaintiff’s wage (i.e., establishes a range of recovery), and the court evaluates the relative strength of the parties’ legal argument asserted in the particular case. However, in an FLSA action, neither party typically attempts to value the claims not asserted by the pleadings but within the scope of a pervasive release—that is, those “known and unknown,” or “past, present, and future,” or “statutory or common law,” or other claims included among the boiler plate, but encompassing, terms unfailingly folded into the typical general release.6 Absent some knowledge of the value of the released claims, the fairness of the compromise remains indeterminate. See, e.g., Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 12:15, at 313 (4th ed. 2002) (“Of course, in order independently and objectively to evaluate the adequacy of the entire settlement . . ., the court must possess sufficient evidence or information to weigh the strengths and weaknesses of the additional . . . claims.”).
In sum, a pervasive release in an FLSA settlement confers an uncompensated, unevaluated, and unfair benefit on the employer. In the typical case, no unknown claim accrues to the employee and the pervasive release effects no change to the legal relationship of the parties. In other words, in the typical case, the pervasive release is superfluous and can be stricken without objection from either the employee or the employer. In the occasional case, an unknown claim accrues to the employee and the employer receives a release from a contingent liability in exchange for a modest payment of wages unconditionally owed to the employee. The employer who obtains a pervasive release receives either nothing (if no claim accrues) or a windfall at the expense of the unlucky employee. In either instance, the employee bears the risk of loss, and the employer always wins—a result that is inequitable and unfair in the
circumstance. The employer’s attempt to “play with house money” fails judicial scrutiny.
Lynn’s Food requires more than a “rubber stamp” of an FLSA compromise; the district court must assure the “fairness” of the proposed compromise. Although the parties’ desire for complete “disengagement” is understandable, a pervasive release in settlement of an FLSA action is both unfair and incapable of valuation. A compromise of an FLSA claim that contains a pervasive release of unknown claims fails judicial scrutiny.”
Click here to read the entire Moreno v Regions Bank opinion.
W.D.Va.: Motion For Approval Of Settlement Agreement Denied, In Part, Because Of Impermissible Confidentiality Language
Poulin v. General Dynamics Shared Resources, Inc.
In a continuing trend, the Court, on the parties’ Joint Motion for approval of settlement, denied same, in part, due to the inclusion of confidentiality language in the proposed settlement agreement. Initially, the Court denied the Motion due to the parties failure to lay out the basis for Plaintiff’s attorney’s fees. However, the Court went on to add an alternative ground for its denial, citing to recent case law, as discussed here:
“Finally, the Settlement Agreement, as presently drafted, contains a confidentiality agreement. This, in pertinent part, provides that “Plaintiff agrees that he shall not disclose the fact of, and/or the terms and conditions of this Settlement Agreement and General Release except that Plaintiff may state that the Poulin action has been dismissed and may disclose the terms and conditions of this Settlement Agreement” under limited enumerated circumstances. Under the Settlement Agreement, “Plaintiff further agrees and acknowledges that confidentiality is a material term of this Agreement and any breach of the confidentiality provisions herein will be considered a material breach of the terms of this Agreement and he will be required to reimburse Defendant for any and all compensation and benefits paid to him or for his benefit under the terms of this Agreement.” Settlement Agreement and General Release, ¶ 13. Further, it provides that the Settlement Agreement, “as executed by the Parties, will be filed under seal.” Id. at ¶ 5.
The Court cannot approve these terms of the Settlement Agreement. The provision that “confidentiality is a material term of [the] Agreement” is in conflict with the Court’s opinions dated March 26, 2010 (docket no. 20) and April 23, 2010 (docket no. 23), which held that the parties had not identified significant interests to outweigh the public interest in access to judicial records, and required the proposed Settlement Agreement be made publicly available on the docket. Furthermore, a confidentiality provision in an FLSA settlement agreement undermines the purposes of the Act, for the same reasons that compelled the Court to deny the parties’ motion to seal their Settlement Agreement. See e.g., Valdez v. T.A.S. O. Prop., Inc., No. 8:09-cv-2250, 2010 WL 1730700, at *1 (M .D.Fla. Apr. 28, 2010); Dees v. Hydradry, Inc., — F.Supp.2d —-, 2010 WL 1539813, at *9 (M.D.Fla.2010) (“A confidentiality provision in an FLSA settlement agreement both contravenes the legislative purpose of the FLSA and undermines the Department of Labor’s regulatory effort to notify employees of their FLSA rights.”). Finally, the confidentiality provisions are likely unenforceable in light of the public filing of the Settlement Agreement. See e.g., Head v. v. & L Services III, Inc., No. 6:08-cv-917, 2009 WL 3582133, at *3 (M.D.Fla. Oct. 27, 2009) (noting that “the settlement agreements contain terms that this Court would not approve, such as the confidentiality provisions, which are partially unenforceable in light of the public filing of the agreements”). The Court cannot approve of a settlement agreement which includes these terms.”
It appears that the public policy grounds behind disallowing confidential settlement agreements in FLSA cases is beginning to pick up speed.
Overtime Law Blog 