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E.D.Pa.: Late Payment of Wages Constitutes Non-Payment of Wages, Subjecting Employer to Liquidated Damages Under FLSA
This case was before the court on the defendant’s motion to dismiss plaintiff’s complaint for failure to state a claim. The issue before the court was whether a defendant/employer who makes payment to its employee of his or her wages, but does so 1 week after such wages are due, is nonetheless liable for liquidated damages under the FLSA. Answering the question in the affirmative, the court held that late payment (in this case 1 week after the regular payday) constituted non-payment under the FLSA, and therefore liquidated damages were due under the FLSA notwithstanding the fact the employer had ultimately made payment of the wages due.
As a starting point for deciding the issue, the court examined the purpose of liquidated damages, as stated previously stated by the Third Circuit:
[t]hese liquidated damages … compensate employees for the losses they may have suffered by reason of not receiving their proper wages at the time they were due.” Id. at 1299 (emphasis added). Our Court of Appeals clearly contemplated that injury from lost wages under the FLSA is to be measured from the payday on which wages are ordinarily to be paid.
Explaining that the Third Circuit had not spoken on the issue subsequent to the 1991 case, Selker, that it quoted, the court turned to the case law from other circuits for guidance on the issue:
[t]he Court of Appeals for the Ninth Circuit cited the Selker decision favorably in Biggs v. Wilson, 1 F.3d 1537, 1542 (9th Cir.1993). There the court undertook a detailed analysis of whether late payment constitutes nonpayment under the FLSA. The issue in that case was whether the State of California, in paying its highway maintenance workers 14–15 days late as a result of a budget impasse, violated the FLSA. Drawing on the language of the statute, mandatory and persuasive authority from other federal courts including Selker, the opinion of the Department of Labor, and policy considerations, the court concluded that payment at a point after payday is tantamount to nonpayment under the FLSA. Id . at 1539–44. Invited by the state to craft a balancing test to distinguish late payment from nonpayment, the court found that any such line drawing would be unworkable under the statutory scheme and detrimental to employees seeking the statute’s protection. Id. at 1540.
The court also rejected the argument that this was an overly harsh result, especially because of the FLSA’s remedial purpose:
This may appear to be a harsh result, causing an otherwise diligent employer who misses payday by a day or two to be subject to liability under the statute. Nonetheless, it must be remembered that the FLSA is to be liberally construed to achieve its purpose. Mitchell v. Lublin, McGaughy & Assocs., 358 U.S. 207, 211, 79 S.Ct. 260, 3 L.Ed.2d 243 (1959). The law is there to protect those who are receiving a minimum wage and are living from paycheck to paycheck. A delay of a few days or a week in the remittance of wages may only be a minor inconvenience to some, but for those at the lower end of the economic scale, even a brief delay can have serious and immediate adverse consequences.
Thus, the court denied the defendant’s motion to dismiss.
Click Gordon v. Maxim Healthcare Services, Inc. to read the entire Memorandum Opinion.
Editor’s Note: Within weeks of this decision, the Court of Federal Claims was called upon to rule upon the same issue and agreed with the Gordon court’s analysis and holding. In the context of government workers, whose paychecks were delayed approximately 2 weeks, by the government’s shutdown in the fall of 2013, the court held that late payment constitutes non-payment, such that the FLSA’s liquidated damages provisions were triggered. Click Martin v. United States to read the Opinion and Order in that case.
E.D.Cal.: Attorney’s Fees and Costs Recoverable Under 216(b) When Plaintiff Obtains Declaratory Relief
This case was before the court on the relatively novel issue of whether an FLSA plaintiff, who prevails in a case solely seeking a declaratory judgment or declaratory relief is entitled to attorneys fees and costs under 29 U.S.C. § 216(b). The court answered the question in the affirmative, reasoning that the broad remedial purpose of the FLSA dictated that such fees are recoverable.
Describing the somewhat unique procedural posture of the case, the court explained:
This case is brought as a collective action under 29 U.S.C. § 201 et seq., the Fair Labor Standards Act (“FLSA”), by Plaintiffs against Defendant Jeffrey Beard in his official capacity as the Secretary of the California Department of Corrections and Rehabilitations. Plaintiffs complain about the calculation of wages by Beard and seek a declaration that Beard is violating the FLSA. Plaintiffs also seek attorneys’ fees under § 216(b). Beard has filed a counterclaim in which he seeks several declarations, the gist of which is that Plaintiffs are not entitled to attorneys’ fees under § 216(b) in this case. Plaintiffs have filed a motion to dismiss under Rules 12(b)(1) and 12(b)(6), and alternatively a Rule 12(f) motion to strike Beard’s counterclaim. For the reasons that follow, Plaintiffs’ motion to dismiss will be granted.
Initially, the court rejected the plaintiffs’ argument that defendant’s claim that attorneys fees was not recoverable on their declaratory judgment count, holding that the issue was one of pure law and thus ripe from the outset of the case.
After summarizing the parties’ respective positions, the court framed the issue before it as follows:
The issue of whether attorney’s fees may be awarded under § 216(b) when only declaratory judgment is sought or obtained appears to be relatively novel. The parties rely to one degree or another on the language of § 216(b), the policies behind § 216(b) and the FLSA in general, and a comparable 2013 district case.
The court then examined the applicable law, noting that it was aware of only two cases discussing the issue before it:
With respect to case law, there are actually two cases that bear on the issue. The first case is Barrows v. City of Chattanooga, 944 F.Supp.2d 596 (E.D.Tenn.2013), which has been cited by Plaintiffs. In Barrows, Fire Captain Barrows sued the City of Chattanooga under the FLSA regarding his employee classification and for past unpaid overtime. Following a bench trial, the district court held that the City had been improperly classifying Barrows as an FLSA-exempt employee and that a declaration that Barrows was a non-exempt FLSA employee was appropriate. See Barrows, 944 F.Supp.2d at 605. As for past unpaid overtime compensation, the district court held that Barrows had failed to meet his burden of proof in that his evidence was essentially too inconsistent and vague. See id. at 606. As a result, Barrows was awarded no monetary damages. See id. With respect to attorney’s fees, the district court held that Barrows could recover attorney’s fees, despite the lack of monetary relief, because Barrow was entitled to a declaratory judgment. See id. at 607. The court explained:
Section 216 of the FLSA provides, in relevant part, that the Court shall allow a prevailing employee to recover his reasonable attorney’s fees, as well as the costs of the action. Defendant has conceded that Plaintiff is entitled to attorney’s fees and costs in the event that he prevails in this action. Although the Court has found that Plaintiff is not entitled to damages for overtime compensation, Plaintiff has prevailed as to his claim for declaratory relief. Judgment for a plaintiff on a claim for declaratory relief will “usually” be satisfactory for finding that the plaintiff has prevailed in order to recover attorney’s fees. Because Plaintiff here has prevailed on his claim for declaratory relief on the merits, the Court finds that he is a prevailing party; accordingly, he is entitled to recovery of reasonable attorney’s fees and costs of this action pursuant to 29 U.S.C. § 216(b).
The second case, which was cited by neither party, is Council 13, American Fed’n of State, Cnty. & Mun. Emples., AFL–CIO v. Casey, 156 Pa.Cmwlth. 92, 626 A.2d 683 (Pa.Commw.Ct.1993).3 In Council 13, employees of the State of Pennsylvania sought inter alia a declaration that the FLSA required Pennsylvania to pay wages and salaries that were coming due, despite an anticipated exhaustion of appropriated funds. See id. at 684. The court held that the employees were entitled to the declaration they sought, and that the FLSA required payment of wages. See id. at 686. With respect to attorney’s fees under § 216(b), the court found that attorney’s fees were not available. See id. After quoting the third and fifth sentences of § 216(b), the court explained:
Although that sentence, as quoted above, itself contains no mention of fault or violation, it rests in a context which plainly involves legal actions against employers in violation. The first sentence in the quoted passage states that it deals with an ‘action to recover the liability prescribed in either of the preceding sentences … against any employer (including a public agency) in any Federal or State court….’ The ‘preceding sentences’ expressly and exclusively refer to situations involving any “employer who violates” [FLSA § 206 or § 207]. However, this present action clearly is not an enforcement action under [§ 216(b) ] to cure and punish a violation, but is one mutually pursuing a declaratory judgment for guidance—no violation having yet occurred. Hence, the federal Act does not mandate imposition of attorney’s fees here….
Id. at 686–87 (emphasis in original).
In both Barrows and Counsel 13, declaratory relief was sought and obtained. In both Barrows and Counsel 13, attorney’s fees under § 216(b) were sought by the plaintiffs. However, only in Barrows, where an actual violation of the FLSA was found, were fees awarded. Because no violation of the FLSA was actually involved in Counsel 13, the court held that attorney’s fees were not appropriate. Together, Barrows and Counsel 13 indicate that an award of only declaratory relief may form the basis of attorney’s fee under § 216(b), but that attorney’s fees are only available when an actual violation of the FLSA is involved.
Turning to the public policy and legislative intent behind the FLSA’s fee provisions, the court reasoned that such policy and intent too supported a reading of the FLSA that permitted the recovery of attorneys fees and costs for a plaintiff who successfully recovered declaratory relief:
With respect to the policy and legislative intent behind § 216(b)‘s attorney’s fee provision, several circuits have made observations. The Fourth and Eleventh Circuits have indicated that Congress intended that a wronged employee “receive his full wages plus the penalty without incurring any expense for legal fees or costs.” Silva v. Miller, 307 Fed. Appx. 349, 351 (11th Cir.2009); Maddrix v. Dize, 153 F.2d 274, 275–76 (4th Cir.1946). Similarly, the Fifth Circuit has indicated that the legislative intent behind § 216(b)‘ s attorney’s fee provision is “to recompense wronged employees for the expenses incurred in redressing violations of the FLSA and obtaining wrongfully withheld back pay.” San Antonio Metro. Transit Auth. v. McLaughlin, 876 F.2d 441, 445 (5th Cir.1989). The Sixth Circuit, in reliance in part on Maddrix, has found that “the purpose of § 216(b) is to insure effective access to the judicial process by providing attorney fees for prevailing plaintiffs with wage and hour grievances; ‘obviously Congress intended that the wronged employee should receive his full wages … without incurring any expense for legal fees or costs.’ ” United Slate, Local 307 v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 501–02 (6th Cir.1984) (quoting Maddrix, 153 F.2d at 275–76). Finally, the D.C. Circuit has noted that through § 216(b), “Congress clearly hoped to provide an adequate economic incentive for private attorneys to take employment discrimination cases, and thereby to ensure that plaintiffs would be able to obtain competent legal representation for the prosecution of legitimate claims.” Laffey v. Northwest Airlines. Inc., 746 F.2d 4, 11 (D.C.Cir.1984). These cases reflect that the intent behind § 216(b) was to allow employees to obtain payment owed under the FLSA in court without the employee incurring legal fees and expenses, and to encourage attorneys to take FLSA cases.
While the court acknowledged that the defendant’s proposed reading of the plain language of the FLSA could support the defendant’s argument that the fees at issue were not recoverable, ultimately it rejected this view, citing the need to liberally construe the FLSA:
The FLSA as a whole is to be interpreted liberally to the fullest extent of Congressional direction. See Probert, 651 F.3d at 1010. As indicated above, the intent behind the attorney’s fees provision is to ensure that employees obtain full payment owed under the FLSA without incurring legal fees. An interpretation of § 216(b) that would eliminate the availability of attorney’s fees to employees who seek to obtain or who only obtain declaratory relief, would partially frustrate the intent behind § 216(b). Although declaratory relief will not necessarily permit an employee to obtain past payments that were mandated by the FLSA, it could ensure that future payments do conform to the FLSA. That is, declaratory relief could aid an employee in obtaining his full future wages. For example, in a case like Barrows, no monetary relief was awarded despite obtaining declaratory relief.4 Nevertheless, by declaring that an employee is properly classified as a non-exempt FLSA employee, and not as an exempt FLSA employee, the declaratory relief will ensure that the employee begins to receive overtime pay in the future and in conformity with the FLSA.5 As another example, in this case, the dispute is whether Beard is currently calculating overtime correctly. A declaration that the overtime calculations are incorrectly being made will help Plaintiffs to obtain the full future FLSA wages and overtime that would be due to them under a proper calculation. In cases where monetary damages are unavailable or very tenuous, but a violation of the FLSA appears to be occurring, the availability of attorney’s fees provides an incentive to correct the FLSA violation. Without the availability of attorney’s fees, the expense to employees bringing such lawsuits would be increased and the incentive for attorneys to take such cases would be diminished.
There is a broader interpretation of § 216(b) that is also reasonable. The fifth sentence is ultimately tethered to actions under the first and second sentences involving violations of § 206, § 207, and § 215(a)(3). In actions that seek to remedy violations of § 206, § 207, or § 215(a)(3), the fifth sentence requires courts to award attorney’s fees in addition “to any judgment obtained by the plaintiff.” 29 U.S.C. § 216(b) (emphasis added). There is no express limit as to the type or amount of judgment that must be obtained before attorney’s fees are available, rather, so long as “any judgment” is obtained by the plaintiff, attorney’s fees are to be awarded. Declaratory relief has been awarded in this district in an FLSA case against a State, the Third Circuit has held that declaratory relief in an FLSA case is available against a State, and the District of Tennessee has awarded declaratory relief in an FLSA case even in the absence of monetary damages. See Balgowan v. New Jersey, 115 F.3d 214, 217–18 (3d Cir.1997); Barrows, 944 F.Supp.2d at 605;Biggs v. Wilson, 828 F.Supp. 774, 779–80 (E.D.Cal.1991), aff d 1 F.3d 1537 (9th Cir.1993). If a declaratory judgment may be issued in an FLSA case, then it is unclear why a declaratory judgment would not be included under § 216(b)‘s “any judgment” language. As long the lawsuit/action is one that seeks to correct/remedy violations of § 206, § 207, or § 215(a)(3), obtaining a declaratory judgment would constitute “any judgment” and could serve as the basis for attorney’s fees under § 216(b).6 Such an interpretation would permit attorney’s fees not only when unpaid wages for past violations of § 206 or § 207 are obtained, but also for declarations that would essentially end ongoing violations of § 206 or § 207. Declarations that find and/or remedy ongoing violations of § 206 or § 207 would help to ensure that an employee obtains the full wages and overtime that are due him in the future. Correcting violations of § 206 or § 207 and obtaining full wages due are both consistent with congressional intent.
As such, the court concluded that fees and costs are available to an FLSA plaintiff who prevails solely on a claim for declaratory relief:
The Court does not find Beard’s interpretation to be unreasonable. However, as discussed above, there is a broader interpretation of § 216(b) that appears consistent with Congressional intent. Further, the very limited case law that deals with § 216(b) attorney’s fees provision in the context of declaratory relief indicates that attorney’s fees may be awarded. Considering the arguments made by the parties, the limited case law, and the Ninth Circuit’s admonition for a liberal interpretation of the FLSA, the Court concludes that, in cases that seek to correct violations of § 206, § 207, or § 215(a)(3), attorney’s fees under § 216(b) are available when only declaratory relief is sought or obtained, so long as an actual violation of the FLSA by the employer is involved. In this case, Plaintiffs allege ongoing violations of § 207, and seek declarations relating to the proper calculation of overtime under § 207. This case is therefore one that seeks to correct an actual and ongoing violation of § 207. Accordingly, if Plaintiffs prevail and obtain declaratory relief, they will be entitled to attorney’s fees.
The declaratory relief requested by Beard is a pure issue of law, and no further facts need be developed before resolving that issue. The declaratory relief requested by Beard is contrary to the Court’s conclusion. Because attorney’s fees are available under § 216(b) in this case, it is appropriate to dismiss Beard’s request for declaratory relief.
Click Pickett v. Beard to read the entire Order on Plaintiffs’ Motion to Dismiss and Alternatively Motion to Strike.
M.D.Fla.: Magistrate Judge’s Order Requiring That FLSA Defendant Take Out-of-State Opt-in Plaintiff’s Deposition In Opt-in’s Home Forum Upheld
Fiore v. Goodyear Tire & Rubber Co.
This matter was before the Court on defendant’s Objection to Order on Plaintiff’s Motion for Protective Order Regarding the Location of an Opt-In Plaintiff Deposition. Previously, the Magistrate Judge had granted in part a protective order by declining to compel an opt-in plaintiff who resides in Texas to come to the Middle District of Florida for a deposition, and further required the deposition to be held in Texas. The Magistrate Judge found that “forcing an out of state opt-in plaintiff to travel hundreds of miles to take a deposition would undermine the purpose of this collective action, and effectively destroy any benefits gained by proceeding as a class under the [Fair Labor Standards Act] FLSA. It would be unreasonable to force Wandell to attend a deposition in Tampa, Florida. Wandell did not choose the Middle District as his forum, the forum was chosen for him.”
Agreeing that the Magistrate Judge’s order was not contrary to law or clearly erroneous, reviewing the prior order, the District Judge reasoned:
“A district court reviews an objection to a non-dispositive order of a magistrate judge to determine whether the order was clearly erroneous or contrary to law. 28 U.S.C. § 636(b)(1)(A); Fed.R.Civ.P. 72(a). Defendant argues that the Magistrate Judge was clearly erroneous and disregarded Middle District of Florida Local Rule 3.04(b), and that Wandell should appear for his deposition in the Middle District of Florida. Because the Order was neither clearly erroneous nor contrary to law, defendant’s objection is overruled.
The Court finds that the Magistrate Judge applied the correct law and that her decision was not clearly erroneous. Control of discovery in a civil case is committed to the sound discretion of the court. Chrysler Int’l Corp. v. Chemaly, 280 F.2d 1358, 1360 (11th Cir.2002). This is the standard recognized by the Magistrate Judge in her Order. (Doc. # 73, p. 2.)
A reviewing court applies an abuse of discretion standard in its review of a decision on a motion to compel. Holloman v. Mail-Well Corp., 443 F.3d 832, 837 (11th Cir.2006). A judge abuses her discretion if she applies an incorrect legal standard, follows improper procedures in making the determination, or makes findings of fact that are clearly erroneous. Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1260 (11th Cir.2008). Additionally, a court “abuses its discretion when it misconstrues its proper role, ignores or misunderstands the relevant evidence, and bases its decision upon considerations having little factual support.” Serra Chevrolet, Inc. v. GMC, 446 F.3d 1137, 1147 (11th Cir.2006). Absent such situations, discretion means that a magistrate judge is allowed a range of choices, and should not be second-guessed unless the decision reflects a clear error of judgment. Holloman, 443 F.3d at 837.
The Court concludes that the magistrate judge did not abuse her discretion. Control over discovery, including the location of a deposition, is committed to the sound discretion of the Court. The decision was not clearly erroneous, i.e., there has been no showing that the location of the deposition was a clear error in judgment. The Magistrate Judge recognized Local Rule 3.04(b), and stated adequate reasons for her decision as to the location. Her decision is well within the permissible range of choices allowed in the sound exercise of discretion.”
However, the Court clarified that it was ruling on the issue before it only, (whether the Magistrate Judge had abused her discretion):
“The Court does not hold that an opt-in [plaintiff’] cannot be required to give a deposition within this District. The Court only holds that, as to Mr. Wandell, there was no abuse of discretion in requiring a deposition in his home district. If this case is certified as a collective action, there may be other considerations as to the locations of depositions. That issue, however, is not before the Court at this time. The Court also does not necessarily adopt the FLSA rationale articulated by the Magistrate Judge.”
Click Fiore v. Goodyear Tire & Rubber Co. to read the entire Opinion and Order.
M.D.Fla.: Approval Of Confidential Settlement In FLSA Case Rejected; Confidentiality Frustrates Remedial Purposes Of The FLSA
Dees v. Hydradry, Inc.
This case was before the Court on the parties’ Joint Stipulation of Dismissal. Although, the Court noted that, “a private settlement and stipulation for dismissal ends the typical case without judicial intervention, the Eleventh Circuit requires the district court to review the settlement of an FLSA claim. See Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir.1982).”
As part of a lengthy discussion of the remedial purposes behind the FLSA, the history of the FLSA and the applicable case law regarding waiver and settlements, and the role of the Court in the settlement process, the Court reasoned that no such resolutions of FLSA cases should involve confidentiality provisions, because such provisions contravene the public policy behind the FLSA’s implementation.
“ii. A Confidentiality Provision Contravenes FLSA Policy
Because of worry that settling with one employee will encourage other employees to assert FLSA rights, the employer may seek to maintain the confidentiality of the settlement agreement. But a confidentiality provision furthers resolution of no bona fide dispute between the parties; rather, compelled silence unreasonably frustrates implementation of the “private-public” rights granted by the FLSA and thwarts Congress’s intent to ensure widespread compliance with the statute. To further Congress’s intent, the Department of Labor requires the employer of an employee covered by the FLSA to display conspicuously in the workplace a detailed notice of the employee’s FLSA rights. By including a confidentiality provision, the employer thwarts the informational objective of the notice requirement by silencing the employee who has vindicated a disputed FLSA right.
Furthermore, Section 15(a)(3) of the FLSA proscribes an employer’s retaliating against an employee for asserting rights under the FLSA. If an employee covered by a confidentiality agreement discusses the FLSA with fellow employees or otherwise asserts FLSA rights, the employer might sue the employee for breach of contract. The employer’s most proximate damages from the employee’s breach are the unpaid FLSA wages due other employees who learned of their FLSA rights from the employee who breached the confidentiality agreement. A confidentiality agreement, if enforced, (1) empowers an employer to retaliate against an employee for exercising FLSA rights, (2) effects a judicial confiscation of the employee’s right to be free from retaliation for asserting FLSA rights, and (3) transfers to the wronged employee a duty to pay his fellow employees for the FLSA wages unlawfully withheld by the employer. This unseemly prospect vividly displays the inherent impropriety of a confidentiality agreement in settlement of an FLSA dispute.
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. “The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered the national health and efficiency and as a result the free movement of goods in interstate commerce.” Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 706-07 (1945). The district court should reject as unreasonable a compromise that contains a confidentiality provision, which is unenforceable and operates in contravention of the FLSA.”
Later in the opinion the Court discussed the issue of confidentiality in greater detail, reasoning that beyond evaluating a settlement for “reasonableness,” the Court has other functions when reviewing FLSA settlements, specifically to ensure that such settlements and records of same are available for public review:
“B. External Factors: Does the Compromise, Although Reasonable, Otherwise Frustrate Implementation of the FLSA
In evaluating a compromise, the district court should also consider an array of “external” or contextual factors pertinent to the statutory purpose of the FLSA. Compromise of a retrospective dispute may be permissible if, for example, the FLSA issue in a case is unresolvably close on the facts or the law or some extraordinary circumstance (say, a suddenly disabled claimant or an employer in liquidation) commends a speedy or certain resolution. On the other hand, several factors may commend rejecting a proposed compromise, including the presence of other employees situated similarly to the claimant, a likelihood that the claimant’s circumstance will recur, a history of FLSA non-compliance by the same employer or others in the same industry or geographic region, or the requirement for a mature record and a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace. In all instances, the district court should faithfully execute the congressional mandate for “minimum wages, promptly paid … for the lowest paid segment of the nation’s workers.” D.A. Schulte v. Gangi, 328 U .S. 108, 116 (1946).
IV. The Effect of Judicial Review: “Confidential” FLSA Settlement Agreements and Public Access to Court Records
“Parties who settle a legal dispute rather than pressing it to resolution by the court often do so, in part anyway, because they do not want the terms of the resolution to be made public.” Jessup v. Luther, 277 F.3d 926, 928 (7th Cir.2002). See generally Laurie Kratzky Dore, Secrecy by Consent: The Use and Limits of Confidentiality in the Pursuit of Settlement, 74 Notre Dame L.Rev. 283 (1999). In an FLSA action, the employer worries that compromise with an employee who has vindicated a valuable FLSA right will inform and encourage other employees, who will vindicate their FLSA rights (or who will wrongly, but expensively for the employer, conclude that additional wages are due). Although perhaps both uncomfortable and expensive to an employer, vindication of FLSA rights throughout the workplace is precisely the object Congress chose to preserve and foster through the FLSA.
In the typical settled case, the district judge remains unaware of the terms of compromise, and the parties enforce the settlement agreement, if necessary, only through a separate action. The parties maintain the confidentiality of their compromise by submitting a stipulation for dismissal under Rule 41, Federal Rules of Civil Procedure. In an FLSA case, however, Lynn’s Food requires the parties to obtain judicial approval of the compromise. Forced to submit the agreement to the court after filing a motion for approval, the parties often seek to preserve the confidentiality of the compromise either by moving to submit the agreement under seal or by requesting an “in camera review” of the agreement.
In the typical FLSA case, however, neither attempt to conceal the compromise comports with the public’s right of access to a judicial proceeding, which right is “an essential component of our system of justice [and] instrumental in securing the integrity of the process.” Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1311 (11th Cir.2001). The judge’s “approving” a settlement constitutes a “public act,” and the public “has an interest in knowing what terms of settlement a federal judge would approve.” Jessup, 277 F.3d at 929. As an active component of the judge’s decision, the settlement agreement is presumptively a public record. See Brown v. Advantage Eng’g, Inc., 960 F.2d 1013, 1016 (11th Cir.1992) (“Once a matter is brought before a court for resolution, it is no longer solely the parties’ case, but also the public’s case.”); Bank of Am. Nat’l Trust & Sav. Ass’n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 343 (3d Cir.1986) (“[T]he common law presumption of access applies to motions filed in court proceedings and to the settlement agreement … filed and submitted to the district court for approval.”). The public enjoys the right both to attend a trial or hearing and to inspect and copy a judicial record.
The presumption that the record of a judicial proceeding remains public “is surely most strong when the ‘right at issue is of a ‘private-public character,’ as the Supreme Court has described employee rights under the FLSA.” Stalnaker, 293 F.Supp.2d at 1264 (quoting Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 708 (1945)). Sealing an FLSA settlement agreement between an employer and employee, reviewing the agreement in camera, or reviewing the agreement at a hearing without the agreement’s appearing in the record (in any event precluding other employees’ and the public’s access to, and knowledge of, the agreement) thwarts Congress’s intent both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA in the workplace.
Furthermore, before sealing a document, the district court must identify and articulate “an overriding interest based on findings that [a seal] is essential to preserve higher values and is narrowly tailored to serve that interest. The interest is to be articulated along with findings specific enough that a reviewing court can determine whether the [sealing] order was properly entered.” Press-Enterprise Co. v. Superior Court of California, 464 U.S. 501, 510 (1984). Preventing the employee’s co-workers or the public from discovering the existence or value of their FLSA rights is an objective unworthy of implementation by a judicial seal, which is warranted only under “extraordinary circumstances” typically absent in an FLSA case. Absent an “overriding interest” in the preservation of some “higher value,” the court should not abide the parties’ request for a seal
The parties’ stipulation to seal the agreement (and the absence of a third-party objection to sealing the compromise agreement) fails to justify a seal. In Citizens First National Bank of Princeton v. Cincinnati Insurance Co., 178 F.3d 943, 944-45 (7th Cir.1999), Judge Posner states:
The parties to a lawsuit are not the only people who have a legitimate interest in the record compiled in a legal proceeding…. [T]he public at large pays for the courts and therefore has an interest in what goes on at all stages of a judicial proceeding. That interest does not always trump the property and privacy interests of the litigants, but it can be overridden only if the latter interests predominate in the particular case, that is, only if there is good cause for sealing a part or the whole of the record in that case. The determination of good cause cannot be elided by allowing the parties to seal whatever they want, for then the interest in publicity will go unprotected unless the media are interested in the case and move to unseal. The judge is the primary representative of the public interest in the judicial process and is duty-bound therefore to review any request to seal the record (or part of it). He may not rubber stamp a stipulation to seal the record. See also Wilson v. American Motors Corp., 759 F.2d 1568, 1571 (11th Cir.1985) (“[I]t is the rights of the public, an absent third party, which are preserved by prohibiting closure of public records….”).
Reviewing an FLSA settlement agreement under seal conflicts with the public’s access to judicial records, frustrates appellate review of a judge’s decision to approve (or reject) an FLSA compromise, contravenes congressional policy encouraging widespread compliance with the FLSA, and furthers no judicially cognizable interest of the parties. A proper consideration of the intent of Congress and the public’s interest in judicial transparency permits only one method to obtain judicial review of a compromise of an FLSA claim. The parties must file the settlement agreement in the public docket. See Stalnaker, 293 F.Supp. at 1262-64; see also Hanson v. Wells Fargo Bank, No. 08-80182-CIV, 2009 WL 1490582 (S.D.Fla. May 26, 2009) (requiring the parties to submit an unsealed copy of their settlement agreement).
To ensure that “all our able-bodied working men and women [receive] a fair day’s pay for a fair day’s work,” the FLSA requires a covered employer to pay each employee a minimum wage and overtime. To combat the typically unequal bargaining power between employer and employee, Congress prohibits a private agreement altering FLSA rights. An employee entitled to FLSA wages may compromise his claim only under the supervision of either the Department of Labor or the district court.
If presented in an FLSA action with a notice of settlement, a stipulation for dismissal, an offer of judgment, or the like, the judicial approval required by Lynn’s Food and the public’s right of access to a judicial proceeding compel the parties to file their agreement in the public docket of the district court. As an initial matter, the district court must determine whether the employee purports to compromise an FLSA right. If judicial scrutiny confirms that the parties’ settlement involves no compromise, the district court should approve the settlement and dismiss the case (if the employer has paid) or enter judgment for the employee (if the employer has not paid). If the parties’ proposed resolution requires the employee to compromise an FLSA right, the district court must scrutinize the compromise for “fairness.”
An employee’s right to a minimum wage and overtime is unconditional, and the district court should countenance the creation of no condition, whether confidentiality or any other construct, that offends the purpose of the FLSA. An employer is obligated unconditionally to pay a minimum wage and overtime to the complainant and his fellow employees; the district court should not become complicit in any scheme or mechanism designed to confine or frustrate every employee’s knowledge and realization of FLSA rights. Accordingly, the district court evaluating an FLSA compromise should examine first the “internal” fairness of the compromise, including the existence of a bona fide dispute and the absence of a prospective waiver, confidentiality agreement, or other provision antithetical to the FLSA. If the proposed compromise is fair and reasonable to the employee, the court should consider whether any other external factor, such as the need to resolve definitively an issue affecting similarly situated employees, recommends rejecting the compromise. If the compromise is fair and reasonable to the employee and furthers the implementation of FLSA rights in the workplace, the court should approve the compromise.
For the reasons stated in this order, the parties’ stipulation of dismissal is rejected.”
Needless to say, it will be interesting to see if other court’s follow the Court’s reasoning.
EDITOR’S NOTE: Less than a week after this opinion, Judge Merryday, who authored the opinion, went a step further in another case, holding that settlement agreements in FLSA cases that prohibit an employee from disparaging his or her employer are equally inappropriate. See McGowan v. CSPS Hotel, Inc., 8:09-cv-02311-SDM-MAP (M.D.Fla. Apr.29, 2010).