New Yorkers whose employers have violated the Fair Labor Standards Act sometimes are able to negotiate settlements with them before any litigation is filed. A recent ruling by the U.S. District Court for the Southern District of New York says that these pre-litigation settlements do not need to be reported to and approved by the Department of Labor or a court.The case involved a woman who negotiated a settlement with her former employer before filing a lawsuit. She subsequently sued her employer for liquidated damages and unpaid wages even though she had previously settled those claims with her employer. The employer filed a motion to dismiss because of the pre-litigation settlement.
The plaintiff argued that the settlement was not binding because it had not been approved by the DOL or a court. The federal court disagreed, ruling that under certain circumstances, pre-litigation settlements do not require approval from either the DOL or a court. Other circuits are split and it is possible that it may ultimately be decided by the Supreme Court of the United States. The Second Circuit has not yet ruled on the enforceability of pre-litigation FLSA settlements.
The Southern District court tired hard to reconcile the differences between the circuits by holding that the plaintiff in the case before it was protected against one sided bargaining by the fact that she was represented by counsel and that the settlement discussions had been lengthy and deliberative.
Employers faced with a demand under the FLSA for back wages and/or overtime before a complaint is filed must take into consideration whether the employee is represented by counsel during settlement negotiations and recognize that if the employee is not represented during those negotiations, there is a greater risk that the settlement will unenforceable without Department of Labor or Court approval. This may be so even if the payment is sought by the Department of Labor on behalf of employees who have not asserted FLSA claims.
Employers offered to opportunity to negotiate wage and hour claims before a complaint has been filed, must consult competent employment counsel to make sure the Employer gets what it bargained for and is not faced with a subsequent suit for the same relief by employees who claim their issues were not adequately represented in the earlier negotiations.