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FLSA Claim Cannot Be Settled Without Court Review First


Cheeks v. Freeport Pancake House, Inc. - Second Circuit Court of Appeals


Facts:  Dorian Cheeks ("Cheeks") worked at Freeport Pancake House ("Freeport") for several years.  In 2012, Cheeks sued Freeport and sought to recover overtime wages, liquidated damages, and attorney's fees and asserted a claim for retaliation for previously having raised those claims under both the Fair Labor Standards Act ("FLSA") and New York Labor Law.  The parties reached a private settlement and filed a joint stipulation and order of dismissal.  

However, the district court judge declined to accept the stipulation and instructed the parties to file a copy of the settlement agreement on the docket and "show cause why the proposed settlement reflects a reasonable compromise of disputed issues rather than a mere waiver of statutory rights brought by an employer's overreaching."  Instead of complying with the judge's instruction, the parties jointly sought certification of an appeal to the Second Circuit and requested a decision on whether the parties may stipulate to the dismissal of an action without the involvement of the court.

Holding:  The Court pointed to the fact that unlike most causes of action which can be settled simply with a stipulation of dismissal, courts should apply extra scrutiny to FLSA settlements to prevent workers from waiving the protections of the Act.  As the Court held, some sort of judicial scrutiny of FLSA settlements is needed to ensure that private settlements further the policy goals of the FLSA.  If plaintiffs agree to compromise settlement amounts that do not achieve the goal of preventing employers from violating the FLSA, the purpose of the FLSA would be frustrated.  Consequently, even if the proposed settlement between Cheeks and Freeport was "reasonable", the Court held that some level of scrutiny was needed before the FLSA claim could be dismissed.

Judgment:  The Second Circuit affirmed the ruling of the district court and held that parties cannot settle their FLSA claims, absent approval from either a court or the Department of Labor.

The Takeaway:  I think this ruling makes sense when you think about it, as the Court of Appeals in essence took steps to protect litigants from themselves.  I think it is especially important when a plaintiff brings an FLSA suit without the help of an attorney and might be "tricked" into signing away more rights than they realize with an FLSA settlement.  By requiring that a court or the Department of Labor approve the settlement, the Court of Appeals set up a safeguard to make sure that no one gets "taken for a ride" and mistakenly settles more than they realize. 

However, note that the Court of Appeals did not provide any guidance on "what the district court must consider in deciding whether to approve the putative settlement."  This is probably for the best though, as the Court did not want to establish any stringent test and instead chose to leave the decision up to the discretion of the judge who decides whether to approve an FLSA settlement.

Majority Opinion Judge:  Judge Pooler

Date:  August 7, 2015

Opinion:  www.ca2.uscourts.gov/decisions/isysquery/e1bc7cde-286a-48c5-a556-375ab0fdaeb6/1/doc/14-299_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/e1bc7cde-286a-48c5-a556-375ab0fdaeb6/1/hilite/

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