What is the proper way to dismiss a case that the parties have settled, and are FLSA cases any different? Typically, when parties to a lawsuit settle a case, they simply alert the court of the settlement and then file a stipulation of termination with prejudice. Other times, a claimant may choose to unilaterally reject a claim without prejudice in order to have the option of filing again or in another forum.
FLSA cases are different when it comes to regulations
The Fair Labor Standards Act allows employees to sue if they believe their employer has not paid them appropriate wages for time worked. FLSA claims include those for unpaid overtime, misclassifying an employee as exempt, or failing to meet the required minimum wage. The FLSA specifically requires that any settlement of an FLSA claim be approved by either the federal court or the Department of Labor. Public policy in this regard is to ensure that the settlement is “fair and reasonable to the employee”.
Cheeks and dismissals
In practice, some parties to an FLSA action bypass the judicial review stage by simply settling a case and filing a joint stipulation of termination with prejudice instead of filing the entire settlement agreement. In 2015, the Second Circuit issued an advisory banning the practice. In Cheeks against Freeport Pancake Housethe parties negotiated an FLSA settlement and, instead of seeking district court approval, they filed a stipulation to dismiss all claims, with prejudice, pursuant to Rule 41(a)(1)(A) of the Federal Rules in Civil Procedure.
the Cheeks The court ruled that the FLSA claims fall within the federal law exception to Rule 41, so the parties cannot go that simple route instead of seeking court approval for the settlement. The court noted that the FLSA is “protective law only” and that the FLSA’s public policy to address “disparate bargaining power between employers and employees” required consideration of an FLSA regulation.
the Cheeks case concerned only dismissals with prejudice under Rule 41. However, in Samake vs. Thunder LubeInc.the Second Circuit faced a situation where a plaintiff wanted to unilaterally deny his claim without damage. Sekouba Samake sued his employer, Thunder Lube, for unpaid overtime under the FLSA. Thunder Lube immediately requested that the matter be referred to arbitration pursuant to an agreement the parties had signed. Instead of responding to this request, Samake offered to reject its request without prejudice, in order to avoid ending up in arbitration. The court of first instance applied Cheeks and asked if the parties had reached a settlement. Samake informed the court that there was no settlement but asked that the federal court hear the case instead of going to arbitration. The court held that Cheeks prohibited Samake from dismissing its claim without prejudice and decided that the matter should be submitted to arbitration.
The main question for the Second Circuit on appeal was whether Cheeks should apply to a party’s attempt to dismiss a case without prejudice. The court held that even an automatic dismissal under Article 41 must be considered by the court. the Cheeks and said that because of the uniqueness of the FLSA, district courts should consider all dismissals to ensure that there is no abuse in a settlement. the Cheeks the opinion cited fears of settlements with highly restrictive confidentiality provisions, overbroad releases, and disproportionate cost awards as reasons a court must review the FLSA firings. The court noted that these types of issues could arise whether the dismissal was with or without prejudice.
Cheeks To advance
Settling FLSA claims can be very complicated, and employers must handle class actions and individual actions very deliberately. Employers should remember that a court will review a wage and hour settlement. Even if you don’t operate in the second circuit, chances are the courts might have the same attitude to review. Although the Cheeks line of cases do not describe settlement terms that are specifically determined to be improper, it is wise to look at how your local jurisdiction has handled FLSA cases in the past to get a good idea of what will be allowed.
© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 46