On February 22, 2013, the U.S. District Court for the Eastern District of New York held that parties may privately settle a Fair Labor Standards Act (FLSA) case without judicial approval or Department of Labor (DOL) supervision. While it is uncertain that such settlement agreements will be upheld upon challenge, defense attorneys should feel more confident in counseling their clients regarding the option to settle their FLSA case out of court. Doing so may ameliorate employers’ fear of publicly filing settlement agreements, which can instigate copycat lawsuits and media attention, and rid the need for added litigation expenses in connection with fairness proceedings.
In Picerni v. Bilingual Seit & Preschool, Inc., the district court ruled that a teacher could dismiss her FLSA lawsuit pursuant to a private settlement agreement with her former employer. Just a few months prior, before the parties had participated in a status conference and before the defendant answered the plaintiff’s complaint or otherwise appeared, the court found just the opposite. When the plaintiff notified the court that she accepted a settlement offer from the defendant, the court rejected the parties’ agreement, citing case law that holds that stipulated settlements in a FLSA case must be approved by the court for fairness when an out-of-court settlement was not directly supervised by the DOL.
The court reversed itself in light of two United States Supreme Court cases: Brooklyn Savings Bank v. O’Neil, and D.A. Schulte, Inc. v. Gangi. These cases hold that an employer who settles an FLSA claim without either court approval or DOL supervision is at risk of a subsequent suit by the same employee, despite receiving a release as part of the settlement agreement. The Picerni court distanced itself from the vast majority of courts that have refused to permit parties to voluntary dismiss their suits after privately settling. The court observed that neither Brooklyn Savings, Gangi, nor their progeny expressly prohibited voluntary dismissal. The court observed it was one thing to say that releases obtained via private settlements will not be enforced in later litigation under certain circumstances, and another to say that courts will not permit parties to privately settle and risk the settlement being ineffective.
In so distinguishing, the court took care to examine the plain language of the FLSA to glean the legislature’s intent. While some federal statutes expressly require court approval for voluntary dismissal of cases, the FLSA does not. The court determined, therefore, that subjecting the parties’ private settlement agreement to a fairness hearing “to achieve some Platonic form of the ideal of judicial vindication [does] not seem necessary to accomplish any purpose under the FLSA.” This ruling marks a significant step for employers and defense attorneys who wish to engage in private settlement agreements to resolve FLSA cases.
Photo credit: MBPhoto, Inc.