Late last month, in Martin v. Spring Break Productions, LLC, No. 30671 (5th Cir. 6/24/12) the 5th Circuit threw a bit of a curve ball to employment lawyers by ruling that individual employees may settle a wage claim without court or Department of Justice approval. This represents a pretty big change from previous law...or at least from what most of us practicing employment law thought the previous law was.
In Spring Break, a union entered into a settlement of employees' FLSA claims on their behalf but the employees never personally signed any settlement documents and the agreements were not approved by the court or by the Department of Labor. Previous to this decision most employment lawyers believed that such a settlement would not be enforceable under existing case law. Generally speaking, settlement of FLSA claims between an employer and individual employee were held to be unenforceable unless they were approved by the Department of Labor and/or a court of competent jurisdiction. This was the law because there was a genuine fear that employers would utilized their unequal bargaining power to force employees to settle their overtime claims for far below what they were actually owed under threat (implied or otherwise) of losing their job or out of a lack of understanding as to what they were actually owed under the law. Of course, this risk still exists.
Nevertheless, the 5th Circuit, under the particular facts in Spring Break, decided that there was a sufficient "bona fide dispute" between the parties and that the parties were adequately represented to make enforcement of the settlement agreement fair. Given the facts of this case, I think that is probably correct. However, this case should be limited to its facts, which are fairly unique.
In Spring Break, the individuals were represented by a union that settled unpaid overtime claims in the context of a case brought by the union. The plaintiffs received the payments and cashed the checks while they were being represented in a separate overtime action by private attorneys. Put simply, this case stands for the proposition that when employees are represented by a union that is pursuing a grievance for unpaid overtime and employees are paid under a settlement of those claims and said employees have private lawyers representing them on the same claims when they cash the check, then the settlement does not need court approval. This is because the parties obviously had a bona fide dispute and the employees obviously had adequate representation.
While I am certain that some attorneys will try to use this case to overreach and argue that it allows settlement of individual FLSA claims in other contexts, I think this would be a misreading of what is, on its face, a fairly narrow ruling. Situations involving union wavers, such as that at issue in Spring Break, have always been interpreted differently than the run-of-the-mill case involving unrepresented individual employees. I don't think this case should be read as a change to the law regarding such individual employees in any respect.