In Bodle v. TXL Mortg Corp., the Fifth Circuit Court of Appeals had to decide whether to extend its holding in Martin v. Spring Break ′83 Productions, L.L.C., 688 F.3d 247 (5th Cir.2012) that a private settlement reached over a bona fide dispute regarding FLSA claims was enforceable despite the general prohibition against the waiver of FLSA claims via private settlement.
In general, FLSA claims cannot be waived through a private settlement agreement unless supervised or approved by a court or the Department of Labor. However, the Fifth Circuit previously created a limited exception to this rule for private settlement agreements reached due to a "bona fide" dispute concerning hours worked or compensation owed. In the 2012 case, Martin v. Spring Break ’83 Productions, L.L.C., the court reasoned that this limited exception would not undermine the purpose of the FLSA because “the plaintiffs did not waive their claims through some sort of bargain but instead received compensation for the disputed hours.
Applying Martin, the district court in Bodle enforced a generic, broad release against the plaintiffs’ subsequent FLSA claims, even though the release was obtained through the private settlement of a prior state court action that did not involve the FLSA or any claim of unpaid wages. Because it reasoned that it could not be assured under the facts at bar that the release at issue resulted from a bona fide dispute regarding overtime wages, the Fifth Circuit declined to extend Martin and reversed.