On May 17, 2019, Judge Renee Marie Bumb of the United States District Court for the District of New Jersey rejected the parties’ request to dismiss a Fair Labor Standards Act (“FLSA”) lawsuit without the Judge’s review of the settlement agreements.  In doing so, the District Court ordered defendants to submit the settlement agreement reached with the named plaintiff or attest that no agreement covering FLSA claims exists.  The case is Kessler v. Joarder Props., LLC, 2019 U.S. Dist. LEXIS 83571 (D.N.J. May 17, 2019) and is a reminder for employers engaged in FLSA litigation that obtaining court approval is a requirement before dismissal of the action is proper.

Relevant Facts And Procedural History

On July 20, 2018, Plaintiff Daniel Kessler filed a lawsuit on behalf of himself and all similarly situated individuals, alleging failure to pay minimum wage and overtime in violation of the FLSA and New Jersey state laws.  Kessler was a former delivery driver for the defendants, which are franchises of Domino’s Pizza with operations in Pennsylvania and New Jersey.  Almost immediately after initiating the lawsuit, five putative class members opted-in to the litigation.

A few months later, on September 14, 2018, defendants requested dismissal of the case because the named plaintiff, Kessler, had allegedly stated his intent to not proceed with the case.  Plaintiffs’ counsel responded by arguing that defendant had used coercive tactics to secure private and confidential settlement agreements without the presence of counsel.  Plaintiffs’ counsel then filed a motion for protective order to prevent defendants from communicating with putative class members without counsel.

Subsequently, on October 29, 2018, plaintiffs’ counsel advised the court that defendants had successfully identified all remaining putative class members and entered into private settlement agreements with each.  As a result, plaintiffs’ counsel filed a motion for voluntary dismissal under the presumption they could no longer pursue the case as the private settlement agreements had convinced the putative class members to withdraw.  Plaintiffs’ counsel also filed a motion for attorneys’ fees arguing the named plaintiff was the “prevailing party” because he had obtained a settlement from defendants.

District Court’s Ruling

In determining whether the District Court could dismiss the action, it relied on the leading Eleventh Circuit Court of Appeals decision, Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1352–53 (11th Cir. 1982), wherein the Appellate Court observed:

There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under section 216(c), the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. An employee who accepts such a payment supervised by the Secretary thereby waives his right to bring suit for both the unpaid wages and for liquidated damages, provided the employer pays in full the back wages.

Through litigation, the Court noted, a district court may enter a stipulated judgment only if it determines that the compromise reached is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.  However, the District Court held that to simply approve a private settlement agreement because the parties had agreed would thwart Congress’s intent of enacting FLSA’s protective legislation and deprecates employee’s FLSA rights.

The District Court held that without the opportunity to review the settlement agreement, it was unable to determine whether it is a “fair and reasonable resolution” of the FLSA claims.  Consequently, the Kessler Court refused to grant either party’s requests to dismiss the case.  In doing so, the District Court reminded the parties that FLSA settlement agreements require approval from either a court or the Department of Labor.  To determine if a fair and reasonable resolution had been reached and whether dismissal is appropriate, Judge Bumb ordered defendants to submit the settlement agreement reached with Kessler for the Court’s review and approval or attest via sworn affidavits there is no such agreement.

Bottom Line

Employers defending FLSA claims must be cognizant of the requirement to submit FLSA settlement agreements for approval and that unapproved settlement agreements may be held unenforceable and not binding.  While many employers may choose not to submit a settlement agreement for a number of reasons, employers settling such claims without DOL or court approval do so at their own risk.