Be Careful When Submitting FLSA Settlement Documents To The Court: Confidentiality And General Release Clauses Are Taboo!

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I have settled numerous FLSA cases and note that there are many elements that management-side lawyers always want to see in such a document.  One is a confidentiality provision as we do not want the employee “shooting his mouth off” over what he received in settlement.  We also want as broad a Release as possible so we never run the risk of being confronted by this worker again in a court.  Well, these goals, laudable as they are, are proving more difficult to achieve given the stance of federal courts on such provisions.  A recent New Jersey case illustrates this point.  The case is entitled Hudson v. Express Transfer & Trucking and was filed in federal court in the District of New Jersey.

In this case, the parties settled on August 10, 2020 and requested that the Court approve the settlement as required.  Included in the Release were a limited confidentiality provision, non-disparagement and neutral reference provisions.  The limited confidentiality provision provided that the parties, if asked about the lawsuit, would respond that “the matter has been resolved” and that the employer could seek equitable relief in court for a violation.  The general release provided that the plaintiff gives up his claims under the Family and Medical Leave Act, the Americans with Disabilities Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Age Discrimination in Employment Act of 1967, the Civil Rights Act of 1991 and the New Jersey Law Against Discrimination.

The Court noted that many courts had found such provisions unenforceable, especially in the District of New Jersey.  The Court observed that such provisions undermine fundamental purposes of the FLSA.  In one case, the confidentiality provision prevented employees from speaking to anyone about the contents of the settlement and compelled them to tell anyone who asked that “the matter has been resolved and I cannot talk about it.”  In another case, the Judge noted that this kind of “compelled silence” allowed employers to “thwart the informational objective of the notice requirement by silencing an employee who has vindicated a disputed FLSA right.”  The court in that case concluded that this provision potentially allowed employers to retaliate against employees for the vindication of their FLSA claims by allowing employers to sue the employee if they spoke about the agreement.

The Court also rejected the broad release provision as possible including future employer FLSA violations that could occur after the signing of the Release and observed that the FLSA was enacted in part to address “inequalities in bargaining power between employers and employees” and that this salutary purpose was endangered by such broad waivers of FLSA rights.  The Court noted that another court had rejected a release provision in a single plaintiff FLSA action because it purported to release any and all claims the plaintiff may have against defendant, and the court had no information regarding the potential value of such released claims so as to evaluate fairness.

Conversely, the Court pointed to another case where a court approved a Release because it was limited to future claims related to the specific litigation at issue and did not incorporate any FLSA claims) and another case where a court approved a release provision in a FLSA collective action because it was limited only to the claims in the subject litigation, and noting that the parties intentionally narrowed the scope of the release because they knew that general releases are disfavored in FLSA settlement agreements.

The Takeaway

The Court believed that the confidentiality provision and the release provisions were overbroad and contravened the “public-private character” of employee rights under the FLSA and served to “nullify the purposes of the Act.”

Attorneys need to be aware…

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