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News | May 05, 2019

A couple of Recent Decisions Protecting the Integrity of FLSA Settlements

Over the years, we have repeatedly published news reports addressing the requirement that FLSA settlements be reviewed and approved by judges.  On the downside, judicial approval makes “small” FLSA cases extremely “unprofitable” because the attorney time necessary for obtaining judicial approval often exceeds the value of the settlement.  Judges should be sensitive to this reality, or else the judicial approval requirement will undermine the FLSA by discouraging competent lawyers from getting involved in “low-value” (but nonetheless important) FLSA cases.

On the other hand, it cannot be denied that the judicial approval requirement provides an important safeguard for American workers.  District of New Jersey Judge Renee Marie Bumb’s May 17, 2019 decision in Kessler v. Joarder Properties LLC, 18-cv-11867 (D.N.J.) provides a good example.  There, the defendant allegedly reached an FLSA settlement directly with employees and without negotiating with the employees’ lawyer.  When the defendant sought dismissal of the case, the employees’ lawyer filed papers that, according to the opinion, “alleg[ed] that Defendants had convinced [the employees] to drop their cases, using coercive tactics to secure private and confidential settlement agreements without presence of counsel.”  In response, Judge Bumb refused to dismiss the lawsuit and ordered defense counsel to turn over any settlement agreements so they can be reviewed for fairness.  Hats off to the Judge.  This is precisely why the judicial approval requirement exists.

I also was interested to read Eastern District of Pennsylvania Magistrate Judge Lynne Sitarski’s April 24, 2019 opinion in Farris v. National Forensic Consultants, Inc., 18-cv-03052.  There, Judge Sitarski recommended the approval of a $50,000 FLSA settlement EXCEPT that she recommended that the settlement agreement’s broad general release language be disapproved.  The Judge provided a good analysis of why FLSA settlements should not be used as a vehicle for employees’ releasing legal claims that have nothing to do with the FLSA.

 

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