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Employment Law Update: Growing Number of Courts Reject FLSA Settlement Approval Requirement

The legal landscape surrounding Fair Labor Standards Act (“FLSA”) settlements is changing as a result of a split among federal courts on whether such settlements actually require judicial or Department of Labor (“DOL”) approval. The FLSA itself does not prescribe such approval. Instead, the requirement originated from the U.S. Court of Appeals for the Eleventh Circuit’s 1982 decision in Lynn’s Food Stores, Inc. v. U.S., in which the court held that “to approve an agreement between an employer and an employee outside of the adversarial context of a lawsuit brought by the employees would be in clear derogation of the letter and spirit of the FLSA.”
 
In the decades since Lynn’s Food, the Second Circuit and many federal district courts have concluded the same, imposing a procedural hurdle that increases costs and delays for parties seeking to resolve wage and hour disputes. Other circuit courts, including the Fourth Circuit (which includes Maryland, Virginia, West Virginia, North Carolina and South Carolina), have acknowledged the requirement without explicitly ruling that FLSA settlements must receive judicial or DOL approval. District courts within the Fourth Circuit, including those in Maryland and Virginia, currently require judicial review and approval.
 
Recently, however, a growing number of courts, including the Fifth Circuit and lower courts in the Sixth and Ninth Circuits, are rejecting Lynn’s Food, holding that courts are not authorized to approve FLSA settlements. Earlier this year, in Bazemore v. Papa John’s USA, Inc., a Kentucky federal judge denied a plaintiff’s Unopposed Motion for Settlement Approval, explaining that neither the FLSA nor binding Sixth Circuit precedent “requires or authorizes” court approval of FLSA settlements. 
 
Under the current state of the law, except in the Fifth Circuit, private settlements of claims for wage and hour violations under the FLSA are not enforceable unless there is judge/court or DOL approval of the settlement terms, which is not particularly tenable in many private settlement negotiations. The growing disagreement among courts increases the likelihood that the Supreme Court may weigh in, potentially changing private litigants’ ability to settle wage and hour disputes without external oversight and approval. Until then, employers should be aware that private settlement of FLSA claims is still complicated in many jurisdictions. Whiteford’s Labor and Employment Team is available to assist with navigating this changing landscape.

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