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Tuesday, August 11, 2015

Some proposed settlement agreements may require court or agency approval


Some proposed settlement agreements may require court or agency approval
Cheeks v Freeport Pancake House, Inc., USCA, 2ndCircuit, Docket 14-299 CV

Dorian Cheeks sued Freeport Pancake House [FPH] seeking to recover overtime wages, liquidated damages and attorneys’ fees under both the Federal Fair Labor Standards Act [FLSA] and New York State’s Labor Law. He also alleged that he was demoted, and ultimately fired, for complaining about FPH’s failure to pay him and other employees the required overtime wage.

After appearing at an initial conference with the district court, the parties agreed on a private settlement of Cheeks’ action  and filed a joint  stipulation  and order  of dismissal with prejudice* pursuant to Federal Rule 41(a)(1)(A)(ii). The federal district court, however, refused to accept the stipulation as submitted, concluding that Cheeks could not agree to a private settlement of his FLSA claims without either the approval of the district court or the supervision of the United Stated Department of Labor [DOL].

The US Circuit Court of Appeals agreed with the district court's holding ruling that in the absence of such approval, parties cannot settle their FLSA claims through a private stipulated dismissal with prejudice and remanded for further proceedings.

Characterizing as “offering useful guidance,” the Second Circuit noted that other circuit courts of appeal have arrived at different results, citing Martin v Spring Break ‘83 Prods., L.L.C., 688  F.3d 247, a 5th Circuit ruling in which the court concluded that a private settlement agreement containing a release of FLSA claims entered into between a union and an employer waived the employees’ FLSA claims, even without district court approval or DOL supervision, and, in contrast, Lynn’s Food Stores, Inc. v United States Dep’t of Labor, 679 F.2d 1350, an 11th Circuit ruling in which that court held that there must be a court finding that the proposed settlement “is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.”

However, said the Second Circuit, the question before it “asks whether the parties can enter into a private stipulated dismissal of FLSA claims with prejudice without the involvement of the district court or DOL that may later be enforceable?”

Explaining that requiring judicial or DOL approval of such settlements is consistent with what "both the Supreme Court and our Court have long recognized as the FLSA’s underlying purpose: to extend the frontiers of social progress by insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work,” the Second Circuit concluded that review of the proposed settlement by the district court or DOL was required.

* Dismissal with prejudice means it can never be filed again by the parties to the settlement.

The Cheeks decision is posted on the Internet at:

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A Reasonable Penalty Under The Circumstances at http://nypplarchives.blogspot.com

The Disability Benefits E-book: at http://section207.blogspot.com/

Layoff, Preferred Lists at http://nylayoff.blogspot.com/

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