According to Lexology, not only are courts focusing on the fairness of the settlement terms, but judges are also questioning whether parties to an FLSA claim can reach a private settlement out of court and have the case dismissed with prejudice, without the court’s approval.
Reyes et. al v. HIP at Murray Street LLC is a prime example of this legislation trend. The plaintiff sued the defendant over unpaid overtime wages, however the company’s agreement had a provision that the former employees are banned from every holding future employment with them. The courts deemed this unfair and required the defendant to revise the settlement terms before the judge will approve it.
In another case, Cheeks v. Freeport Pancake House, Inc. et al, the court insisted on reviewing the settlement agreement in depth before allowing the settlement to proceed. While the case almost worked its way to up to the Supreme Court, it was ultimately decided that they would not weigh in on the case as it was determined that the case fell within a Rule of Civil Procedure, and must be handled by the Department of Labor or the FLSA.
These cases just provide a glimpse into the federal scrutiny that the courts are using when examining labor disputes. These issues should be taken very seriously and employers are required to uphold fair and safe practices to avoid legal action being taken against them.
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