Throw out the release?
Throw out the release?

Yesterday, I had the opportunity to talk at the Connecticut Legal Conference about employment law issues. My talk focused on free speech rights in the workplace — a topic I’ve covered well in some prior posts here and here, for example.

One of the other topics of our discussion was the Cheeks v. Freeport Pancake House case — a recent case by the Second Circuit discussing wage & hour claim settlements under the Fair Labor Standards Act.

I’ve talked about this issue in prior posts as well but the general takeaway from the discussion yesterday was a renewed emphasis on receiving approval from either a federal court or the U.S. Department of Labor on any wage/hour claim settlements.

In most employment law cases filed in federal court, when a settlement is reached, the parties typically stipulate to the dismissal of the claim under a rule of civil procedure (Rule 41).

In Cheeks, the Second Circuit said that wasn’t good enough due to the unique nature of wage/hour claims and that employees were particularly susceptible to bad settlements:

We conclude that the cases discussed above, read in light of the unique policy considerations underlying the FLSA, place the FLSA within Rule 41’s “applicable federal statute” exception. Thus, Rule 41(a)(1)(A)(ii) stipulated dismissals settling FLSA claims with prejudice require the approval of the district court or the DOL to take effect. 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 Court pointed out settlements in other cases which might be troubling.

In [one case], the proposed settlement agreement included (1) “a battery of highly restrictive confidentiality provisions ․ in strong tension with the remedial purposes of the FLSA;” (2) an overbroad release that would “waive practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to wage-and-hour issues;” and (3) a provision that would set the fee for plaintiff’s attorney at “between 40 and 43.6 percent of the total settlement payment” without adequate documentation to support such a fee award….. In [another case], the district court rejected a proposed FLSA settlement in part because it contained a pledge by plaintiff’s attorney not to “represent any person bringing similar claims against Defendants.” … “Such a provision raises the specter of defendants settling FLSA claims with plaintiffs, perhaps at a premium, in order to avoid a collective action or individual lawsuits from other employees whose rights have been similarly violated.”

Would these apply to claims that were not filed in federal court to begin with? The speakers said the decision left that open a bit but still recommended that parties seek USDOL approval or even file the suit in federal court and seek judicial approval at the same time.

While the court noted that this might be difficult, “the burdens…must be balanced against the FLSA’s primary remedial purpose: to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employers and employees.”

Note: These same rules do not apply to settlements under the state wage/hour laws and if you’re not covered by the FLSA, there isn’t much of a need to follow that — at least until the issue is raised in state courts.

But suffice to say that if you get a claim by a current or former employee regarding, say, past overtime wages, be wary of settling the claim without receiving outside approval.

GA2It’s been a long-time coming but the General Assembly finally approved of a measure that would allow employers to pay employees on a bi-weekly basis without receiving prior CTDOL approval.

The provision, part of a set of “technical” revisions to various Department of Labor matters, is long overdue.

Several employers had moved to a bi-weekly payroll scheme without realizing that they needed approval from the CTDOL beforehand.  That approval won’t be required anymore (assuming this bill is approved by the governor).

I’ve previously discussed the requirement so now employers who have been wary about seeking such approval, can just move ahead on their own.

Senate Bill 220 also makes lots of technical changes to the unemployment compensation scheme and even to drug testing (getting rid of the suggesting that the DOL develop some regulations in this area).  These probably won’t be of interest to most employers, but it’s worth a look through the bill summary to see if something else touches on your industry.

The measure will become effective when the Governor signs the overall bill.  (Other provisions in the bill go into effect October 1, 2016.)

GavelConnecticut has pretty strict rules that employers must follow if they want to take deductions off of an employee’s salary.  Typically, an employer must seek CTDOL approval for all sorts of deductions, which I covered back in a 2012 post.

But what happens if an employer makes a mistake on a paycheck and overpays an employee. What then?

That situation is not uncommon. Most of the time, employees will note the mistake and return the money to the employer — no questions asked.

But I’ve heard of other instances where the employee cashes the check and then, say, buys a used car with the mistake.  Or the employee just says no. What then?

Well, I’ve received informal indications from the CTDOL that in those cases, the agency allows for the use of deductions to recover clerical errors.  The employer may try to work out an agreement or payment schedule to recover the money in an orderly manner.

I would add that the employer should really be sure that whatever deductions are made from future salary payments leave enough that the employer is really paying minimum wage for the week.  That should avoid any issue with a claim that minimum wage laws aren’t be followed.

In short, employees don’t get to profit from employer paycheck mistakes and employers are free to engage in a bit of self-help to recover the funds … if it’s really necessary.


Your former employee files suit against your company in federal court in Connecticut claiming that she is entitled to overtime under the Fair Labor Standards Act.   You go to a settlement conference before a magistrate judge. After a few hours of back and forth negotiation, you reach a settlement with the ex-employee.

Is judicial approval of the settlement necessary?

It’s clear that in discrimination cases, the answer is no. Parties settle such claims all the time without judicial intervention.

But, federal judges in Connecticut are noting that there is a developing split of authority on whether judicial approval is needed to settle FLSA claims.

On the one side, there are cases like Socias v. Vornado Realty L.P. (E.D.N.Y. 2014), from earlier this year, which requir a fairness hearing prior to voluntary dismissal of a FLSA action.

On the other, there are cases like Picerni v. Bilingual Seit & Preschool Inc. (E.D.N.Y. 2013) which hold that no judicial approval is required prior to settlement of FLSA lawsuit.

Who’s right? That issue will eventually have to be decided by the Second Circuit and perhaps even the U.S. Supreme Court if a circuit split develops.

In the meantime, companies and their lawyers should be prepared for courts to bring this issue up on their own (the latin phrase is sua sponte).  If so, there are a number of factors that the court may look too, as outlined in one case, Lliguichuzhca v. Cinema 60, LLC (S.D.N.Y. 2013).

As the court noted, in “scrutiniz[ing] the settlement agreement to determine [whether] the settlement is fair and reasonable[,]” the court must look at the following factors: whether there was “overreaching” by the defendant-employer, whether plaintiff was represented by “competent” counsel; whether there were “legitimate concerns about the collectability of any judgment against defendant[]”; and whether the “proposed settlement [was] . . . the product of negotiation between represented parties following extensive litigation[,]” especially because “[a]rm’s length bargaining between represented parties weighs in favor of finding a settlement reasonable.”

This “fair and reasonable” standard may not be terribly difficult to satisfy, but for parties who believe that the settlement they reached on their own should be enough, it can still be a bit nervewracking.

For employers, be mindful of your settlements of FLSA claims.  As the saying by Yogi Berra (and the song by Lenny Kravitz) goes, “It ain’t over ’til it’s over.”