As previously reported, the Fifth Circuit recently enforced a private settlement of certain FLSA claims. More recently, however, Judge Christopher Conner of the U.S. District Court for the Middle District of Pennsylvania reached the opposite conclusion and agreed with the majority view of courts that unsupervised FLSA settlements are not enforceable.

In Dietz v. Budget Innovations and Roofing, Inc., plaintiffs sought unpaid wages under the federal Fair Labor Standards Act (“FLSA”) and Pennsylvania law. Without their attorneys’ knowledge, plaintiffs had entered into a settlement agreement with their employer before the employer had answered the complaint. Plaintiffs’ counsel then filed an emergency motion, claiming that the settlement agreement was unenforceable because it lacked approval from a court or the Department of Labor.

Before reaching its own conclusion, the Dietz Court compared the reasoning of the Eleventh Circuit in Lynn’s Food Stores, Inc. v. U.S. and its progeny that private settlement of FLSA claims are unenforceable with that of the Fifth Circuit in Martin v. Spring Break ’83 Productions, Inc.  Martin made news two months ago when, contrary to other courts, it upheld an unsupervised, private settlement of a federal Fair Labor Standards Act (“FLSA”) dispute over the hours worked by and pay owed to the plaintiffs. Martin upheld this private resolution of FLSA claims because it settled a bona fide dispute about time worked without compromising any substantive rights under the FLSA.

Expressly rejecting the Fifth Circuit’s position in Martin, the Dietz court expressed doubt that a district court could decide whether a settlement agreement is fair, or whether a bona fide dispute remains on liability, without the supervision and approval by the presiding court or the Department of Labor.

In contrast to Martin, where the settlement payments delineated agreement on the hours worked and pay due, the Dietz facts were undeveloped and the settlement therefore uncertain on fairness and liability. The Dietz court, however, found these differing facts unimportant. Instead, it held that, once an FLSA claim comes under a court’s jurisdiction, all proposed FLSA settlements must be submitted to the court for approval, regardless of whether the parties are in agreement on the amount owed. 

Pennsylvania is within the appellate jurisdiction of the United States Court of Appeals for the Third Circuit, which has yet to rule on this issue.

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