Waiver and Release

Seeking to resolve a split among the district courts in the Second Circuit, the Court of Appeals has accepted an interlocutory appeal to decide whether, in resolving cases involving FLSA claims, offers of judgment under Rule 68 require DOL or judicial scrutiny and approval. Yu v. Hasaki Restaurant, Inc., 2017 U.S. App. LEXIS 20698 (2nd Cir. Oct. 23, 2017).

Last month we wrote a post concerning the National Labor Relations Board’s (“NLRB”) rejection of a seemingly standard settlement agreement resolving, among other things, Fair Labor Standards (“FLSA”) claims. Since then, FLSA settlement agreements have come under more scrutiny from federal court judges, and some have even refused to grant a stipulated motion for dismissal without first reviewing the agreement. 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.

A recent decision by the Second Circuit will likely make it more difficult for parties to enter into private Fair Labor Standards Act (FLSA) settlements in cases pending not only in the Second Circuit, but nationwide. On August 7, 2015, in Cheeks v. Freeport Pancake House, Inc., No. 14-299, the Second Circuit held that parties may not stipulate to dismiss an FLSA action with prejudice, pursuant to Federal Rule of Civil Procedure 41(a)(1)(A), without court approval, “even if the parties want to take their chances that their settlement will not be” enforced in future litigation.

Bringing some degree of clarity to the murky question of whether parties can dismiss a pending FLSA lawsuit on their own volition, the Court of Appeals for the Second Circuit has ruled that any dismissal with prejudice requires “the approval of the district court or the DOL to take effect.” Cheeks v. Freeport Pancake House, 2015 U.S. App. LEXIS 13815 (2d Cir. Aug. 7, 2015).