06/21/2015 // Dallas, Texas, United States // Attorney Keith Clouse // Keith Clouse // (press release)
The Fifth Circuit Court of Appeals recently ruled on whether a release agreement covered claims under the Fair Labor Standards Act. Bodle v. TXL Mort. Corp., No. 14-20224 (5th Cir. June 1, 2015), available at http://www.ca5.uscourts.gov/opinions/pub/14/14-20224-CV0.pdf.
The plaintiffs filed a lawsuit against their former employer and its president, alleging that they were not paid for overtime work. The defendants moved for summary judgment because the plaintiffs executed waivers of claims in a prior state court action. These waivers purported to release all claims against the defendants arising from the parties’ employment relationships. The trial court granted the summary judgment.
The Court reversed. In light of the FLSA’s recognition of the unequal bargaining power between employers and employees, the FLSA forbids waiver of an employee’s right to statutory wages. An exception exists, however, when parties reach a private settlement agreement that constitutes a compromise over FLSA claims when there is a bona fide dispute as to the amount of hours worked or the compensation due. Here, the prior state court action concerned noncompetition claims. The parties never discussed overtime compensation or the FLSA in their settlement negotiations. Because of this, the exception did not apply.
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