The New York Law Blog: New York Legal News: No More Private Settlements of Federal Fair Labor Claims
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Monday, July 11, 2016

New York Legal News: No More Private Settlements of Federal Fair Labor Claims

Several federal district courts and federal circuit courts of appeals - including those affecting New York -  have issued decisions characterized as overly-protective toward plaintiffs in Fair Labor Standards Act (FLSA) cases.

In Cheeks v. Freeport Pancake House, an employee brought a claim for overtime wages against his employer under the FLSA and New York Labor Law. After the parties reached a private settlement and filed a joint stipulation of dismissal with prejudice, the district court rejected it, holding that a FLSA plaintiff cannot enter into a private settlement stipulating dismissal with prejudice without either court approval or without that of the U.S. Department of Labor.

The Second Circuit Court of Appeals, which includes New York within its jurisdiction, affirmed the trial court decision.

This ruling separates FLSA cases from the default provisions contained in the Federal Rules of Civil Procedure which set forth the general rule that parties may stipulate to dismissal of an action without court involvement.

However, the Second Circuit ruled that "the unique policy considerations underlying the FLSA," constitutes an "applicable federal statute" outside of those default rules. The Second Circuit also cited the potential for abuse to plaintiffs employees in private settlements that make outside supervision necessary.

This is significant for employers in New York, who now cannot simply settle federal employment law disputes without leave of court or supervision by the Federal government
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.