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New Friends in the Lion’s Den
The FLSA stands out from other employment laws because it is one of the few statutory claims that cannot be waived in a private settlement between an employee and employer. The U.S. Supreme Court has made clear that the FLSA does not permit the private waiver of FLSA claims (Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945); Dize v. Maddrix, 324 U.S. 697 (1945) (companion case to Brooklyn Savings); D.A. Schulte, Inc. v. Gangi, 328 U.S. 108 (1946)).
As noted by the Supreme Court in Brooklyn Savings, a driving public policy consideration behind the passage of the FLSA was a “recognition of the fact that due to the unequal bargaining power between employers and employees, certain segments of the population required federal compulsory legislation to prevent private contracts on their part that endangered national health and efficiency” (Brooklyn Savings, 324 U.S. at 706). Based on this public policy, the court concluded that private waivers of FLSA back wages or liquidated damages “would nullify the purposes of the act.”
Ironically, even though Congress originally charged the DOL with enforcement of the FLSA, the FLSA did not provide the DOL with the authorization to negotiate binding waivers of employees’ FLSA claims. Not surprisingly, in the early years following the enactment of the FLSA, employers were reluctant to settle claims through the DOL as these settlements did not bar claims by employees.
As a result, Congress recognized that the FLSA should be amended and Section 216(c) was added to the FLSA in 1949. This amendment authorizes the DOL to negotiate binding waivers of employees’ FLSA claims where the DOL supervises the settlement.
Some states parallel the FLSA prohibition against private waivers, but this is by no means universal. For example, in a recent case, O’Brien v. Encotech Construction Services Inc. (183 F. Supp. 2d 1047 (N.D. Ill. 2002)), an employer sought private releases from employees after they filed a collective action to recover unpaid overtime. While the court ultimately determined that the FLSA releases were invalid, it nonetheless recognized that the releases could be effective with respect to state law claims absent fraud, duress or misrepresentation.
The author, an attorney at Littler Mendelson in Atlanta, is a former HR executive with extensive experience in wage-and-hour issues, employee relations and general employment matters.
SHRM article: New Friends in the Lion’s Den (HR Magazine)
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