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Fair Labor Standards Act Update: Recent Federal Court Decisions Signal Potential Trend Against Requiring Judicial Approval of FLSA Settlements

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On August 8, 2022, a Kentucky federal judge granted two stipulated dismissals filed by plaintiffs in a conditionally certified Fair Labor Standards Act (“FLSA”) case—without first reviewing and approving the settlement entered into between the parties. U.S. District Judge Benjamin Beaton’s decision to decline judicial review of the parties’ FLSA settlement is significant because courts have generally held that FLSA claims can only be released with authorization by: (1) the U.S. Department of Labor (“DOL”); or (2) judicial approval by a federal judge. However, two recent decisions by federal district court judges signal that certain district court judges disagree with the longstanding practice of seeking judicial approval of an FLSA settlement. 

The text of the FLSA does not contain an explicit requirement that parties to an FLSA settlement must seek court approval before claims under the statute can be release. Nevertheless, the concept has essentially developed into a requirement, with the Eleventh Circuit case of Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982), serving as a key reference point for courts and practitioners. However, some federal courts have recently disagreed with the generally accepted notion that judicial approval is necessary for FLSA settlements.

In his decision in Askew v. Inter-Continental Hotels Corp., Case No. 5:19-cv-24-BJB (W.D. Ky. Aug. 8, 2022), Judge Beaton looked to the language of Federal Rule of Civil Procedure 41, which permits a plaintiff, subject to “any applicable federal statute,” to “dismiss an action without a court order by filing . . . a stipulation of dismissal signed by all parties who have appeared.” Fed. R. Civ. P. 41(a)(1)(A)(ii). Judge Beaton concluded that, in the absence of an FLSA provision expressly requiring court approval for the stipulated dismissals to be granted, the FLSA was not an “applicable federal statute” that should interfere with the Rule 41 default that judicial approval of settlements is not required.

In Alcantara v. Duran Landscaping, Case No. 2:21-cv-03947 (E.D. Pa. July 12, 2022), U.S. District Judge Josh Wolson reached a similar conclusion, finding that parties to an FLSA action can stipulate to a dismissal under Rule 41. Judge Wolson noted that “while settlements do not need to be approved, there is nothing that prevents the Court from approving a settlement if the Parties request it.”

What do these decisions mean for employers? While neither of these decisions are binding on other courts, they indicate a potential erosion of the general consensus that parties to an FLSA settlement must seek judicial (or DOL) approval. This potential change to the landscape of FLSA settlements would allow parties to a stipulated FLSA dismissal to maintain greater control over the settlement process and, importantly, limit the public disclosure of private settlement terms and amounts paid by employers. Employment counsel will likely continue to recommend seeking judicial approval of FLSA settlement in most cases, as these two decisions are still outliers with no binding effect. However, that analysis may begin to shift if additional federal courts conclude that judicial approval is unnecessary for an FLSA settlement.