an employer may not “use an FLSA claim (a matter arising from the employer's failing to comply with the FLSA) to leverage a release from liability unconnected to the FLSA[ ]”
How later courts described this case
- an employer may not “use an FLSA claim (a matter arising from the employer's failing to comply with the FLSA) to leverage a release from liability unconnected to the FLSA[ ]”
Written by the judges who cited it.
The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
PATRICIA SHELLY, )
)
Plaintiff, )
)
v. ) CIVIL ACTION NO. 23-00021-KD-N
)
THE CITY OF CHICKASAW BOARD )
OF EDUCATION, )
)
Defendant. )
ORDER
This action is before the Court on the parties’ joint Motion to Approve Settlement (Doc.
16); Defendant’s Rule 68 Offer of Judgment (Doc. 16-1); Plaintiff’s Itemization of Work of
Paralegal (Docs. 17, 17-1); and Defendant’s Position Concerning Claimed Paralegal Time (Doc.
18).
I. Background
Plaintiff Patricia Shelly (“Shelly”) is currently the Executive Administrative Assistant for
the Superintendent of Defendant City of Chickasaw Board of Education (the “Board”). Shelly was
employed by the Board for the three years prior to filing the present action. (Doc. 16 at 2).
Prior to August 2020, Shelly was paid a monthly salary, stipends, and overtime premium
pay for hours worked in excess of 40 hours during a seven-day workweek. (Doc. 16 at 2). Shelly
“was required to clock in at the start of [the] workday and clock out at the end of the workday.”
(Doc. 16 at 2).
On or about September 2020, “in connection with a significant salary increase and based
on a belief that [Shelly] was an ‘exempt’ employee, [Shelly] was no longer paid overtime premium
pay for hours worked over 40 in the workweek.” (Doc. 16 at 2). Instead, Shelly was paid her
monthly salary – regardless of how many hours or days she worked in a week. (Doc. 16 at 2).
Consequently, the Board no longer required Shelly to clock out at the end of the work day.
On or about February 14, 2023, the Board began to require Shelly to “clock in for work,
clock out for a lunch break, clock in after the lunch break, and clock out when work ended for the
day.” (Doc. 16 at 3).
Shelly claims she was not adequately compensated for overtime premium pay for hours
worked in excess of 40 in the workweek from September 2020 to the filing of the present action,
January 13, 2023. Shelly argues that two practices by the Board caused the inadequate
compensation. First, Shelly asserts that she was “required to work hours outside of her regular
working hours, including staying afterhours for meetings of the [] Board.” (Doc. 16 at 3; Doc. 1 at
2). Second, Shelly alleges that she “regularly work[ed] through what should [have been] a lunch
break, thus causing work in excess of forty (40) hours many weeks.” (Doc. 16 at 3; Doc. 1 at 2).
As relief, Shelly requests that this Court issue a declaratory judgment that the employment
policies, practices, procedures, conditions and customs of the Board are violative of the rights of
Shelly as secured by the FLSA; award damages from the Board, including compensation for
unrecorded overtime work plus interest, post-judgment interest, and liquidated and exemplary
damages, in an amount to be proven at trial; award all costs of litigation, including expert fees and
attorneys’ fees and costs; and award such other legal and equitable relief as the Court deems proper.
(Doc. 1 at 4).
II. Governing Law
In Lynn's Food Stores, Inc. v. United States ex rel. Dep't of Labor, Emp. Standards Admin.,
Wage & Hour Div., 679 F.2d 1350, 1352-1355 (11th Cir. 1982), the Eleventh Circuit recognized
two (2) methods for settlement of claims brought pursuant to the FLSA: supervision by the
Secretary of Labor; or court approval in a private action where a plaintiff is represented by counsel.
As to the latter, which applies here, the parties may compromise and settle the FLSA claims but
only with Court approval of the settlement agreement.
Specifically, courts must determine whether the settlement is a “fair and reasonable
resolution of a bona fide dispute” of the FLSA claims. Lynn’s Food Stores, 679 F.2d at 1352-1355;
Dees v. Hydradry, Inc., 706 F.Supp.2d 1227, 1238-1239 (M.D. Fla. 2010). Evaluating the fairness
of an FLSA compromise includes an assessment of: 1) the existence of fraud or collusion behind
the settlement; 2) the complexity, expense and likely duration of the litigation; 3) the stage of the
proceedings and amount of discovery completed; 4) the probability of plaintiff's success on the
merits; 5) the range of possible recovery; and 6) the opinions of the counsel. Dees, 706 F.Supp.2d
at 1241. Additionally, the FLSA “contemplates that ‘the wronged employee should receive his full
wages plus the penalty without incurring any expense for legal fees or costs.’” Silva v. Miller, 307
Fed. Appx. 349, 351 (11th Cir. 2009). “When a settlement agreement includes….attorney's fees
and costs, the ‘FLSA requires judicial review of the reasonableness of counsel's legal fees to assure
both that counsel is compensated adequately and that no conflict of interest taints the amount the
wronged employee recovers under a settlement agreement.’" Id. Moreover, 29 U.S.C. § 216(b)
provides that “...[a]ny employer who violates…shall be liable to the employee….affected in the
amount of….their unpaid overtime compensation….and in an additional equal amount as
liquidated damages...The court…shall, in addition to any judgment awarded to the plaintiff…allow
a reasonable attorney's fee to be paid by the defendant, and costs of the action.” Thus, “in any case
where a plaintiff agrees to accept less than his full FLSA wages and liquidated damages, he has
compromised his claim within the meaning of Lynn's Food Stores.” Vergara v. Delicias Bakery &
Restaurant, Inc., 2012 WL 2191299, *1 (M.D. Fla. May 31, 2012).
Relative to the foregoing, there is no actual settlement agreement before the Court.
Specifically, the parties’ did not submit a document that constitutes a settlement agreement.
Instead, the Parties submit a Rule 68 Offer of Judgment and Plaintiff’s acceptance, combined in
Docs. 16 and 16-1, for the Court’s review of the overall settlement.
III. Bona Fide Dispute and Fair and Reasonable Resolution
Courts may approve a compromise resolving a bona fide dispute over FLSA provisions
where a plaintiff's compromise of his claims (the settlement agreement) is a fair and reasonable
resolution of that dispute. Lynn's Food, 679 F.2d at 1352-1355; Dees, 706 F.Supp.2d at 1238-1239.
“[T]he parties requesting review of an FLSA compromise must provide enough information for
the court to examine the bona fides of the dispute.” Dees, 706 F.Supp.2d at 1241.
A. Bona Fide Dispute
Section 216(b) of the FLSA provides that “... [a]ny employer who violates the provisions
of section 206 or section 207 of this title shall be liable to the employee or employees affected in
the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case
may be, and in an additional equal amount as liquidated damages ...” 29 U.S.C. § 216(b). Section
207 is captioned “Maximum Hours” and paragraph (a)(1) states as follows:
Except as otherwise provided in this section, no employer shall employ any of his
employees who in any workweek is engaged in commerce or in the production of goods
for commerce, or is employed in an enterprise engaged in commerce or in the production
of goods for commerce, for a workweek longer than forty hours unless such employee
receives compensation for his employment in excess of the hours above specified at a rate
not less than one and one-half times the regular rate at which he is employed.
29 U.S.C. § 207(a)(1).
Plaintiff initiated this lawsuit against Defendant seeking to recover liquidated and
exemplary damages, interest, litigation costs, and reasonable attorneys’ fees pursuant to the
FLSA. (Doc. 1 at 1, 4). Specifically, Plaintiff alleges that during the time she worked for
Defendant, she was not properly compensated with an overtime premium for hours worked over
40 each week, in violation of her FLSA rights. Plaintiff claims that she regularly worked hours
that went uncompensated while working for Defendant; particularly, Plaintiff alleges that she
was required to 1) “work hours outside of her regular working hours, including staying
afterhours for meetings of the [] Board” and 2) “regularly work[] through [lunch].” (Doc. 16 at
3; Doc. 1 at 2). Plaintiff alleges, therefore, that the compensation she has received since
September 2020 is inadequate overtime pay.
Defendant does not dispute that Plaintiff was required to work outside of her regular
working hours, but “disputes the extent to which this practice caused Plaintiff to work in excess
of 40 hours in workweeks during the relevant period.” (Doc. 16 at 3). Defendant also disputes
that Plaintiff regularly works through lunch, “disputes Plaintiff’s assumption of the number of
days she worked in the office during the relevant period, and also disputes the extent to which
this alleged conduct caused Plaintiff to work in excess of 40 hours in workweeks during the
relevant period.” (Doc. 16 at 3).
Based on a review of the docket, the present Motion (Doc. 16) and proposed Offer of
Judgment (Doc. 16-1), the Court finds that a bona fide dispute exists as to whether Plaintiff was
paid overtime for all hours worked over 40 as required by 29 U.S.C. §207 (a).
B. Fair and Reasonable Resolution
Lynn's Food requires this Court to determine whether Plaintiffs’ compromise of their claims
is fair and reasonable. Lynn's Food, 679 F.2d at 1352-1355; Dees, 706 F.Supp.2d at 1238-1239. A
general framework for evaluating the fairness of an FLSA compromise includes: 1) the existence
of fraud or collusion behind the settlement; 2) the complexity, expense, and likely duration of the
litigation; 3) the stage of the proceedings and the amount of discovery completed; 4) the probability
of plaintiff's success on the merits; 5) the range of possible recovery; and 6) the opinions of the
counsel. Dees, 706 F.Supp.2d at 1241. The parties agree that the terms of settlement are fair and
reasonable. (Doc. 18 at 2). Per Lynn Food's however, the Court must still assess same.
1. Compromise of the FLSA Claims
Under the FLSA, “[a]ny employer who violates the provisions of section 206 or section
207 of this title shall be liable to the employee or employees affected in the amount of their unpaid
minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional
equal amount as liquidated damages[.]” 29 U.S.C. § 216(b).
The parties agree that both sides compromised their positions. (Doc. 16 at 8). According to
the parties, Shelly’s settlement amount provides for 56% of the estimated amount she “gave in
response to the Court’s interrogatories.” (Doc. 16 at 5). Defendant explained how the agreed upon
overtime amount was calculated:
(1) the number of office workdays Plaintiff claimed to have “worked through lunch” was
significantly lower than Plaintiff’s assumptions, and (2) the number of weeks in which her
“afterhours work” actually caused her to work over 40 hours was significantly lower than
Plaintiff assumed. Defendant also noted that certain amounts of overtime work occurred
more than two years before she filed this lawsuit, and thus she would have to prove the
failures to pay overtime in 2020 were “willful” in order to recover overtime pay for those
hours…
… Defendant assumed Plaintiff had worked an extra 0.5 hours “working through lunch”
on all days when she was in the office during 2020-2022, assumed Plaintiff could recover
for overtime hours worked more than two years before the lawsuit filing date, and assumed
the pay calculations should multiply hours over 40 by 1.5 times the regular rate of pay
rather than 0.5 times the regular rate.
Doc. 16 at 5.
In other words, the Board corrected the amount of claimed overtime forming the basis of
Shelly’s initial valuation of her claims. This calculation gives Shelly proper overtime
compensation required by law and doubles it to include liquidated damages. (Doc. 16 at 4-5).
Further, the parties assert that the settlement is a “compromise of a sharply disputed claim.” (Doc.
16 at 8).
2. Scope and Terms of the Proposed Settlement Agreement
The assessment of fairness is guided by prevailing FLSA case law and a review of the
specific terms of the parties’ proposed settlement. Here, the settlement terms contain a disfavored
provision that encumbers approval of the FLSA settlement.
In short, Paragraph 26 of Document 16 is pervasive (not just limited to FLSA claims).1
Specifically, Paragraph 26 reads:
The parties agree that the settlement is intended to be a total resolution and complete
satisfaction of any and all claims and allegations by Plaintiff against Defendant known or
unknown that are or could have been asserted in this action.
Doc. 16 at 8.
The foregoing proposed settlement term exceeds the bounds of FLSA claims and provides
for a general release from liability unconnected to the FLSA -- i.e., "any and all claims…by
Plaintiff against Defendant…known or unknown.” (Doc. 16 at 8). As such, this provision covers a
“dizzying array of claims, known and unknown[ ]” which “courts have found to be an anathema
to the FLSA.” Moreno v. Regions Bank, 729 F. Supp. 2d 1346, 1350-1352 (M.D. Fla. 2010) (an
employer may not “use an FLSA claim (a matter arising from the employer's failing to comply
with the FLSA) to leverage a release from liability unconnected to the FLSA[ ]”); Robinson v.
Waste Pro of Fla., Inc., 2022 WL 17476666, *3 (M.D. Fla. Nov. 9, 2022), Report &
Recommendation. “Such general or pervasive releases are frequently viewed as ‘side deal[s]’ in
which the employer extracts a gratuitous (although usually valueless) release of all claims in
1 Paragraph 5 in Document 16-1 contains similar language.
exchange for money unconditionally owed to the employee[ ]’ ... [b]ecuase general releases
‘confer[] an uncompensated, unevaluated, and unfair benefit on the employer,’ they often do not
survive judicial scrutiny.” Robinson, 2022 WL 17476666 at *3.
Many courts in the Eleventh Circuit conclude that such broad releases are unfair and
unreasonable. For example, as summarized in Moreno, 729 F.Supp.2d at 1351:
An employee who executes a broad release effectively gambles, exchanging unknown
rights for a few hundred or a few thousand dollars to which he is otherwise unconditionally
entitled. In effect, the employer requests a pervasive release in order to transfer to the
employee the risk of extinguishing an unknown claim. In the language of Hydradry, a
pervasive release is a “side deal” [ ] in which the employer extracts a gratuitous (although
usually valueless) release of all claims in exchange for money unconditionally owed to the
employee. (If an employee signs a pervasive release as part of a “side deal” and later
discovers a valuable but released claim, the employee perhaps looks for compensation from
the attorney who advise the employee to grant the release.) Although inconsequential in
the typical civil case (for which settlement requires no judicial review), an employer is not
entitled to use an FLSA claim (a matter arising from the employer's failing to comply with
the FLSA) to leverage a release from liability unconnected to the FLSA.
“‘Put simply, in order to be compensated consistent with the FLSA, an employee cannot
be compelled to surrender other rights, for doing so undermines the fundamental mandatory nature
of the minimum wage and overtime protections of the Act by enabling an employer to extract a
price for simply doing what the Act requires[ ]’ Briggins v. Elwood TRI, Inc., 3 F.Supp.3d 1277,
1289 (N.D. Ala. 2014).” Lee v. Guyoungtech USA, Inc., 247 F.Supp.3d 1257, 1263-1264 (S.D.
Ala. Mar. 23, 2017).
An acceptable release would narrow the scope of release, for instance, to “any and all
charges, claims, damages, causes of action or lawsuits of the claims specifically pled in this civil
action under the FLSA, 29 U.S.C. § 201 et seq., and all claims for damages or attorneys’ fees based
on any such claims, arising out of, or pertaining in any way to” Plaintiffs’ actions against
Defendant, up to the date of Plaintiffs signing this agreement. Harris v. Waste Serv. of Ala, LLC,
2017 WL 6498146, *3 (N.D. Ala. Dec. 19, 2017). Therefore, Paragraph 26 would be permissible
if it read, “The parties agree that the settlement is intended to be a total resolution and complete
satisfaction of any and all claims and allegations by Plaintiff against Defendant known or unknown
that or could have been asserted under the FLSA, 29 U.S.C. § 201 et seq., in this civil action.”
For this reason, the Court cannot approve the parties' proposed settlement at this time.
V. Conclusion
Accordingly, it is ORDERED that on or before August 11, 2023, the parties shall jointly
file a new motion and settlement which cures the foregoing deficiencies.
Last, the parties are advised that the only settlement terms before the Court are the terms
specifically identified in Docs. 16 and 16-1. To the extent any other terms exist, they are not
included in this Settlement and have not been submitted for approval by the Court.
DONE and ORDERED this the 3rd day of August 2023.
/s/ Kristi K. DuBose
KRISTI K. DuBOSE
UNITED STATES DISTRICT JUDGE