In Bodle v. TXL Mortgage Corp., No. 14-20224 (June 1, 2015), the Fifth Circuit Court of Appeals held that a generic, broad-form settlement release between an employer and two of its former employees did not bar those employees’ subsequent lawsuit under the Fair Labor Standards Act (FLSA) for alleged overtime violations.
TXL Mortgage Corp. initially sued Ambre Bodle and Leslie Meech in state court for alleged violations of their noncompetition agreements. The parties entered into a settlement agreement that included a general release by Bodle and Meech of “all claims and causes of action related to or in any way arising from [their] employment with TXL” and filed a consent final judgment.
On the same date, Bodle and Meech filed suit in federal court alleging that TXL and its president had failed to compensate them for their overtime work. The district court granted summary judgment in TXL’s favor on the basis of Bodle’s and Meech’s release of claims arising from the parties’ employment relationship.
Generally, FLSA claims may not be waived through a private settlement agreement unless supervised or approved by a court or the Department of Labor. The Fifth Circuit previously excepted from this general rule private settlement agreements reached due to a bona fide dispute concerning hours worked or compensation owed in the 2012 case, Martin v. Spring Break ’83 Productions, L.L.C. The court reasoned that this limited exception would not undermine the purpose of the FLSA because “the plaintiffs did not waive their claims through some sort of bargain but instead received compensation for the disputed hours.
Unlike Martin, which involved a settlement agreement reached in response to the filing of an FLSA lawsuit, the general release of claims in Bodle arose out of non-compete litigation brought by the defendants against Bodle and Meech. While the topic of unpaid wages for commissions and salary had arisen during settlement discussions, Bodle and Meech never mentioned their claims for unpaid overtime, even though they were aware of them at the time. Consequently, the parties never discussed overtime compensation or the FLSA in their settlement discussions, such that “there was no factual development of the number of unpaid overtime hours nor the compensation due for unpaid overtime.” On this basis, the Fifth Circuit refused to extend the exception in Martin to the instant case and held that the general prohibition against FLSA waivers applied.
Thus, while the Martin case may have once suggested a trend toward increased judicial receptivity to private settlements and waivers of FLSA claims, the Bodle case reminds us that the enforceability of such private agreements remains the exception, not the rule.