Nall v. Mal-Motels, Inc., the Eleventh Circuit recently overturned a district court order upholding
the private settlement of Nall's claim for unpaid overtime. The Court
reaffirmed its position that judicial or Department of Labor (DOL) approval
was necessary for a lawful settlement of FLSA claims brought by then current
Nall extended this position to include settlements by former employees.
Even though the trial court approved the private settlement, the appellate
court concluded that the underlying reasons supporting the requirement
of judicial approval also apply to settlements with former employees.
The Court stressed the importance of ensuring that the deterrent effect
of the FLSA's liquidated damages provision is not circumvented by
unscrupulous employers who take advantage of an employee (whether current
or former) by settling FLSA claims privately for less than the employer
would be liable for in court.
Now, at least in Florida (and other states bound by the Eleventh Circuit,
employers must reassess their strategy towards settlement of FLSA claims.
Nall raises several legal and practical issues for employers wishing to arrange
for private settlements of FLSA claims that have been negotiated at arm's-length
with represented parties. Although not all courts within the Eleventh
Circuit require a detailed review of private settlements, litigants must
be prepared to disclose the terms of their settlement for review by the
trial court. IN addition, employers desiring to maintain confidentiality
in their settlements may not be able to do so if the trial judge insists
on reviewing the settlement terms.
Employers should avoid the pitfalls of settling with their employees unless
they comply with the requirements ofNall unless they are prepared to face the potential consequences of having the
settlement set aside.
Alex P. Rosenthal, Esq.
Rosenthal Law Group
2115 North Commerce Parkway
Weston, FL 33326