Court Says Clever Attempt at FLSA Settlement No Good

In Business, Employment by GWAO

Because of the potential for high damage awards and keen federal interest in potential employee wage violations, most employers never set a foot wrong when it comes to complying with the Fair Labor Standards Act (“FLSA”) or similar state legislation. Down in Texas however, one business tried to dodge claims arising from its mistakes by issuing checks to affected employees with “FLSA Settlement” on the memo line. In court, the employer argued that by cashing said checks, the employee waived their right to bring a lawsuit against the business.

Unfortunately for the employer, the Department of Labor (“DOL”) and a federal judge disagreed, finding that such sleight-of-hand did not comply with the strict waiver requirements of FLSA and could be sued despite the payments. While the best course of action is obviously not to violate the law in the first place, employers should know that attempting to use unapproved settlement tactics could constitute fraud in these cases and with DOL’s primary interest being seeing that employees get their due, honesty and cooperation may be the best tactic.