Nov 14, 2013

Settlement Restrictions Arise in FLSA Claims

In a Fair Labor Standards Act (“FLSA”) claim, the Eleventh Circuit Court of Appeals (covering Florida, Georgia and Alabama) recently held that a settlement offer, consisting of the overtime pay demanded and an equal amount in liquidated damages, does not prevent the plaintiff from receiving his or her attorney’s fees and costs.  

In Wolff v. Royal American Management, Inc. (11th Cir. October 1, 2013), an employer failed to pay its employee $1,800 in overtime wages.  The company offered the plaintiff-employee a $3,600 check, representing her overtime claim and liquidated damages, through her attorney and moved to dismiss the complaint in December of 2011.  The attorney refused the check, and the company subsequently informed the plaintiff of the $3,600 settlement offer.  The plaintiff signed a release and accepted the $3,600 check.  The parties then moved the court to determine whether the payment and release rendered the case moot, prohibiting the plaintiff from recovering her attorney’s fees.

The FLSA requires that a plaintiff receive a judgment in his or her favor prior to being entitled to his/her attorney’s fees because there must be a “prevailing party” for such an award.  A plaintiff can be considered a prevailing party only when he or she obtains a judgment on the merits or a settlement agreement enforced through a consent decree.  The consent decree shows that the district court determined the settlement to be a fair and reasonable resolution of the dispute.  The Eleventh Circuit previously determined in Zinni v. ER Solutions, Inc., 692 F.3d 1162,1166 (11th Cir. 2012), that a settlement offer for the full amount of statutory damages under the Fair Debt Collection Practices Act, without an offer of judgment, did not render a plaintiff’s claim moot. 

The court in Wolff ultimately held that, without an offer of judgment, there was no offer of full relief.  Without an offer of full relief, regardless of whether the plaintiff accepted the settlement, the employer could not moot the employee’s FLSA claim.  Therefore, the employee was still entitled to her attorney’s fees and costs in the amount of $61,810.44.

With its decision in Wolff, the Eleventh Circuit made its position clear that it will not allow employers to escape liability for costly attorney’s fees by paying off small FLSA claims that have already found their way to court.  Employers are advised to make liability determinations early on in FLSA claims in order to avoid the accumulation of attorney’s fees for low-dollar plaintiffs.

If you have any questions about this decision and its implications, please do not hesitate to contact your labor and employment counsel at Smith, Gambrell & Russell, LLP.  

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