If an employee files a
claim for unpaid overtime compensation with the U.S. Department of Labor (DOL),
it is often wise to discuss settling the claim rather than face a protracted
and potentially expensive lawsuit. But a new case demonstrates that carefully drafting
the settlement terms is of the utmost importance— even if a DOL settlement form
is used. We’ll explain what happened.
DOL Supervises Wage
Settlement
David Dent filed an
overtime compensation claim against his former employer, MC Communications. Dent
and MC Communications eventually entered into a settlement that was supervised
by the DOL as authorized by the Fair Labor Standards Act (FLSA).
The DOL prepared the
settlement document on the agency’s standard form, WH-58. The form stated that
the settlement was for payment of unpaid wages for the period beginning April
28, 2002, through Oct. 11, 2003.
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Employee Still Sues
A few months later, Dent
filed a lawsuit against MC Communications in
for overtime wages under the FLSA and various
the court to dismiss the case, arguing that the previous settlement agreement
released any claims for unpaid wages Dent might have against the company. A
trial court agreed with MC Communications and threw out the lawsuit. Dent then
appealed, contending that the settlement clearly applied only to wages owed for
the specified time period and didn’t bar him from seeking compensation earned
before those dates.
Waiver Was Limited
Now the Ninth Circuit
Court of Appeals, which covers California, has ruled that Dent can pursue his
wage claims in court because the DOL settlement agreement didn’t release Dent’s
claims against MC Communications for wages earned before the period specified
in that agreement.1 The court explained that regulations issued under the FLSA
authorize the DOL to supervise minimum wage and overtime settlements. When an employee
accepts payment under the settlement agreement, that amounts to a waiver of any
right to file a lawsuit for unpaid compensation or damages. The court added,
however, that the law doesn’t rule out the possibility of having a settlement
payment and waiver that are tied to a specified time period.
As this
case shows, even if the DOL supervises a wage settlement, it is still a good
idea to have your own attorney review the settlement to ensure it covers what you
intend it to cover
In this case, said the
court, the settlement form provided adequate notice to waive Dent’s rights
associated with unpaid wages only from April 2002 to October 2003. The court
noted that the form specified that time period and stated that Dent was giving
up his right to sue for “such back wages.” According to the court, a straightforward
reading of this language indicates that Dent was waiving the right to file a
lawsuit against MC Communications only for the period mentioned.
The court also noted a
shortcoming with the language of the DOL WH-58 form itself. The form only
advised Dent that there was a two-year time limit for his claims, and it didn’t
mention that a three-year limit would apply when willful FLSA violations were
involved.
Use Care
This decision
underscores the necessity of using care when drafting settlement agreement
terms, regardless of whether a DOL form
is used. It is critical to explain, with easy-to-understand wording, the rights
that are being waived and the claims that are covered by the agreement. And, as
this case shows, even if the DOL supervises a wage settlement, it is still a
good idea to have your own attorney review the settlement to ensure it covers
what you intend it to cover.
You can link to the new
case online at www.ce9.uscourts.gov.
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1 Dent v. Cox
Communications Las Vegas, Inc., U.S.C.A. 9th Cir. No. 05-15455, 2007