Court finds that a confidentiality provision in a Fair Labor Standards Act Settlement Agreement impermissibly frustrates the implementation of the FLSA.

The parties negotiated a resolution of a collective action pursuant to the Fair Labor Standards Act and sought the court's approval of the settlement agreement. In particular, the court noted that "[c]laims arising under the FLSA may be settled whether either the Secretary of Labor supervises an employer's payment of unpaid wages to employees or a district court enters a stipulated judgment after scrutinizing a proposed settlement for fairness." Although the court found that the settlement agreement was fair and reasonable, the court further determined that "[t]he Non-Publication provision impermissibly frustrates the implementation of the FLSA." Specifically, the court reasoned that, by including a confidentiality provision, the "[e]mployer thwarts the informational objective of the notice requirement by silencing the employee who has vindicated a disputed FLSA right." In addition, the court found that a potential violation of the confidentiality provision—which would authorize the employer to recover damages from the plaintiff if the plaintiff discloses any information regarding the settlement to a third party—"[c]ontravenes the FLSA" because "[i]t permits [an employer] to retaliate against a plaintiff and promotes the silencing of an employee." As a result, while both parties often bargain for confidentiality in settlement agreements, courts have become increasingly hesitant to approve an agreement pursuant to the FLSA that has such a clause.

Case Law Alert - 2nd Quarter 2013