Hogan v. Allstate Beverage Company, Inc.
Filing
60
OPINION AND ORDER: It is ORDERED that the defendant Allstate Beverage Company, Inc.'s 24 Motion to Dismiss and to Enforce Settlement is denied as further set out in the opinion and order. Signed by Honorable Judge Myron H. Thompson on 8/15/2011. (dmn)
IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION
FLOYD HOGAN, JR.,
)
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
ALLSTATE BEVERAGE
COMPANY, INC., d/b/a
Gulf Distributing,
Defendant.
CIVIL ACTION NO.
2:10cv390-MHT
(WO)
OPINION AND ORDER
Plaintiff Floyd Hogan, Jr., charges that his former
employer,
defendant
Allstate
Beverage
Company,
Inc.,
wrongfully withheld overtime pay in violation of federal
law.
Hogan asserts a claim for back wages and liquidated
damages
under
the
Fair
Labor
Standards
Act
of
1938
(FLSA), as amended, 29 U.S.C. § 201 et seq.
This case is before the court on Allstate Beverage’s
motion to enforce settlement and dismiss the case with
prejudice.
Allstate Beverage contends that it and Hogan
agreed to settle this case in exchange for $ 7,500 paid
by Allstate Beverage to Hogan.
parties reached a settlement.
Hogan denies that the
Based on the evidence and
argument, including that presented at a hearing, Allstate
Beverage’s motion to enforce settlement and dismiss this
case will be denied.
I.
BACKGROUND
Hogan worked for Allstate Beverage from May 2008
through December 2009, performing a range of tasks in the
company’s warehouse.
Hogan alleges that he was regularly
required to work between 45 and 55 hours in a given week
and that Allstate Beverage deliberately failed to pay
required overtime.
In addition to the FLSA action before this court,
Hogan filed a separate administrative charge with the
Equal Employment Opportunity Commission (EEOC), pursuant
to Title VII of the Civil Rights Act of 1964 (Title VII),
42 U.S.C. § 2000e et seq. Hogan alleges that Allstate
Beverage discriminated against him because he is AfricanAmerican.
(Prior to initiating a Title VII lawsuit in
2
court, a plaintiff must file a charge with the EEOC.
42
U.S.C. § 2000e-5.)
Soon after the FLSA complaint was filed, Hogan’s
attorney commenced settlement negotiations with Allstate
Beverage.
Hogan authorized his attorney to negotiate for
a settlement offer that Hogan would review and then
approve.
Hogan
maintains
he
never
authorized
his
attorney to make a final agreement or to settle any
claims beyond his FLSA claim.
would
be
willing
to
sign
He told him only that he
a
provision
to
keep
the
settlement confidential.
During the months of June and July 2010, Hogan’s
attorney communicated with Allstate Beverage’s attorney
to
negotiate
the
terms
and
amount
of
a
potential
settlement. Counsel exchanged emails and telephone calls
regarding the terms of the settlement.
In exchange for
a settlement of $ 7,500, Allstate Beverage requested that
Hogan agree both to a confidentiality provision and to a
waiver
of
his
pending
EEOC
3
charge
for
race
discrimination.
Hogan’s attorney responded that Hogan
would keep the settlement confidential but he would not
release
the
EEOC
charge.
According
to
Allstate
Beverage’s counsel, the two attorneys verbally confirmed
settlement of the case over the phone on or around
July 13.
On July 15, Allstate Beverage sent Hogan’s attorney
a written settlement contract for Hogan to sign.
This
contract included a confidentiality agreement as well as
a release provision.
The release provision, on the one
hand, preserved Hogan’s “EEOC Charge” but, on the other
hand,
explicitly
“Title VII.”
waived
any
“right
or
claims”
under
The provision read in pertinent part:
“With the exception of the specific
allegations found in EEOC Charge, Hogan
does hereby forever RELEASE ... Allstate
... from any and all ... liabilities ...
that have arisen prior to Hogan’s
execution
of
this
Agreement.
Specifically, Hogan acknowledges that by
signing below, Hogan is releasing any
rights or claims he may have against
Allstate or the other Released Parties
under Title VII ... or any other claims
4
arising under federal, state or local
statutory or common law.”
Settlement Contract 1, Evidentiary Hr’g, Def.’s Ex.
1.
Hogan came to his attorney’s law offices and received
a copy of the written settlement Allstate Beverage had
prepared.
Hogan refused to sign the contract because he
believed the broad language of the contract’s waiver
provision could be interpreted as releasing his racediscrimination
claim.
Hogan
had
expressly
told
his
attorney that he intended to proceed with this charge.
When Hogan raised his concern, his attorney “admitted
that he had ‘not read’ the settlement document prepared
by [Allstate Beverage]” and that the language departed
from the agreement counsel had reached over the phone.
Hogan Aff. at 7 (doc. no. 28).
Hogan’s attorney told him
he would redraft the contract.
On
July
28,
2010,
Hogan’s
attorney
revised copy of the written settlement.
limiting
the
confidentiality
5
agreement,
faxed
him
a
In addition to
this
version
removed the language explicitly releasing any Title VII
claim.
However,
releasing
it
“Allstate
retained
...
from
a
any
pervasive
and
all
waiver,
demands,
charges, causes of action ... or liability of any kind
... that have arisen prior to Hogan’s execution of this
Agreement.”
Hogan Aff. at 3 (doc. no. 28).
Hogan again
objected that this language could compromise his racediscrimination claim.
He also protested that he had
never agreed to release any claim beyond the pending FLSA
suit.
Hogan refused to sign the document and advised his
attorney that he no longer wished to retain him as
counsel.
Hogan’s attorney filed a motion to withdraw on
August 2, 2010.
After receiving the motion to withdraw, Allstate
Beverage
requested
a
conference
call
before
the
magistrate judge to discuss the status of settlement
negotiations.
On August 11, 2010, the magistrate judge
held an on-the-record conference call with Hogan, his
attorney, and counsel for Allstate Beverage.
6
Allstate
Beverage’s attorney asserted that the parties had already
reached
a
binding
settlement
through
counsels’
oral
agreement over the telephone on July 13.
Hogan’s
attorney
verified
that
he
and
Allstate
Beverage’s attorney had agreed on the phone to settle the
FLSA claim for $ 5,000 to Hogan with an additional $2,500
in attorney’s fees.
Hogan’s counsel said that, while
Hogan had authorized the suit to be settled for this sum,
Allstate Beverage’s release waiver diverged from their
agreement; Hogan’s attorney said he had never agreed to
waive any future Title VII claim.
Hogan
subsequently
recalculated
the
retained
overtime
pay
new
counsel
allegedly
and
due.
has
Hogan
asserts that Allstate Beverage’s own time-card records
demonstrate that the $ 5,000 settlement would not have
fully compensated him for the wages wrongfully withheld.
Hogan contends that he is owed an uncontested sum of
$
7,972
in
substantially
back
more
wages
than
and
the
7
$
liquidated
5,000
he
damages,
would
have
received under the agreement negotiated by his prior
counsel.
In addition, Hogan now contends that he is owed
wages for overtime hours unreflected on his time cards.
He maintains he was regularly required to remain at the
warehouse and continue working until the last person
completed any outstanding tasks.
working
hours
should
be
He asserts that his
calculated
using
the
“clock out” time of other employees on his shift.
latest
Using
this last “clock out” method, Hogan calculates he is owed
$ 15,211 in back wages and liquidated damages.1
Allstate Beverage argues that Hogan is barred from
revisiting his FLSA claim because he entered into a
binding agreement through his prior counsel to settle
this suit.
1. Allstate Beverage disputes the calculation of
Hogan’s back wages and contends that any damages should
be offset by bonus wages Hogan received through a
separate company program.
8
II.
DISCUSSION
A.
The court will first determine whether the parties
reached a binding agreement settling Hogan’s claims.
A
district court ordinarily has the power to enforce a
settlement agreement entered into by litigants while
litigation is pending before the Court.
Massachusetts
Cas. Ins. Co. v. Forman, 469 F.2d 259, 260 (5th Cir.
1972) (per curiam).2
If material facts concerning the
existence or enforceability of a settlement agreement are
in
dispute,
determine
the
the
court
holds
enforceability
a
plenary
of
the
hearing
to
settlement.
Murchison v. Grand Cypress Hotel Corp., 13 F.3d 1483,
1486 (11th Cir. 1994); Pearson v. Ecological Science
Corp., 522 F.2d 171 (5th Cir. 1975).
On November 23,
2. The Eleventh Circuit has adopted as precedent all
decisions of the former Fifth Circuit rendered prior to
October 1, 1981. Bonner v. City of Prichard, 661 F.2d
1206, 1207 (11th Cir. 1981) (en banc).
9
2010, the court heard testimony regarding the parties’
settlement negotiations.
“Principles governing general contract law apply to
interpret settlement agreements.”
Resnick v. Uccello
Immobilien GMBH, Inc., 227 F.3d 1347, 1350 (11th Cir.
2000).
The parties dispute whether state or federal law
should govern here.
Hogan relies on state law to argue
that an enforceable settlement was never reached because
the parties never signed a written settlement contract,
as required by Alabama law.
Allstate Beverage contends
that federal common law of settlements should govern
claims
arising
under
the
FLSA,
a
uniquely
federal
regulatory scheme, and that it and Hogan reached an oral
agreement enforceable under federal common law.
On some occasions, federal courts have enforced oral
settlement of federal claims under principles of federal
common law.
See, e.g., Fulgence v. J. Ray McDermott &
Co., 662 F.2d 1207, 1209 (5th Cir. Dec. 7, 1981) (“[For
cases dealing] with the operation of a Congressional
10
statutory scheme, the federal courts are competent to
determine whether a settlement exists without resort to
state law. ... Creation of a federal rule rather than
absorption of a state rule is appropriate where ... the
rights of the litigants and the operative legal policies
derive from a federal source.”) (citations omitted).
other
occasions,
federal
courts
have
applied
On
state
contract law to interpret settlement agreements even when
a plaintiff’s claims derive from federal statutes.
Resnick
construe
227
a
F.3d
at
1350
settlement
(applying
under
the
Florida
See
law
Americans
to
with
Disabilities Actof 1990, as amended, 42 U.S.C. § 12101,
et seq.); Hayes v. National Serv. Indus., 196 F.3d 1252,
1253 (11th Cir. 1999) (applying Georgia law to construe
a Title VII settlement).
In this case, the court need
not
of
resolve
which
body
law
applies,
because
no
settlement was reached under either Alabama or federal
common law.
11
Alabama law typically requires a signed, written
document to create a validly executed settlement.
Ala.
Code
§
34-3-21
(providing
that
an
1975
attorney
authorized to settle a client’s case “has authority to
bind his client, in any action or proceeding, by any
agreement in relation to such case, made in writing”);
see also Ala. R. App. P. 47 (“No private agreement or
consent between the parties or their attorneys, relating
to the proceedings in any cause, shall be alleged or
suggested by either against the other, unless the same be
in
writing,
and
signed
by
the
party
to
be
bound
thereby....”).
Allstate Beverage contends that, even if Alabama law
applies as argued by Hogan, the settlement with him was
“validly evidenced by writing--the emails between counsel
for the parties.”
no. 25).
Def. Br. Supp. Mot. Dismiss at 3 (doc.
The court agrees with Hogan that there was no
written agreement.
12
The emails between counsel in July 2010 did not
constitute a written settlement of this lawsuit; they
merely reflected negotiations regarding Hogan’s claims.
On July 12, Allstate Beverage’s attorney wrote Hogan’s
attorney
offering
$
7,500
if
Hogan
would
sign
a
confidentiality provision and waive all other claims
against Allstate Beverage. Hogan’s attorney responded on
July 13 that Hogan would accept $ 7,500 and agree to keep
the settlement confidential but he would not relinquish
his pending EEOC claim.
Allstate Beverage’s attorney
replied on the same day, writing: “Agreed if he will sign
a release with a confidentiality provision that releases
any and all claims except his currently pending EEOC
charge which I will specify by charge number.”
Def. Mot.
Dismiss, Ex. 1 (doc. no. 24-1) (emphasis in original).
The July 13 response email from counsel for Allstate
Beverage did not create a binding contract because it was
a counteroffer.
Under elementary principles of contract
law, if a party changes the substantive terms of an
13
agreement
while
purporting
to
accept
an
offer,
no
contract is formed; the party has made a counteroffer
rather than accepting the original agreement.
Cook’s
Pest Control, Inc. v. Rebar, 852 So. 2d 730, 736 (Ala.
2002) (quoting Joseph M. Perillo, Corbin on Contracts
§ 3.32 at 478 (rev. ed., 1993)) (“If the purported
acceptance attempts to restate the terms of the offer,
such
restatement
must
be
accurate
in
every
material
respect. ... An acceptance using a different form makes
no contract.
terms
is
A variation in the substance of the offered
material,
even
though
the
variation
is
slight.”).
The July 13 email from Allstate Beverage’s attorney
was
a
counteroffer
settlement
by
that
requiring
changed
Hogan
to
the
terms
release
of
the
all
claims
against Allstate Beverage beyond his EEOC claim.
There
is no written record indicating that Hogan’s attorney
ever accepted the counteroffer.
When Hogan was presented
with a written settlement contract incorporating the
14
added term, he refused to sign it.
memorializing
the
terms
in
With no agreement
writing,
settlement fails under Alabama law.
the
putative
Phillips v. Knight,
559 So. 2d 564, 568 (Ala. 1990).
In the evidentiary hearing before the court, Allstate
Beverage’s attorney testified that, on or around July 14,
2010, she spoke with Hogan’s attorney and verified the
settlement with him over the phone.
While a subsequent
oral agreement would still fail under Alabama law because
it was not in writing, Allstate Beverage urges the court
to
craft
a
federal
common
law
rule
permitting
oral
settlement of FLSA claims.
In this case, the court need not craft and apply a
rule of decision from federal common law allowing oral
agreements
in
FSLA
cases,
for
Allstate
Beverage
has
failed to demonstrate that the parties reached a valid
oral
agreement.
“It
is
a
fundamental
principle
of
contracts that in order for a contract to be binding and
enforceable, there must be a meeting of the minds on all
15
essential
terms
and
obligations
of
the
contract.”
Browning v. Peyton, 918 F.2d 1516, 1521 (11th Cir. 1990).
Here,
counsel
never
reached
a
meeting
of
the
minds
regarding the material terms of the settlement.
Allstate
Beverage’s
attorney
testified
that
she
orally confirmed the settlement with Hogan’s attorney in
a
series
of
July 14, 2010.
telephone
conversations
on
and
around
However, she could not state definitively
whether Hogan’s attorney explicitly agreed to her new
condition requiring Hogan to waive all claims beyond his
pending
EEOC
claim.
Moreover
and
to
the
contrary,
Hogan’s attorney himself credibly denied agreeing to such
a waiver because a broad release might bar Hogan from
suing
under
administrative
conference
Title
VII
after
remedies.
call
with
the
In
the
exhausting
August
magistrate
11,
judge,
attorney stated:
“[T]he problem arose, I believe, when
[Hogan] came in to sign the release. And
what [Allstate Beverage] had sent had
him dismissing all his Title VII claims,
16
EEOC
2010,
Hogan’s
which is not what I agreed to. I never
would have agreed to that. The purpose
for not agreeing to release the EEOC
claim is that Mr. Hogan had made it
clear to me from the onset that that was
something he was going to pursue. So
obviously,
if
he
released
his
substantive right under the lawsuit,
then there was no reason to preserve the
EEOC claim.”
Official Tr. of Tel. Conf. at 8 (doc. no. 44).
There is circumstantial evidence that counsel for the
two
parties
agreement
attempted
over
the
to
reach
phone
some
because
settlement contract for Hogan to sign.
sort
they
of
oral
prepared
a
Nevertheless, it
remains unclear what the terms of the putative oral
agreement were.
In her testimony, Allstate Beverage’s
attorney could not conclusively say whether her oral
agreement with Hogan’s counsel would have required Hogan
to release a subsequent Title VII claim after pursuing
his complaint with the EEOC (let alone any parallel but
independent
claim
brought
under
42
U.S.C.
1981,
explained in more detailed later in this opinion).
as
When
Allstate Beverage’s attorney drafted the first version of
17
the settlement contract, the release stipulated that
“Hogan is releasing any rights or claims he may have
against Allstate or the other Released Parties under
Title VII.”
See Settlement Contract 1, Evidentiary Hr’g,
Def.’s Ex. 1.
Hogan’s attorney later stated that this
provision “is not what I agreed to.”
Tel. Conf. at 8 (doc. no. 44).
Official Tr. of
This indicates that there
was never mutual understanding about the scope of the
release.
Given the lack of evidence of any oral agreement, the
court can find no meeting of the minds on this essential
term.
There may have been an agreement to settle Hogan’s
claim for $ 7,500, but the dollar amount was only one
condition; it does not demonstrate mutual agreement on
“all essential terms and obligations of the contract.”
Browning, 918 F.2d at 1521.
With no meeting of the
minds, there was no oral agreement to enforce.
See
Johnson v. University College of University of Alabama,
706 F.2d 1205, 1209 (11th Cir. 1983) (“Under elementary
18
principles of contract law, an offeree cannot accept a
different offer from that made by the offeror.
There
must be a meeting of the minds.”).
B.
Even if the court could imply a binding agreement
from the email correspondence as Allstate Beverage urges,
the court would still decline to enforce the agreement,
for the agreement fails to meet FLSA’s requirement that
the agreement be “a fair and reasonable resolution of a
bona fide dispute over FLSA provisions.”
Lynn’s Food
Stores, Inc. v. United States, 679 F.2d 1350, 1355 (11th
Cir. 1982).
Settlement of an action under the FLSA differs from
settlement of other claims.
Congress enacted the FLSA to
protect workers from the poor wages and long hours that
can result from severe inequalities in bargaining power
between employers and employees.
For this reason, the
FLSA’s provisions are mandatory and generally not subject
19
to bargaining, waiver, or modification by contract or
settlement.
Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697,
708 (1945).
Employees may not negotiate away liquidated
damages or back wages in the interest of achieving a
settlement.
D. A. Schulte, Inc. v. Gangi, 328 U.S. 108,
114 (1946).
Despite
employee
may
this
general
settle
a
rule,
private
supervision of the district court.
an
FLSA
employer
suit
and
under
an
the
Such settlements are
intended principally to resolve controversy over any FLSA
terms actually in dispute.
at 1353.
Lynn's Food Stores, 679 F.2d
(“If a settlement in an employee FLSA suit ...
reflect[s] a reasonable compromise over issues, such as
FLSA coverage or computation of back wages, that are
actually in dispute; we allow the district court to
approve the settlement in order to promote the policy of
encouraging settlement of litigation.”) (emphasis added).
Therefore, there must be a “bona fide dispute” over FLSA
20
coverage–-for example, over the amount of time worked or
the back wages due.
Id. at 1355.
Any amount due that is not in dispute must be paid
unequivocally;
employers
may
not
extract
valuable
concessions in return for payment that is indisputably
owed under the FLSA.
An employee who agrees to such
concessions will have effectively accepted payment below
the FLSA’s minimum wage in derogation of the statute and
O’Neil.
A federal court must therefore “scrutiniz[e] the
settlement for fairness,” Lynn's Food Stores, 679 F.2d at
1353,
to
ensure
that
employees
have
received
all
uncontested wages due and that they have received a fair
deal regarding any additional amount that remains in
controversy.
In the current case, Hogan and Allstate Beverage do
contest
the
appropriate
amount
of
back
wages
due.
Counsel for both parties initially disagreed over the
total overtime wages Allstate Beverage would have to pay.
See
Official
Tr.
of
Tel.
Conf.
21
at
6
(doc.
no.
44)
(Allstate Beverages attorney stated, “I had certainly
very
different
numbers
from
the
numbers
that
Mr.
Hogan ... had in terms of what he thought he was due”).
However, Allstate Beverage’s purported settlement
contract exceeded the scope of the bona-fide dispute over
the amount of back wages due Hogan.
The settlement did
not simply calculate a middle-ground sum of damages to
award Hogan; rather the contract required Hogan to agree
to a confidentiality provision and to a pervasive waiver
of all other claims against Allstate Beverage.
Such
terms may be standard to civil litigation, but in the
context of the FLSA, they represent “side deals.”
Dees
v. Hydradry, Inc., 706 F. Supp. 2d 1227, 1238 (M.D. Fla.
2010) (Merryday, J.).
The provisions “confer a partially
offsetting benefit on the employer” that is ancillary to
the bona-fide dispute over FLSA coverage and wages due.
Id.
This is not to say that employees may never agree to
ancillary terms when settling FLSA claims; but the court
22
should closely scrutinize the fairness of such “side
deals” because they do not directly relate to any bonafide dispute over FLSA coverage or wages due.
Settlement
of an FLSA claim is not an occasion for employers to
extract valuable concessions unfairly from employees.
Here, this court finds that the purported settlement’s
confidentiality provision and its pervasive waiver are
unfair under the FLSA.
The current case exposes the drawbacks of enforced
confidentiality regarding FLSA violations.
is
no
evidence
compensation
though
in
typical
that
Hogan
return
in
for
civil
received
this
any
First, there
independent
provision.
litigation,
Second,
confidentiality
agreements in FSLA cases have the potential to hinder
unfairly the congressional goal of universal compliance
with the FLSA.
As this court has previously explained,
“In most cases when the parties settle,
the court does not examine or approve
their agreements; the settlements are
purely private contracts.
However,
when, as here, a settlement [must be]
approved by a court, the settlement
23
becomes part of the judicial record.
Jessup v. Luther, 277 F.3d 926 (7th Cir.
2002) (noting that when a settlement is
entered into the court's file under seal
it becomes part of the judicial record);
Boone v. City of Suffolk, 79 F.Supp.2d
603 (E.D. Va. 1999) (treating FLSA
settlement approved by court as judicial
record).
“There is a common-law presumption that
judicial records are public documents.
Nixon v. Warner Communications, Inc.,
435 U.S. 589, 597 (1978); Chicago
Tribune Co. v. Bridgestone/Firestone,
263 F.3d 1304, 1311 (11th Cir. 2001).
... [T]he presumption is based on the
nature of democracy and the ‘citizen's
desire to keep a watchful eye on the
workings of public agencies.’
Nixon,
435 U.S. at 598.
A judge is ‘the
primary representative of the public
interest in the judicial process and is
duty-bound therefore to review any
request to seal’ any part of the record.
For this reason, a judge ‘may not rubber
stamp a stipulation to seal the record.’
Citizens First Nat'l Bank of Princeton
v. Cincinnati Ins. Co., 178 F.3d 943,
945 (7th Cir. 1999).
“The strength of the presumption of
openness falls along a continuum, with
the presumption being stronger for
documents that ‘directly affect an
adjudication’ than for documents, such
as certain discovery materials, that
‘come within a court's purview solely to
24
insure their irrelevance.’
United
States v. Amodeo, 71 F.3d 1044, 1049
(2nd Cir. 1995); see also Chicago
Tribune, 263 F.3d at 1311.
“And the presumption is surely most
strong when the ‘right’ at issue is of
a ‘private-public character,’ as the
Supreme Court has described employee
rights under the FLSA. Brooklyn Savings
Bank v. O'Neil, 324 U.S. 697, 708
(1945). This public character is based
on ‘an intent on the part of Congress to
protect certain groups of the population
from substandard wages and excessive
hours which endangered the national
health and well-being and the free flow
of goods in interstate commerce.
The
statute was a recognition of the fact
that due to the unequal bargaining power
as between employer and employee,
certain segments of the population
required federal compulsory legislation
to prevent private contracts on their
part which endangered national health
and efficiency and as a result the free
movement
of
goods
in
interstate
commerce. To accomplish this purpose
standards of minimum wages and maximum
hours were provided.’
Id. at 706-707
(footnotes
omitted).
Absent
some
compelling reason, the sealing from
public scrutiny of FLSA agreements
between employees and employers would
thwart the public's independent interest
in assuring that employees' wages are
fair and thus do not endanger ‘the
national health and well-being.’ Id.”
25
Stalnaker v. Novar Corp., 293 F.Supp.2d 1260, 1263 -1264
(M.D. Ala. 2003) (Thompson, J.)
Aside from these public-policy concerns, there may
also
be
a
direct
impact
on
the
employee
himself.
Admittedly, keeping a settlement confidential will often
be of little concern to an employee trying to resolve his
personal claims.
But, in some cases, such terms can not
only prove costly to the overall enforcement of the
statute, they can prove costly to the employee himself,
for they prevent the employee from alerting other workers
to
potential
liability.
FLSA
violations
on
pain
of
personal
Indeed, here Hogan’s new counsel now seeks to
join several other plaintiffs in a class-action lawsuit
against
Allstate
Beverage.
These
Allstate
Beverage
employees allege that they were victims of the same wage
and hour violations as was Hogan.
Were the court to
authorize the settlement and confidentiality provision,
Hogan could become liable for breach of contract for
cooperating
in
the
planned
26
class
action
against
the
company.
Moreover, if Hogan has already collaborated
with other employees, Allstate Beverage could sue him to
recover damages claimed by the other workers.
Such an
outcome would not only undermine the legislative purpose
of ensuring widespread compliance with FLSA wage and hour
requirements, see Hydradry, 706 F. Supp. 2d at 1242 (“A
confidentiality agreement, if enforced, ... empowers an
employer to retaliate against an employee for exercising
FLSA
rights”
by
advising
other
employees
of
FLSA
violations); see also Glass v. Krishna Krupa, LLC, No.
10-mc-00027-CG-B
2010,
2010
WL
4064017
(S.D.
Ala.
Oct. 15, 2010) (Granade, J.) (following Hydradry); Poulin
v.
General
Dynamics
Shared
Resources,
Inc.,
No.
3:09-cv-00058, 2010 WL 1813497 (W.D. Va. May 5, 2010)
(Moon, J.) (same), it could prove personally detrimental
to Hogan himself.
Therefore, the confidentiality provision here is not
only unequally to the benefit of Allstate Beverage alone
and it would not only frustrate FLSA goals, it would
27
expose
Hogan
violation
to
liability
for
Hogan
having
without
its
almost
received
certain
anything
whatsoever in return.
The
purported
settlement
must
also
be
rejected
because of the provision requiring Hogan to release all
claims against Allstate Beverage beyond his pending EEOC
charge.
Even if the release provision were interpreted
to permit a subsequent Title VII action, the court finds
the pervasive waiver overbroad and unfair.
“[A]n employer is not entitled to use an FLSA claim
(a matter arising from the employer’s failing to comply
with the FLSA) to leverage a release from liability
unconnected to the FLSA.”
Moreno v. Regions Bank, 729 F.
Supp. 2d 1346, 1351 (M.D. Fla. 2010) (Merryday, J.).
Workers seeking to recover backpay may be willing to
waive
unknown
claims
in
order
to
withheld wages as soon as possible.
to
sign
previously
a
pervasive
unknown
waiver
tort
and
claim,
28
access
wrongfully
If an employee were
later
that
discover
claim
would
a
be
released before the employee could assess its value.
Thus, the employee would unknowingly make a valuable
concession to the employer simply to recover wages that
should never have been withheld in the first place.
For
this reason, “a pervasive release in an FLSA settlement
[that] confers an uncompensated, unevaluated, and unfair
benefit on the employer,” id. at 1352, should be examined
closely.
First, as with the confidentiality provision, here
the
waiver
provision,
if
allowed,
would
have
been
extracted from Hogan without any independent compensation
for
it,
as
far
as
the
record
shows.
Second,
the
pervasive waiver Allstate Beverage seeks to enforce is
even less fair, than the confidentiality provision, to
Hogan because it could compromise the race-discrimination
claim he has maintained consistently. Plaintiffs seeking
damages
for
racial
discrimination
typically
simultaneous actions under Title VII and § 1981.
file
Even if
a plaintiff alleging racial discrimination explicitly
29
preserved a Title VII claim, he could unknowingly release
a
§
1981
claim
in
agreeing
to
a
pervasive
waiver.
Plaintiffs often resort to § 1981 if their claim under
Title VII becomes time-barred or so as to seek relief
unavailable under Title VII.
This avenue of redress
could be mistakenly extinguished by a general release.
It is clear from the record that Hogan sought damages
for alleged racial discrimination.
Allstate
Beverage’s
release,
To knowingly agree to
Hogan
would
have
to
understand and evaluate the relative merits of proceeding
with a § 1981 action, a Title VII claim, or solely with
his EEOC complaint.
To his credit, Hogan recognized that
the
written
waiver
in
his
settlement
contract
could
potentially release all the bases for his claim of racial
discrimination, a detail his attorney had missed.
Other
employees may not be so discerning.
The FLSA was enacted in part to address “inequalities
in bargaining power between employers and employees.”
Lynn's Food Stores, 679 F.2d at 1352 (citing O'Neil, 324
30
U.S. at 706).
Given this legislative context, it would
be unfair for the court to enforce this settlement’s
pervasive waiver.
This is not to say that an employee can never waive
independent claims in settling an FLSA action; this court
need not reach that issue.
However, assuming such a
waiver is permissible, the court must be convinced that
the employee has a full understanding of what he is
releasing in exchange for a settlement award.
In the
current case, it is clear that neither Hogan nor his
attorney intended to release all the bases of Hogan’s
claim of racial discrimination. Because the settlement’s
pervasive waiver could impact those bases, enforcing the
settlement would have been unfair.
***
31
Accordingly,
it
is
ORDERED
that
the
defendant
Allstate Beverage Company, Inc.’s motion to dismiss and
to enforce settlement (doc. no. 24) is denied.
DONE, this the 15th day of August, 2011.
/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE
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