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