FLSA Claims Can Be Resolved Without Judicial Approval

• Author: Nhan T. Ho
• Pages: 23-24

without the conse nt of all parties , or

if section 632 .7 applies only to call

recording by third par ties.

The plainti brou ght a class action

alleging that th e defendant violated

CIPA when it recorded their telephone

call without his co nsent. The com-

pany called the pl ainti’s residence

to speak with his spo use, and the call

ended shor tly after the plainti stated

that his spouse wa s not available.

About three seco nds into the call,

the company’s pho ne system caused

a single “beep to ne,” which was the

only indicatio n that the call was being

recorded. The company argued that

the beep tone noti f‌ied the plainti

that it was recording th e call.

Following trial, th e court entered

judgment against the plainti, con-

cluding (i) the be ep tone was su-

cient notice of the reco rding; and (ii)

the plainti impl icitly consented to the

recording by staying o n the call. The

plainti appealed, and the appellate

court arme d. It held that “without

the consent of all pa rties” only modi-

f‌ies “intercepts o r receives.” As the

“parties to a comm unication” implic-

itly consent to receive the c ommuni-

cation, the sta tute can only apply to

the recording of ca lls by nonparties.

Trial courts outsid e the Fourth

Appellate District are not bound

by Smith, and they are not l ikely to

adopt it uniform ly, believes Adam

Polk, San Franc isco, CA, cochair of

the Litigation Sec tion’s Class Actions

& Derivative Suits Co mmittee. Polk

f‌inds more pers uasive the federal

court decisi on in Brinkley v. Monterey

Financial Ser vices, LLC, which found in

favor of all-par ty consent, noting that

section 632 .7 was intended to “simply

extend[] to pers ons using cellular or

cordless teleph ones the same protec-

tion from recordation that persons

using ‘landline’ telephones enjoy.”

“Given the Brin kley decision and the

other cases alig ning with the Brinkley

court’s conc lusions, I believe that the

split in statutory interpretation will

persist notwi thstanding the Smith

case,” Polk explains.

The Smith decisi on “seems to

undermine and gut the whole purpose

of CIPA and having all- party consent,”

says Peter A. McL aughlin, Boston, MA,

editor-in-chief of th e ABA Section

of Science & Technolog y Law’s The

Sci-Tech Lawyer. “Who would the

violating third pa rty be, other than

some nefarious actor?” McLaughlin

asks. But until S mith is narrowed o r

overturned, “ if you are going to do

any sort of monitori ng or record-

ing, let someo ne know in advance,”

McLaughlin advises.

FLSA Claims Can Be

Resolved Without

Judicial Approval

By Nhan T. Ho, Litigation Ne ws

Contributing Editor

Settlement of claims brought under

the Fair Labor Stan dards Act (FLSA)

typically req uires approval by courts

or the U.S. D epartment of Labor

(DOL). The U.S . Court of Appeals

for the Second Ci rcuit’s decision in

Mei Xing Yu v. Hasaki Res taurant,

Inc., changed that p rocess by requir-

ing trial court s to honor the parties’

agreement to oers of judgment

under Federa l Rule of Civil Procedure

68. ABA Litigat ion Section leaders say

Yu correctly ope ns up channels for

parties to resolve FL SA litigation with-

out judicial supervision.

Yu involved an overtime dispute

under the FLSA. There, the employee

accepted an empl oyer’s oer of judg -

ment under Rul e 68. The district court

then sought to cond uct a fairness

review of the parties ’ agreement for

judicial approval, despite the parties’

objection. T he parties jointly f‌iled a

petition for an interl ocutory appeal.

The Second Circ uit held that judi -

cial approval was not re quired for

resolution of an FL SA dispute by

means of a Rule 68 o er of judgment.

The court foun d no clear congressio-

nal intent to exempt the FL SA from

Rule 68 operati on and rejected t he

various argum ents relied on by the

amici and the dis sent: precede nt,

statutory histo ry, and the unique fe a-

tures of the FLSA . The court found

the basis under lying such contentions

inapplicable, unpersuasive, or incor-

rect in applyin g the canon of stat u-

tory interpretation.

The concept of a non -waivable

employment right is categorically

unique to the FLSA . “Generally speak-

ing, the FLSA provi des protection to

workers who have the lea st ability to

defend their rig hts: workers making

minimum wage an d workers who do

not know or under stand their rights,”

says John S. Austi n, Raleigh, NC,

cochair of the Litig ation Section’s Trial

Practice Comm ittee. “For decades,

courts have bee n concerned that

employers could exer t undue pressure

on employees to waive the ir wage-

and-hour ri ghts given the unequal

bargainin g power that exists between

an employer and employees,” explains

David E. Gevertz , Atlanta, GA, cochair

of the Section’s Emp loyment & Labor

Relations Law Committee.

In that sense, “ the FLSA, as read

by the Supreme Cou rt, is a uniquely

protective st atute, which—unlike any

number of other s tatutes, including

Title VII and § 19 83—requires super-

vision of settlement agreements,”

Gevertz adds. For example, abuse can

occur “where the employee is coerced

to sign a release dur ing his employ-

ment; the empl oyee may not under-

stand that he is wai ving his liquidated

damages,” Austin illustrates.

Some Sectio n leaders agree with

the majority ’s holding in Yu. “T he Yu

majority is corr ect that a settlement

agreement and an oer of judgment

are two dierent a nimals.” says Austin.

“Typically, oers of judg ment are not

negotiated, bu t they usually include a

good estimate of wh at the defendant

believes a jury may awa rd. Also, you

have to consider that wag e-and-hour

claims are fairly m athematical cases.

If you have records showin g the hours

worked, the dama ges are fairly simple

to calculate. Con sequently, oers of

judgment in su ch cases may be more

calculated than arbitrary,” he adds.

Faced with the same iss ue, the

courts in the Eleventh Circuit, fo r

example, have come to a con clusion

opposite to Yu’s, h olding that Rule

68 offers of ju dgment are subj ect to

judicial scruti ny. Gevertz sees a pos-

sibility for the S upreme Cour t to get

involved, as “the c urrent circuit split

will need resolu tion so that employ-

ees in all circuits a re equally pro-

tected und er the FLSA .”

Practitioners settling FLSA cases

should “know wh ether your circuit

follows the reasoni ng in Yu befo re

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Published in Litigation News Volume 46, Number 3, Spring 20 21. © 2021 by the American Bar A ssociation. Repr oduced with permissi on. All rights reser ved. This informati on or any portion the reof may not be copie d or disseminated in any

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