Under the FLSA and a growing volume of case law, the presiding judge has to approve any settlement of an FLSA claim, be it individual, collective under §216(b) of the Act, or as a class. A failure to get judicial approval can lead to the settlement being busted and unenforceable. It is rare, but not unheard of.
Usually when a judge has to okay something, it is public and viewable. This is particularly true when the statute upon which the claims and settlement are based is a remedial statute intended to protect the public. Judges tend to honor the spirit of the FLSA with some fidelity and the case law is similarly positive toward that spirit of remediation.
However, many judges are willing to allow parties in FLSA unpaid wage cases to settle confidentially. After all a settlement is good for parties and courts alike. The matter is concluded satisfactorily and it is off the judge's docket. A win-win.
Whether the settlement approved by the court is kept confidential really depends where the case is situated.
Normal practice in federal court is to advise the court when a case has been settled before trial. The court will gratefully put on a conditional dismissal entry to the effect that the case is settled and dismissed without prejudice for sixty days. After that time has elapsed, the dismissal is converted to one with prejudice, i.e., never to be filed again. If in the sixty day period a party advises the court that an agreement was not finalized, or won't be, then the case is renewed on the court's docket.
This is usually a fine way to proceed. A deal is reached in principle, and the parties tell the court. Court is happy to delete the matter from its crowded calendar. Lawyers breathe easier knowing they will be getting paid after a short time haggling over release agreement details.
In FLSA cases though, reporting a settlement before an agreement is approved can be a disaster. Not an end of the world disaster, but one that is fraught with procedural hiccups and a general cart before the horse vibe. It causes delays and uncertainty that nobody wants. I know. Trust me.
It is error for parties to an FLSA case report to the court that a matter is settled when that settlement is based only on an agreement between counsel. To be SETTLED, the terms of the settlement have to be approved by the court. So telling the court that the matter is resolved and can be taken off the docket, before the judge has approved the terms of the agreement, puts the parties in the painful position of having a dismissed case, but an unapproved settlement. Now the parties have a case that reads as terminated on a federal judge's docket. And you know how intensely they pay attention to terminated cases.
Now the parties have to attract the judge's attention (and not their ire) to the settlement agreement. And even if the matter was well negotiated and all the parties are on board, the judge may not approve.
Don't report an FLSA case as settled to the court based on counsel's agreement alone.
If counsel reach an agreement in principle, but have to hammer out a confidential release agreement, then just wait. Do it like this:
1) Reach an agreement in principle; 2) file a joint motion to stay proceedings pending release agreement negotiations; 3) after reaching agreement on the release details, file a joint motion to approve the release/settlement agreement at the same time you present it to court confidentially, e.g., judge's chambers email; then 4) on judicial approval of the agreement and upon receipt of the settlement payment(s), the plaintiffs file their voluntary dismissal with prejudice.
This process avoids the cart before the horse problem that rears up in FLSA cases prematurely reported as settled.
