The Eighth Circuit Court of Appeals recently ruled that employees who settled claims with their employer for unpaid overtime could still pursue legal claims seeking more such payments even though they signed releases and cashed their settlement checks.
ActionLink designated their “brand advocates” as exempt “outside salesmen” under the Fair Labor Standards Act (“FLSA”). They therefore did not pay them overtime even though some of them worked up to 75 hours per week. The U.S. Department of Labor (“DOL”), after investigating a complaint, persuaded ActionLink to classify these workers as nonexempt and therefore eligible for overtime.
The company also agreed to pay back overtime wages to each brand advocate that had been misclassified. The reimbursement check given to each affected employee contained the following disclaimer:
By cashing this check, the employee to whom [this payment] is made is agreeing that he or she has received full payment [for] wages earned, including minimum wage and overtime, up to the date of the check.
A number of the brand advocates cashed the settlement checks. Thereafter, a group of brand advocates, some of whom had cashed their checks and some had not, brought FLSA claims against ActionLink in federal court for unpaid overtime.
The trial court dismissed the claims of the employees who had already cashed their settlement checks, finding that they had waived their rights to further legal recourse. Those employees appealed and the Eighth Circuit reversed the original decision, finding that the waivers on the settlement checks were not valid because the employees cashing those checks did not have adequate notice of the rights that they were actually waiving. The waiver “made no mention of the FLSA, waiving legal claims, or any additional damages to which the employees may be entitled,” all of which were mandatory components of a valid settlement release under the FLSA.
The case was sent back to the trial court to allow the employees who had cashed their settlement checks the chance to pursue their claims.
Bottom Line
Many federal and state employment laws have very precise requirements for a valid release of claims. Employers using a release like the one in this case probably will not find it to be a useful short cut through these regulations; more likely, they will wind up as dead ends. Better to call an experienced lawyer to steer you in the right direction.