Waivers and Releases of Massachusetts Wage Claims

By Evan J. Spelfogel

On December 17, 2012, in Crocker v Townsend Oil, the Massachusetts Supreme Judicial Court invalidated a settlement agreement, waiver and release to the extent it purported to release claims under the Massachusetts Wage and Hour Laws, but did not expressly include that statute by name among the claims being released. Specifically, the Court held:

We...conclude that a settlement or contract termination agreement by an employee that includes a general release, purporting to release all possible existing claims will be enforceable as to the statutorily provided rights and remedies conferred by the Wage Act only if such an agreement is stated in clear and unmistakable terms.  In other words, the release must be plainly worded and understandable to the average individual, and it must specifically refer to the rights and claims under the Wage Act that the employee is waiving.  Such express language will ensure that employees do not unwittingly waive their rights under the Wage Act.  At the same time, this course preserves our policy regarding the broad enforceability of releases by establishing a relatively narrow channel through which waiver of Wage Act claims can be accomplished.

In settling claims with departing employees and offering severance packages in return for all-encompassing written waivers and releases, employers often list by category in the settlement papers, among others, all tort and contract claims, claims for emotional distress, all public policy and statutory claims including, without limitation, all claims that might arise under anti-discrimination laws and wage and hour laws.  We have frequently advised employers that they would be better protected if they listed expressly at least the relevant major federal and state statutes.  In light of Crocker, employers who wish to obtain binding waivers of wage and overtime claims under Massachusetts law must be careful to list the Massachusetts Wage Act expressly, in the settlement documents.

In the Name of "Fairness," a New Jersey Federal Court Strikes the Confidentiality and Release Provisions from a Fair Labor Standards Act Settlement Agreement

By Douglas Weiner and Meg Thering

In one of the many “wrinkles” in Fair Labor Standards Act (“FLSA”) litigation, settlements of wage and hour disputes between an employer and its employees are only enforceable if supervised by the U.S. Department of Labor or approved by a court. Courts will approve settlements if they are “fair”; however, as demonstrated in a recent decision arising out of New Jersey - Brumley v. Camin Cargo Control - courts may need to be reminded that employers also have rights and legitimate interests. The Brumley Court took what was a bargained-for exchange between both parties and turned it into what could only be considered a one-sided deal, good only for the plaintiffs. 

After litigating and negotiating alleged overtime violations with 112 opt-in plaintiffs over a four year period, Camin Cargo Control, Inc. ultimately offered to pay $3.9 million in exchange for the release of all wage claims and a confidentiality provision. Plaintiffs then filed an unopposed motion to approve these terms of settlement.  Unfortunately for Camin Cargo Control, Inc., the Court granted Plaintiffs their full benefit of the bargain – including $1.3 million in costs and attorneys’ fees – but in the name of “fairness” denied the portion of the motion containing the confidentiality provision and release of claims.

In Brumley,the Honorable Jose Linares, citing Brooklyn Sav. Bank v. O’Neil, a U.S. Supreme Court case from 1945 and Dees v. Hyradry, Inc., a 2010 casefrom the Middle District of Florida, refused to approve the parties’ agreement as submitted because he found that the confidentiality provisions ran afoul of “the ‘public – private’ rights granted by the FLSA and thwart[ed] Congress’s intent to ensure widespread compliance with the statute.” Additionally, citing Dees, he stated: “[i]n practice, leaving an FLSA settlement to wholly private resolution conduces inevitably to mischief.” He also deemed the release unfair because he interpreted it as a release of both prior and prospective claims.

In light of this opinion, employers should double check the language of release provisions in FLSA settlement agreements to make sure that they unambiguously release all claims prior to the date of the agreement (and no claims after the date of the agreement). 

Employers should also keep in mind that courts are becoming increasingly hostile to confidentiality provisions in FLSA settlements. Thus, employers may no longer assume that their confidentiality provisions will be approved. 

We will keep an eye on this decision and report if it is appealed or distinguished by courts in other jurisdictions.