SUMMARY re: Bodle v. TXL Mortgage Corp., No. 14-20224, 2015 WL 3478146 (5th Cir. June 1, 2015)

The Fifth Circuit declined to extend precedent allowing the waiver of Fair Labor Standards Act (FLSA) claims in certain settlement agreements in its recent decision, Bodle v. TXL Mortgage Corp.  Generally speaking, the FLSA forbids waiver of the right to statutory wages or liquidated damages. However, in Martin v. Spring Break '83 Productions, L.L.C., 688 F. 3d 247 (5th Cir. 2012), the Fifth Circuit permitted an exception where a private settlement agreement was reached over a bona fide dispute regarding FLSA claims. The Fifth Circuit found that the release of a party's rights under the FLSA is enforceable where a settlement has been reached over a bona fide dispute as to the amount of hours worked or compensation owed.

In Bodle, the Fifth Circuit reversed the District Court and declined to extend Martin's holding to a generic, broad release obtained through a prior state court action that did not involve the FSLA or any claim of unpaid wages. Here, Plaintiffs filed an FLSA action against their former employer, TXL Mortgage Corp. (TXL), alleging that they were not compensated for overtime work. TXL moved for summary judgment on the basis that the Plaintiffs previously executed a valid and enforceable waiver in a prior state court action releasing all claims against TXL arising from the parties' employment relationship.

However, because the prior court action did not specifically involve claims arising under the FLSA and the parties did not discuss overtime compensation or the FLSA in the course of their settlement negotiations, the Fifth Circuit determined that the Martin exception did not apply. To avoid this potential pitfall, when negotiating settlements of employment related claims, be sure to specifically include any claim of unpaid wages and/or overtimecompensation pursuant to FLSA and delineate that these claims are included and have been considered in the settlement release and agreement. Read the full document here.