In Chan v. A Taste of Mao, Inc., 2017 U.S. Dist. LEXIS 107923 (S.D.N.Y. July 12, 2017), even though the U.S. Department of Labor assured a restaurant (“Defendant”) that it had the authority to settle FLSA claims on behalf of Defendant’s employees, the Southern District of New York held that any employee who did not sign the DOL’s WH-60 form specifically accepting the settlement and waiving their claims, was not precluded from subsequently filing a lawsuit under the FLSA.

By way of background, after Defendant allegedly failed to pay its employees minimum wage and overtime, Defendant entered into a settlement supervised by the DOL to resolve these FLSA claims on behalf of Defendant’s employees.  Under the FLSA Section 216, the “Secretary [of Labor] is authorized to supervise payment of the unpaid minimum wages or the unpaid overtime compensation owing to any employee … and the agreement of any employee to accept such payment shall upon payment in full constitute a waiver by such employee of any right he may have … to such unpaid minimum wages or unpaid overtime compensation and an additional equal amount as liquidated damages.”  During negotiations, the DOL confirmed that it “had the authority” to represent and resolve all of the employees’ claims and thereafter mailed WH-60 forms to each employee notifying them of the settlement and asking each to return a signed copy.  At the same time, Defendant transferred the settlement funds to the DOL for distribution to the employees.  Five of those employees (“Plaintiffs”) refused to sign the WH-60 form and instead sued Defendant under the FLSA.

 Defendant moved for summary judgment arguing that, “[d]espite the Plaintiffs’ decisions not to sign the WH-60 forms and accept their settlement payments, … the funds are still constructively in Plaintiffs’ possession because the DOL, as their agent, has not returned any of the settlement monies.”  Defendant also argued that Plaintiffs should be bound to the agreement because “employers who in good faith strive to settle claims should be afforded the benefit of knowing that they will not face liability in the future.”  Plaintiffs responded that their decision not to sign the WH-60 form constituted an unequivocal rejection of the DOL settlement and preserved their right to sue.

The Southern District denied summary judgment and held that Plaintiffs’ refusal to sign the WH-60 form was “tantamount to a rejection” of the settlement offer.  “The presumption here is that employees do not have to take the settlement unless they specifically opt into it.”  In fact, the DOL settlement agreement expressly provided that, “[i]n the event that any employees cannot be located, or refuse to accept the back wages, the employer agrees after three years, any monies which have not been distributed because of inability to locate the proper persons or because of their refusal to accept payment” shall be disbursed to the Treasury.  “Such provisions clearly account for the possibility that an employee will preserve the right to prosecute his claims in court to recover damages in excess of a DOL-supervised settlement, and they impose the risk of loss resulting from unexpended settlement funds on the employer.”  The court was clear that, “it is Congress—not this Court—which must forge a solution to that quandary.  This Court’s obligation is to interpret and apply the statute in its current form, even if it means compelling an outcome that forces [Defendant] to address the same allegations it believed were resolved through the DOL Settlement.”

If you believe that your employer is violating the FLSA by denying you minimum wage and overtime compensation, it is important to speak with a lawyer for unpaid wages to properly assess and determine all of your legal rights.

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