Quick Hits
- The U.S. District Court for the Western District of Washington recently granted summary judgment to an employer, holding that the plaintiff’s FLSA and Washington state wage claims were barred by a valid separation agreement and release.
- The court rejected the argument that FLSA rights can never be waived by contract, finding no binding authority or statutory text to support a categorical prohibition on waiver.
- The court also held that U.S. Department of Labor supervision or court approval is not required for a private FLSA settlement to be valid, provided a bona fide dispute exists.
- The ruling has significant implications for employers and employees in Washington, particularly regarding the enforceability of severance agreements containing broad releases of wage-and-hour claims.
Background
Eufronio Lomibao was an hourly employee of AGC Biologics, Inc., between December 2022 and May 2024. Lomibao filed suit, alleging that AGC Biologics had failed to compensate him and other hourly employees for all hours worked over forty in a workweek, in violation of the FLSA and the Washington Minimum Wage Act (WMWA), willfully withheld earned wages, and failed to provide bona fide meal and rest periods in violation of the Washington Wage Rebate Act (WWRA) and the Washington Industrial Welfare Act (WIWA).
AGC Biologics moved for summary judgment, arguing that Lomibao could not bring his claims because he had signed a separation agreement and release upon the termination of his employment. The agreement provided Lomibao with certain benefits, including a severance payment of $7,140 and job placement services, in exchange for a general release of all claims against the employer, including claims under the FLSA. The agreement explicitly stated that the employee had been “fully paid for all hours worked” and contained a “Knowing and Voluntary Agreement” signature page confirming that Lomibao had read and understood the terms, been advised to consult an attorney, and was signing voluntarily.
Lomibao opposed summary judgment on two primary grounds and contentions: (1) FLSA rights are not waivable by contract, and (2) even if such rights could be waived, a valid FLSA release requires a bona fide dispute and approval by a court or the U.S. Department of Labor (DOL), neither of which occurred in this case.
The Court’s Analysis
The court rejected Lomibao’s argument that FLSA rights can never be waived. While acknowledging that numerous federal court decisions contain language suggesting that FLSA rights are nonwaivable, the court found that many of those cases involved collective bargaining agreements or circumstances materially different from those in a private severance agreement. The court also noted that several of those same cases “either explicitly or implicitly indicate that FLSA rights can be waived by contract, at least in some situations.”
Critically, the court found no binding authority holding that a waiver of FLSA rights via contract is categorically prohibited. The court observed that nothing in the text of the FLSA itself indicates that waiver is impermissible. Without such authority, the court declined to “recognize a categorical ban on waiver of FLSA rights via contract, especially when prudential concerns and other public policies counsel against such a prohibition.”
Having concluded that FLSA rights can be waived, the court turned to whether such a waiver required DOL supervision or court approval. The Eleventh Circuit has held that FLSA claims can be settled only under DOL supervision or through court-approved stipulated judgments, and the Second Circuit similarly requires judicial approval. In contrast, the Fifth Circuit permits private settlements where a bona fide dispute exists.
The U.S. District Court for the Western District of Washington sided with the Fifth Circuit’s approach, holding that DOL supervision or court approval is not required. The court reasoned that this approach is “wholly consistent with the text of the FLSA, its legislative history, and all binding authority on this subject.” Both parties agreed that a valid FLSA release must resolve a “bona fide dispute,” and the court found this requirement had been satisfied because legitimate questions existed regarding the employer’s FLSA liability.
The Lomibao decision is consistent with the recent trend of federal courts questioning whether court approval is truly required for FLSA settlements.
Key Takeaways
The district court in Lomibao held that FLSA rights can be waived through a well-drafted severance agreement—provided the release resolves a bona fide dispute and is executed knowingly and voluntarily. Given the lack of binding authority from the U.S. Court of Appeals for the Ninth Circuit, continued litigation on this issue within the Ninth Circuit’s district courts (located in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington) is likely. Employers may want to ensure separation agreements include clear acknowledgment of full payment, adequate consideration, and knowing and voluntary signature provisions, and take into careful consideration the applicable laws in their respective jurisdictions.
Ogletree Deakins’ Seattle office and Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Class Action, State Developments, and Wage and Hour blogs as additional information becomes available.
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