Recently, the United States District Court for the Southern District of Illinois reviewed a dispute regarding a pharmaceutical company’s driver. In their ruling, they articulated the standard required for courts to approve settlement agreements under the Fair Labor Standards Act (“FLSA”). [i]

The Case

Plaintiff, a delivery driver filed her complaint on March 14, 2023, alleging defendants, the pharmaceutical company for which plaintiff made deliveries, misclassified plaintiff as an independent contractor and consequently violated various Missouri and federal laws. [ii] Plaintiff brought claims under both the FLSA and Missouri minimum wage laws.[iii] She further sought to certify a class of current and former drivers employed by defendants in Missouri.[iv] “Plaintiff sought a declaratory judgment that [d]efendants’ alleged practices are unlawful under Missouri minimum wage laws, and an award of unpaid minimum wages, overtime wages, reimbursement for expenses, liquidated damages, prejudgment and post-judgment interest, and attorneys’ fees and costs.” [v] Defendants denied any liability or wrongdoing. [vi] Nevertheless, to avoid the expense and risks of litigation, [d]efendants agreed to settle the lawsuit.[vii] As this was a settlement under the FLSA, the parties needed court approval.[viii]

The Outcome

The court approved the settlement agreement because it found that it reflected “a reasonable compromise of a bona fide dispute and is fair and reasonable.” [ix] “The Seventh Circuit has not addressed the question of whether stipulated agreements under the FLSA require court approval, but district courts in the Seventh Circuit routinely require such approval.”[x] A court should approve a settlement when the proposed settlement demonstrates reasonable compromise over the contested issues. [xi] The court relied on Farber v. Riestererblend, Inc. which stated, “[a] reviewing court normally approves a settlement where it is based on ‘contentious arm’s-length negotiations, which were undertaken in good faith by counsel’ and where ‘serious questions of law and fact exist such that the value of an immediate recovery outweighs the mere possibility of further relief after protracted and expensive litigation.’”[xii] Here, the court found the required factors had been met after reviewing the settlement agreement in camera.

Takeaway

The takeaway here is a simple one. When bringing a settlement for court approval under the FLSA, ensure that the settlement is a reasonable compromise of a bona fide dispute. Altogether, the settlement must be fair and reasonable.

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Sources

[i] Frazier v. Omnicare, Inc., 3:23-cv-856-DWD, at 3 (S.D. Ill. 2024)

[ii] Id. at 1.

[iii] Id. at 1-2.

[iv] Id. at 2.

[v] Id.

[vi] Id.

[vii] Id.

[viii] Id.

[ix] Frazier v. Omnicare, Inc., 3:23-cv-856-DWD, at 3 (S.D. Ill. 2024)

[x] Mollett v. Kohl’s Corp., No. 21-CV-707- PP, 2022 WL 4641082, at *2 (E.D. Wis. 2022)

[xi] Frazier v. Omnicare, Inc., 3:23-cv-856-DWD, at 3 (S.D. Ill. 2024)

[xii] Farber v. Riestererblend, Inc., 1:22-CV-17-HAB, at 2 (N.D. Ind. 2022)