Maggie Thomas v. State of Louisiana

534 F.2d 613, 1976 U.S. App. LEXIS 8209, 22 Wage & Hour Cas. (BNA) 1146

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 1, 1976
• Docket: 75-1801
• Status: Published

Opinions

GEE, Circuit Judge:

The State of Louisiana challenges the lower court’s order setting aside its settlement agreement with 1,941 state employees in compromise of a claim for unpaid overtime compensation. Finding the agreement valid and binding, we reverse.

Appellees, employees of various state agencies who had sued their employer under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. (1970),¹ for unpaid overtime compensation, won a verdict in 1972 for three years of overtime pay, liquidated damages, and attorneys’ fees. But before final judgment was entered, the Supreme Court in Employees of the Department of Public Health & Welfare v. Department of Public Health & Welfare, 411 U.S. 279, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973), held that because section 16(b) of the FLSA, 29 U.S.C. § 216(b) (1970), was silent on whether a state could be sued for recovery under the Act by its own employees, Congress would not be deemed to have caused a state to forfeit its eleventh amendment sovereign immunity to suit² by citizens of its own state. At this point, our appellees had claims of no value.³ In early 1974, the two parties agreed to a settlement by which the state agreed to pay each appellee overtime compensation for two years, but no liquidated damages, attorneys’ fees, or costs. Shortly thereafter, in April 1974, Congress amended section 16(b) of the FLSA to overturn the Supreme Court decision and authorize such suits.⁴

Appellees persuaded the lower court to void the settlement agreement on the authority of Schulte v. Gangi, 328 U.S. 108, 66 S.Ct. 925, 90 L.Ed. 1114 (1946), which held that the remedy of liquidated damages under the FLSA cannot be bargained away by an agreement between employer and employee in settlement of a bona fide dispute over whether the employer was subject to the FLSA. Basing its decision on the danger that one-sided bargaining might frustrate the congressional purpose of insuring minimum wage payments,⁵ the Schulte Court noted, id. at 113 n.8, 66 S.Ct. 925, that it might countenance an exception for stipulated judgments, subject as they are to judicial scrutiny. Several courts, including this circuit, subsequently elevated the Schulte dictum to law.⁶

Although no court ever approved this settlement agreement, the same reason for enforcing a court-approved agreement — i. e., little danger of employees being disadvantaged by unequal bargaining power— applies here. Initially, appellees had three alternatives to filing suit in federal court. First, they could have requested the Secretary of Labor to exercise his discretionary power under 29 U.S.C. § 216(c) (1970) to intervene and prosecute the action in their behalf in a federal proceeding, but they would thereby have waived their claim to liquidated damages and attorneys’ fees.⁷ Second, they could have sued in state court. Finally, they could have attempted to negotiate an out-of-court settlement. After Employees, only the last option remained, and appellees wisely pursued it. Appellants, equally wisely, were amenable.

Settlement agreements have always been a favored means of resolving disputes.⁸ When fairly arrived at and properly entered into, they are generally viewed as binding, final, and as conclusive of rights as a judgment.⁹ We see no reason here to depart from the general rule. There is no problem of disproportionate bargaining power when a settlement gives employees everything to which they are entitled under the FLSA at the time the agreement is reached. Thus, the agreement is enforcible, and the lower court erred in setting it aside.

REVERSED.

1 . Section 16(b) of the FLSA read at the time:

Any employer who violates the provisions of section 206 [prescribing a minimum wage] or section 207 [prescribing maximum hours and overtime rates (section (h))] of this title shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. Action to recover such liability may be maintained in any court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. . . . The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.

29 U.S.C. § 216(b) (1970).

2 . The Court in Parden v. Terminal Ry., 377 U.S. 184, 84 S.Ct. 1207, 12 L.Ed.2d 233 (1964), had held that while a state is immune from suit by an individual unless it consents, Congress can condition the state’s decision to engage in some activity within Congress’ power to regulate commerce on a waiver of immunity. The Employees Court recognized that while Parden involved a railroad business that the state there operated for profit, Congress could regulate working conditions of employees in state institutions not conducted for profit if it determined that those employees “have such a relation to interstate commerce that national policy, of which Congress is the keeper, indicates that their status should be raised.” 411 U.S. at 284, 93 S.Ct. at 1618.

3 . While the Secretary of Labor could have sued in their behalf, see text accompanying note 7 infra, he had not chosen to do so.

4 . The second sentence of section 16(b) was amended to read as follows:

Action to recover such liability may be maintained against any employer (including a public agency) in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated.

29 U.S.C.A. § 216(b) (Supp.1976).

5 . See also Brooklyn Sav. Bank v. O’Neal, 324 U.S. 697, 706-07, 65 S.Ct. 895, 89 L.Ed. 1296 (1944).

6 . See Urbino v. Puerto Rico Ry. L & P Co., 164 F.2d 12 (1st Cir. 1947); Jarrard v. Southeastern Shipbuilding Corp., 163 F.2d 960 (5th Cir. 1947); Bracey v. Luray, 161 F.2d 128 (4th Cir.), cert. denied, 332 U.S. 790, 68 S.Ct. 98, 92 L.Ed. 372 (1947); cf. Satterwhite v. United Parcel Serv., Inc., 496 F.2d 448 (10th Cir.), cert. denied, 419 U.S. 1079, 95 S.Ct. 668, 42 L.Ed.2d 674 (1974) (employees cannot challenge denial of liquidated damages for claim submitted to binding arbitration).

7 . While retaining the right to recover for three (rather than two) years of compensation if they could prove, as the lower court found here, that the violations were willful. See Brennan v. Heard, 491 F.2d 1, 2-3 (5th Cir. 1974).

8 . See, e. g., Williams v. First Nat’l Bank, 216 U.S. 582, 595, 30 S.Ct. 441, 54 L.Ed. 625 (1910).

9 . See, e. g., Cia Anon Venezolana De Navigacion v. Harris, 374 F.2d 33, 35 (5th Cir. 1967).