Federal Appeals Court Rules Release of “All Claims” in Texas Employment Lawsuit Does Not Preclude Separate Wage-Hour Claim

Austin, TX (Law Firm Newswire) July 30, 2015 – A federal appeals court ruled that a general release of claims in a Texas employment lawsuit did not serve to waive a separate wage-hour claim under the Fair Labor Standards Act (FLSA).

In the case of Bodle, et al. v. TXL Mortgage Corporation, the U.S. Court of Appeals for the Fifth Circuit reversed a federal district court’s dismissal of a lawsuit under the FLSA regarding overtime wages. In a previous case filed in Texas state court, employer TXL had alleged that Ambre Bodle and Leslie Meech violated their noncompetition covenants by working for a direct competitor. Bodle and Meech asserted nine state law causes of action against TXL, and the settlement agreement released “all claims” by Bodle and Meech against TXL, including those based on “any federal, state or local law, statute or regulation.” But on the same day the case settled, Bodle and Meech filed their overtime lawsuit against TXL in federal court.

“The Fifth Circuit had previously ruled that a private settlement of FLSA claims is enforceable when reached over a bona fide dispute regarding FLSA claims,” said Gregory D. Jordan, an Austin employment attorney with the Law Offices of Gregory D. Jordan, who has been involved in similar disputes pertaining to releases of FLSA claims. “Here, the Fifth Circuit declined to extend that reasoning to cover the facts of the Bodle case.” Jordan notes that, “there are still open questions in the Fifth Circuit as to the effectiveness of certain releases of FLSA claims.”

In many other federal circuits, a release of FLSA claims must have court approval or supervision by the Department of Labor in order to be enforceable. However, in Martin v. Spring Break ’83 Productions, L.L.C., a 2012 case, the Fifth Circuit held that parties may settle FLSA claims with enforceable releases, without government or court approval, in most circumstances. However, the Fifth Circuit has now ruled that such reasoning will not necessarily apply when the underlying dispute is not a bona fide dispute over wage-hour issues.

“The lesson here is that when an employment lawsuit is not over wage-hour issues, a general release of all claims may not by itself preclude an FLSA claim,” said Jordan. “Depending upon the circumstances, more specific wording and even other actions may be appropriate.”