FLSA Releases: When Employers Might Get The Benefit Of Their Bargain

Seyfarth Synopsis: It has long been established that, to be enforceable, a release of a FLSA claim must be approved by either the Department of Labor or a court. While courts in the Second and Eleventh Circuits have consistently adhered to this precedent, in recent years, a growing number of courts in other jurisdictions like the Ninth Circuit have begun to take a different view. The U.S. District Court for the Western District of Washington can now be added to that growing list with its summary judgment decision upholding the enforcement of a private separation agreement as a valid release of FLSA claims.

In a scenario familiar to many employers, AGC Biologics Inc. ("AGC") and former hourly employee Eufronio Lomibao voluntarily entered into a separation agreement following the termination of his employment in which Lomibao received money and job placement services in exchange for a broad release of all claims arising out of his employment. The general release explicitly accounted for any claim brought under the FLSA. The parties did not obtain, or attempt to obtain, approval from a court or the Department of Labor.

About nine months after signing that agreement, Lomibao initiated a class and collective action against AGC, claiming the company failed to compensate him for all hours worked in violation of the FLSA and Washington wage-hour law.

AGC moved for summary judgment before discovery on the basis that Plaintiff's individual FLSA and state law claims were barred by the parties' separation agreement. The Court agreed, granting AGC's motion and dismissing the action in its entirety with prejudice.

Underscoring the lack of clarity on this issue, Judge John H. Chun started his analysis in Opinion and Order by noting that "caselaw regarding waiver of FLSA rights is hardly perspicuous." Indeed, even within the Ninth Circuit, where the Western District of Washington sits, courts have diverged on whether judicial or Department of Labor approval is always required for a valid waiver of FLSA rights. Against that backdrop, Judge Chun framed his analysis around three key questions: (1) whether FLSA rights can ever be waived by contract; (2) if so, under what circumstances should an agreement waiving FLSA rights be considered valid; and (3) if the Court does not invalidate the agreement on FLSA waiver grounds, whether any genuine issues of material fact existed that would preclude summary judgment.

In addressing the first issue, Judge Chun declined to hold, as a matter of law, that an employee can never waive FLSA rights through a contractual agreement. Taking a textualist approach, he noted that neither binding precedent nor the plain language of the FLSA supports a bright-line prohibition on such waivers. In light of that absence – and mindful of "prudential concerns and other public policies," including longstanding principles favoring the enforcement of contracts according to their terms – Judge Chun explained that he was "not inclined to recognize a categorical ban on waiver of FLSA rights via contract."

Second, Judge Chun determined that a bona fide dispute existed between the parties at the time the separation agreement was executed regarding potential FLSA coverage and liability. He emphasized that Lomibao was aware during his employment, and, moreover, before signing the agreement that he believed AGC had failed to compensate him for all hours worked. The Court squarely rejected Lomibao's contention that no "active dispute" existed at that time, correctly pointing out that an "active dispute" is not the applicable standard. Rather, the law requires only the existence of a bona fide dispute between the parties.

The Court acknowledged but ultimately declined to adopt the approach followed by the Eleventh and Second Circuits, which always require Department of Labor or judicial approval for any enforceable waiver of FLSA rights. Instead, having already concluded that the parties' separation agreement was not invalid for lack of a bona fide dispute, the Court found no remaining basis on which to invalidate the release of Lomibao's FLSA claims.

Because Lomibao challenged the validity of the separation agreement solely on legal grounds – namely, the argument that FLSA waivers require approval to be valid and enforceable – the Court found he failed to identify any genuinely disputed or missing facts suggesting the parties did not form a valid contract. Unlike the cases Lomibao cited in opposing summary judgment, it was undisputed here that he signed an agreement expressly releasing his right to bring any FLSA claim against AGC. The Court highlighted several undisputed facts underscoring the agreement's validity: the employee had 45 days to review the agreement; he signed it after 21 days; he was advised to consult with an attorney before executing it; he did not revoke his acceptance within the seven‑day revocation period; and AGC fully performed its obligations under the agreement, including issuing the severance payment and providing job‑placement services.

Judge Chun's decision underscores that, unlike some other circuits, the Ninth Circuit has not embraced a universal rule. Generally, the appropriate course for each employer depends on the jurisdiction and the specific factual circumstances surrounding the agreement. The most risk‑averse approach remains obtaining judicial or DOL approval for any release of FLSA claims. Many employers, however, may elect to proceed without approval – particularly in situations like this one, where it is undisputed that a valid contract was formed between the parties, the contract expressly provides for the release of FLSA claims and the jurisdiction does not have a hard-fast rule requiring approval.

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