DEES

v.

HYDRADRY, INC.

STEVEN D. MERRYDAY, District Judge.

John Dees sues (Doc. 1) his former employer to recover overtime compensation due under the Fair Labor Standards Act, 29 U.S.C. § 201

et seq.

(the “FLSA”). The parties announce a settlement and submit a “Joint Stipulation for Dismissal With Prejudice.” (Doc. 13) Although a private settlement and stipulation for dismissal ends the typical case without judicial intervention, the Eleventh Circuit requires the district court to review the settlement of an FLSA claim.

See Lynn’s Food Stores, Inc. v. United States,

679 F. 2d 1350 (11th Cir.1982).

1

The congressional purpose of the FLSA and the public’s interest in the transparency of the judicial process decisively inform both the procedure and the standard applicable to a district court’s review of an FLSA settlement.

I. The FLSA, Private Agreement, and Supervised Compromise

The FLSA embodies a congressional intent to ensure that “all our able-bodied working men and women [receive] a fair day’s pay for a fair day’s work.” Letter to Congress from President Franklin D. Roosevelt (May²⁴, 1937) (reprinted in H.R.Rep. No. 101-260 (Sept. 26, 1989), 1989 U.S.C.C.A.N. 696-97). By enacting the FLSA, Congress sought “to protect certain groups of the population from substandard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce.”

2

Brooklyn Sav. Bank v. O’Neil,

324 U.S. 697, 706, 65 S.Ct. 895, 89

*1232

L.Ed. 1296 (1945). Combatting the typically unequal bargaining power between employer and employee, the FLSA imposes both a minimum wage and an overtime wage for each of several categories of employee.

See

29 U.S.C. § 206 (establishing a minimum wage); 29 U.S.C. § 207 (providing that no employer shall require an employee to work “for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed”). To ensure compliance with the overtime and minimum wage provisions, the FLSA permits an employee to sue his employer to recover unpaid wages, an additional and equal amount as liquidated damages, and a reasonable attorney’s fee.

3

The FLSA prohibits a private agreement altering an employee’s right to a minimum wage and overtime. For example, the employer and the employee may not agree for the employee to work prospectively for an overtime rate of one-and-a-quarter times the regular hourly rate; the FLSA requires one-and-a-half times the regular hourly rate. Although prohibiting a contract that restricts the FLSA rights of an employee, the FLSA leaves unanswered whether an employee may compromise a claim for unpaid wages.

4

A. Private Agreement and Unsupervised Waiver of FLSA Rights

The Supreme Court first addressed the issue of compromise and waiver of FLSA rights in

Brooklyn Savings Bank v. O’Neil,

324 U.S. 697, 65 S.Ct. 895, 89 L.Ed. 1296 (1945), in which the bank employed O’Neil as a night watchman for approximately two years but failed to pay O’Neil $423.16 for overtime wages due under the FLSA. Two years after O’Neil ceased his employment, the bank offered O’Neil $423.16 in exchange for O’Neil’s releasing his rights under the FLSA. The parties disputed neither the amount of wages owed nor the bank’s status as a covered employer under the FLSA. O’Neil signed the release but later sued the bank to recover liquidated damages. Enforcing the release, the trial court dismissed O’Neil’s claim.

Invalidating the release,

Brooklyn Savings Bank

holds that an employee who accepts delayed payment of wages due under the FLSA may not waive the right to

*1233

recover liquidated damages. Focusing on the absence of evidence that the release “was obtained as a result of the settlement of a bona fide dispute between the parties with respect to coverage or amount,”

Brooklyn Savings Bank

finds that the release “constituted a mere waiver of [O’Neil’s] right to liquidated damages.” 324 U.S. at 703, 65 S.Ct. 895. O’Neil’s waiver contravened the congressional policy implemented by the FLSA:

[A] statutory right conferred on a private party, but affecting the public interest, may not be waived or released if such waiver or release contravenes the statutory policy. Where a private right is granted in the public interest to effectuate a legislative policy, waiver of a right so charged or colored with the public interest will not be allowed where it would thwart the legislative policy which it was designed to effectuate.

The legislative history of the Fair Labor Standards Act shows an intent on the part of Congress to protect certain groups of the population from substandard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce. The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency and as a result the free movement of goods in interstate commerce. To accomplish this purpose standards of minimum wages and maximum hours were provided. Neither petitioner nor respondent suggests that the right to the basic statutory minimum wage could be waived by any employee subject to the Act. No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act. We are of the opinion that the same policy considerations which forbid waiver of basic minimum and overtime wages under the Act also prohibit waiver of the employee’s right to liquidated damages.

324 U.S. at 705-08, 65 S.Ct. 895 (citations and footnotes omitted).

Brooklyn Savings Bank

declines to determine the validity of a private agreement that settles a bona fide dispute over an FLSA claim.

One year later,

D.A. Schulte v. Gangi

328 U.S. 108, 114, 66 S.Ct. 925, 90 L.Ed. 1114 (1946), broadened the holding in

Brooklyn Savings Bank

and held that “the remedy of liquidated damages cannot be bargained away by bona fide settlements of disputes over coverage.”

5

In

*1234

Gangi

several maintenance employees worked for the owner of an office building in New York City. Following

Kirschbaum v. Walling,

316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638 (1942), which holds that the FLSA covers maintenance employees in a building occupied by a manufacturer producing goods for interstate commerce, the employees in

Gangi

demanded unpaid overtime wages and liquidated damages from their employer. Because the employees in

Gangi

worked in a building whose tenants shipped no goods in interstate commerce, the employer disputed the employees’ right to overtime pay. Under threat of suit, however, the employer fully compensated the employees for unpaid overtime due under the FLSA in exchange for a release from any further FLSA claim.

After signing a release, the employees sued to recover liquidated damages. Despite the parties’ bona fide dispute whether the FLSA covered the employer, the Supreme Court refused to enforce the release:

In a bona fide adjustment on coverage, there are the same threats to the public purposes of the [FLSA] that exist when the liquidated damages are waived. The damages are at the same time compensatory and an aid to enforcement. It is quite true that the liquidated damage provision acts harshly upon employers whose violations are not deliberate but arise from uncertainties or mistakes as to coverage. Since the possibility of violations inheres in every instance of employment that is covered by the Act, Congress evidently felt it should not provide for variable compensation to fit the degree of blame in each infraction. Instead Congress adopted a mandatory requirement that the employer pay a sum in liquidated damages equal to the unpaid wages so as to compensate the injured employee for the retention of his pay.

It is realized that this conclusion puts the employer and his employees to an “all or nothing gamble,” as Judge Chase phrased the result in his dissent below (

[Ceco Steel Products Corp. v. C.I.R. ], 150 F. 2d 698 [8th Cir.1945]). Theoretically this means each party gets his just deserts, no more, no less. The alternative is to find in the Act an intention of Congress to leave the adjustments to bargaining at the worst between employers and individual employees or at best between employers and the employees’ chosen representatives, bargaining agent or some other. We think the purpose of the Act, which we repeat from the

[.Brooklyn Savings Bank

] case was to secure for the lowest paid segment of the nation’s workers a subsistence wage, leads to the conclusion that neither wages nor the damages for withholding them are capable of reduction by compromise of controversies over coverage. Such a compromise thwarts the public policy of minimum wages, promptly paid, embodied in the [FLSA], by reducing the sum selected by Congress as proper compensation for withholding wages.

328 U.S. at 115-16, 66 S.Ct. 925. Thus,

Gangi

offers an employer that disputes FLSA coverage only two choices. The employer must either (1) pay employees the disputed wage or (2) litigate the coverage issue and risk paying liquidated damages in addition to the unpaid wage. The employer may not privately resolve the coverage issue by compromising with an individual employee. Although prohibiting purely private compromise,

Brooklyn Sav

*1235

ings Bank

and

Gangi

leave unanswered whether an employee may compromise a claim with supervision by the district court.

B. The Eleventh Circuit Permits an FLSA Compromise Supervised by Either the District Court or the Department of Labor

In

Lynn’s Food Stores, Inc. v. United States,

679 F. 2d 1350 (11th Cir.1982), after an official investigation, the Department of Labor determined that Lynn’s Food Stores failed to pay employees the minimum wage and overtime required by the FLSA. Lynn’s Food Stores attempted to negotiate a compromise with the Department of Labor. After the negotiation failed, Lynn’s Food Stores approached its employees — all of whom were unrepresented by counsel and many of whom spoke no English — to resolve the FLSA claims individually. Many of the employees remained unaware that the Department of Labor had found that Lynn’s Food Stores owed the employees more than $10,000.00 in back wages. Lynn’s Food Stores offered the employees “$1,000.00, to be divided among them on a

pro rata

basis, in exchange for each employee’s agreement to waive ‘on behalf of himself (herself) and on behalf of the U.S. Department of Labor’ any claim for compensation arising under the FLSA.” 679 F. 2d at 1352. Fourteen employees signed a waiver and accepted a

pro rata

share of the $1,000.00.

After the Department of Labor rejected the compromise, Lynn’s Food Stores sued the Department of Labor in district court for a declaratory judgment approving the compromise with the fourteen employees. Affirming the district court’s refusal to enforce the employees’ written waivers of their FLSA rights, the Eleventh Circuit held that the FLSA permits an employee only two avenues for compromising an FLSA claim. First, an employee may accept a compromise supervised by the Department of Labor.⁶

By accepting the compromise, the employee waives the right to sue for the unpaid wages.

7

Second, if an employee sues for back wages under the FLSA, the parties may present a proposed compromise to the district court, which “may enter a stipulated judgment after scrutinizing the settlement for fairness.” 679 F. 2d at 1353.

The Eleventh Circuit noted that “FLSA rights cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.” 679 F. 2d at 1352 (quoting

Barrentine v. Arkansas-Best Freight Sys.,

450 U.S. 728, 740, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981)). Nevertheless, the Eleventh Circuit permits compromise of an FLSA claim under certain circumstances:

Settlements may be permissible in the context of a suit brought by employees under the FLSA for back wages because

*1236

initiation of the action by the employees provides some assurance of an adversarial context. The employees are likely to be represented by an attorney who can protect their rights under the statute. Thus, when the parties submit a settlement to the court for approval, the settlement is more likely to reflect a reasonable compromise of disputed issues than a mere waiver of statutory rights brought about by an employer’s overreaching. If a settlement in an employee FLSA suit does reflect a reasonable compromise over issues, such as FLSA coverage or computation of back wages, that are actually in dispute; we allow the district court to approve the settlement in order to promote the policy of encouraging settlement of litigation. But to approve an “agreement” between an employer and employees outside of the adversarial context of a lawsuit brought by the employees would be in clear derogation of the letter and spirit of the FLSA.

679 F. 2d at 1354. Thus, an employee may compromise a claim if the district court determines that the compromise “is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.” 679 F. 2d at 1354.

Lynn’s Food’s

approval requirement remains unique to the Eleventh Circuit, although other circuits refuse to enforce a written waiver of FLSA rights.

8

Although, at first glance, requiring a district court to approve each FLSA compromise appears unnecessary,

Martinez v. Bohls Bearing Equip. Co.,

361 F. Supp. 2d 608 (W.D.Tex.2005), illustrates the problem with permitting unsupervised, private compromise. In

Martinez,

an employee sued his employer for overtime after accepting $1,000.00 to compromise a dispute over hours worked and “actual rate of pay.” Enforcing the employee’s release, negotiated without approval of either the Department of Labor or a district court,

Martinez

states, “The move away from the rigid interpretation of statutory rights of the 1940s to a regime which supports settlement as a favored means of resolving disputes supports the holding that a compromise and release of FLSA rights involving a bona fide dispute as to liability, such as the amount of hours worked or compensation due, is not prohibited.” 361 F. Supp. 2d at 630.

Although leaving the definition of “bona fide dispute” unstated,

Martinez

decides that only a “bona fide dispute” under the FLSA is subject to private compromise and that, apparently, a category of non“bona fide” FLSA disputes requires approval by the Department of Labor or the district court.

Martinez

omits an explanation of the mechanism by which, absent involvement by the Department of Labor or the district court, the bona fldes of the dispute are reliably identified. On the other hand,

Lynn’s Food

requires approval of each FLSA compromise, regardless of the

*1237

issue that underlies the compromise. In practice, leaving an FLSA settlement to wholly private resolution conduces inevitably to mischief.

An employer who pays less than the minimum wage or who pays no overtime has no incremental incentive to comply voluntarily with the FLSA, if, after an employee complains, the employer privately compromises the claim for a discount-an amount less than the full amount owed under the FLSA (plus, with savvy negotiation, a confidentiality agreement to preclude the spread to other employees of information about the FLSA). If approval is required, the discount might become unavailable and the undiscounted principal owed the employee might increase (for example, as a result of liquidated damages or a more refined damage computation), both of which unhappy prospects conduce to voluntary compliance by the employer. The Eleventh Circuit in

Lynn’s Food

and perforce this district court proceed on the logical and salutary premise that the FLSA, a statute famously designed to preempt in certain particulars the possibility of private agreement, remains immune to the unsupervised intrusion of a private agreement — a result much more compelling than

Martinez’s

dicey rejection of the Supreme Court’s allegedly “rigid interpretation.”

9

In sum, an employer undertakes the private resolution of an FLSA dispute at his peril. If the employer pays the employee in full, including all wages owed and liquidated damages, the employee retains no uncompensated FLSA claim and the peril dissipates. However, if the employer extracts a compromise, the release of an FLSA claim approved by neither the Department of Labor nor the district court remains unenforceable.

10

See Brooklyn Savings Bank v. O’Neil,

324 U.S. 697, 708, 65 S.Ct. 895, 89 L.Ed. 1296

*1238

(1945) (“No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.”). The employer remains liable for the unpaid wages, and the employee may sue to recover any wages (or liquidated damages) allegedly compromised by private agreement. An employee’s compromise and release of his FLSA rights is enforceable in only a narrow and confined circumstance. If an employee sues his employer for back wages, if the parties propose a compromise that resolves a bona fide dispute and furthers the purpose of the FLSA, and if the district court approves the compromise, the employer obtains an enforceable release.

II. Implementing Lynn’s Food: Determining the Existence of a Compromise

If an employee sues an employer for back wages under the FLSA,

Lynn’s Food

permits only one method for the parties to compromise the employee’s claim. After determining that a proposed compromise “is a fair and reasonable resolution of a bona fide dispute,” that is, a fair and reasonable compromise of a matter susceptible to compromise, the district court may approve the compromise. To avoid

Lynn’s Food’s

requirement for judicial approval, some employers attempt to “moot” the controversy and avoid judicial scrutiny by stipulating that a compromise “fully compensates” the employee for his FLSA claim, including actual and liquidated damages, attorneys’ fees, and costs. For example, in the present case, the parties’ stipulation for dismissal states:

The Defendant has agreed to pay Plaintiff for all overtime owed in full, without compromise. ($550 in Actual Damages, $550 in Liquidated Damages). Defendant agreed to separately pay Plaintiff attorney’s fees and costs of $2,900 ($1,900 in attorney’s fees; $1,000 in costs). As such, no judicial scrutiny is needed.

(Doc. 13) The parties rely on

Mackenzie v. Kindred Hospitals East, LLC,

276 F. Supp. 2d 1211, 1217 (M.D.Fla.2003), for the proposition that an employee’s receiving “full compensation” obviates the need for judicial scrutiny of an FLSA compromise. But the anomalous facts and narrow holding in

Mackenzie

offer no support for the broad exception to

Lynn’s Food

proposed by the parties.

In

Mackenzie,

a pharmacist sued his employer to recover unpaid overtime wages due under the FLSA. Purporting to act as a representative of other pharmacists entitled to overtime compensation from the employer, the pharmacist styled his complaint as a collective action.

11

The

*1239

employer served the pharmacist with an offer of judgment for $1,200.00 plus costs and a reasonable attorney’s fee, which fully compensated the pharmacist for the alleged FLSA violation. After the pharmacist declined the offer, the employer moved to dismiss the action as moot. Contending that an offer of judgment under Rule 68, Federal Rules of Civil Procedure, is inappropriate in an FLSA collective action, the pharmacist moved both to strike the offer of judgment and “to facilitate court-authorized notice of this lawsuit to potential collective action members.”

12

276 F. Supp. 2d at 1213. Noting the pharmacist’s failure to identify another similarly situated pharmacist who expressed interest in joining the action, the court rejected the propriety of proceeding in a collective action and denied the motion “to facilitate court-authorized notice.”

13

Because only the pharmacist’s individual FLSA claim remained, the magistrate judge considered the effect of the employer’s offer of judgment. The magistrate judge investigated the existence of any “side deal” or condition not present on the face of the employer’s offer. The magistrate judge found no “compromise” requiring approval under

Lynn’s Food

because the offer fully compensated the pharmacist for the FLSA claim. Accordingly, the magistrate recommended entry of judgment in favor of the pharmacist for the amount of the employer’s offer of judgment. In approving the magistrate judge’s report and recommendation, I cautioned:

The result in this case undoubtedly would differ if the plaintiff offered some material evidence of other willing and similarly situated claimants. Of course, in all instances, the court should guard

*1240

against a defendant’s misuse of the procedure employed in this case. A dismissal for mootness is a tool to comply with the jurisdictional limitations imposed by the Constitution of the United States and not a ploy for an agile defendant to escape compliance with the Fair Labor Standards Act.

276 F. Supp. 2d at 1213 n. 1.

Mackenzie

remains sound, but if the parties’ proposed “full compensation” agreement includes an additional term— such as the forbearance of a valuable right of the employee, including perhaps one of the employee’s FLSA rights, or the exchange of another valuable consideration of any kind — the notion of “full compensation” becomes illusory and inapplicable (and the MacKenzie mechanism becomes unavailable).

14

For example, the employer in an FLSA case might offer full monetary compensation to the employee for the FLSA claim but might require the employee to refrain from informing fellow employees about the result the employee obtained. Or the employer might require the employee to trim the shrubbery at the employer’s home each weekend for a year. In either instance, the employee outwardly receives full monetary compensation for his unpaid wages, but effectively the additional term (the “side deal”) confers a partially offsetting benefit on the employer. To the extent that the employee receives a full wage but relinquishes something else of value, the agreement (even if exhibited to the court as a stipulation for “full compensation” or an offer of judgment) involves a “compromise,” and

Lynn’s Food

requires judicial approval of the compromise.

See Silva v. Miller,

307 Fed.Appx. 349, 351 (11th Cir.2009) (“On its face,

Lynn’s Food

suggests no exception to judicial oversight of settlements when the employee receives all wages due; it offers no support for the even broader exception proposed by [the plaintiffs attorney] that would include all counseled settlements.”). Announcing an exceedingly narrow and patently obvious “exception” to

Lynn’s Food, Mackenzie

finds only that, after judicial inquiry confirms both “full compensation” and “no side deal” (in other words, the absence of compromise), no further judicial inquiry is necessary. In every other instance,

Lynn’s Food

requires plenary review by the district court.

III. Evaluating an FLSA Compromise

Lynn’s Food

requires the parties to an FLSA compromise to present the proposed agreement to the district court, which “may enter a stipulated judgment after scrutinizing the settlement for fairness.”

15

679 F. 2d at 1353. Although noting the unfairness of the settlements at issue, Lynn’s Food specifies no criteria for evaluating the “fairness” of a proposed compromise in a different case.

Bonetti v. Embarq Management Co.,

— F. Supp. 2d

*1241

-, -, 2009 WL 2371407, at 4 (M.D.Fla. Aug.⁴, 2009), describes the problem faced by a district court:

Short of a bench trial, the Court is generally not in as good a position as the parties to determine the reasonableness of an FLSA settlement. Many factors may be in play as the parties negotiate a compromise that is acceptable to both sides. The parties may disagree as to the number of hours worked by the plaintiff, the plaintiffs status as an exempt employee, or the defendant’s status as a covered employer. In certain cases, the Defendant may assert (or threaten to assert) a counterclaim arising from the employment relationship. If the parties are represented by competent counsel in an adversary context, the settlement they reach will, almost by definition, be reasonable. Rarely will the Court be in a position to competently declare that such a settlement is “unreasonable.”

Nevertheless, the district court must “scrutinize the settlement for fairness.” To fully implement the policy embodied by the FLSA, the district should scrutinize the compromise in two steps. First, the court should consider whether the compromise is fair and reasonable to the employee (factors “internal” to the compromise). If the compromise is reasonable to the employee, the court should inquire whether the compromise otherwise impermissibly frustrates implementation of the FLSA (factors “external” to the compromise). The court should approve the compromise only if the compromise is reasonable to the employee and furthers implementation of the FLSA in the workplace.

A. Internal Factors: Is the Compromise Fair and Reasonable to the Employee?

The factors for evaluating the “fairness” of a settlement in a class action provide a familiar starting point for evaluating the “internal” fairness of an FLSA compromise:

(1) the existence of fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of plaintiffs success on the merits; (5) the range of possible recovery; and (6) the opinions of the counsel.

Pessoa v. Countrywide Home Loans, Inc.,

2007 WL 1017577, at 3 (M.D.Fla. Apr.², 2007) (quoting

Leverso v. SouthTrust Bank of Ala., Nat. Assoc.,

i. The Compromise Must Resolve a Bona Fide Dispute

Lynn’s Food

permits approval of a compromise resolving a#“bona fide dispute over FLSA provisions.” 679 F. 2d 1350. Accordingly, the parties requesting review of an FLSA compromise must provide enough information for the court to examine the bona fides of the dispute. The parties’ motion (or presentation at a hearing) must describe the nature of the dispute (for example, a disagreement over coverage, exemption, or computation of hours worked or rate of pay) resolved by the compromise. Parties wishing to compromise a coverage or exemption issue must describe the employer’s business and the type of work performed by the employee. The employer should articulate the reasons for disputing the employee’s right to a minimum wage or overtime, and the employee must articulate the reasons justifying his entitlement to the disputed wages. If the parties dispute the computation of wages owed, the parties must provide each party’s estimate of the num

*1242

ber of hours worked and the applicable wage. In any circumstance, the district court must ensure the bona fides of the dispute; implementation of the FLSA is frustrated if an employer can extract a disproportionate discount on FLSA wages in exchange for an attenuated defense to payment.

ii. A Confidentiality Provision Contravenes FLSA Policy

Because of worry that settling with one employee will encourage other employees to assert FLSA rights, the employer may seek to maintain the confidentiality of the settlement agreement. But a confidentiality provision furthers resolution of no bona fide dispute between the parties; rather, compelled silence unreasonably frustrates implementation of the “private — public” rights

16

granted by the FLSA and thwarts Congress’s intent to ensure widespread compliance with the statute. To further Congress’s intent, the Department of Labor requires the employer of an employee covered by the FLSA to display conspicuously in the workplace a detailed notice of the employee’s FLSA rights.

17

By including a confidentiality provision, the employer thwarts the informational objective of the notice requirement by silencing the employee who has vindicated a disputed FLSA right.

Furthermore, Section 15(a)(3) of the FLSA proscribes an employer’s retaliating against an employee for asserting rights under the FLSA. If an employee covered by a confidentiality agreement discusses the FLSA with fellow employees or otherwise asserts FLSA rights, the employer might sue the employee for breach of contract. The employer’s most proximate damages from the employee’s breach are the unpaid FLSA wages due other employees who learned of their FLSA rights from the employee who breached the confidentiality agreement. A confidentiality agreement, if enforced, (1) empowers an employer to retaliate against an employee for exercising FLSA rights, (2) effects a judicial confiscation of the employee’s right to be free from retaliation for asserting FLSA rights, and (3) transfers to the wronged employee a duty to pay his fellow employees for the FLSA wages unlawfully withheld by the employer. This unseemly prospect vividly displays the inherent impropriety of a confidentiality agreement in settlement of an FLSA dispute.

A confidentiality provision in an FLSA settlement agreement both contravenes the legislative purpose of the FLSA and undermines the Department of Labor’s regulatory effort to notify employees of their FLSA rights. “The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered the nation

*1243

al health and efficiency and as a result the free movement of goods in interstate commerce.”

Brooklyn Savings Bank v. O’Neil,

324 U.S. 697, 706-07, 65 S.Ct. 895, 89 L.Ed. 1296 (1945). The district court should reject as unreasonable a compromise that contains a confidentiality provision, which is unenforceable and operates in contravention of the FLSA. in.

An Employee May Not Prospectively Waive His FLSA Rights

Because “FLSA rights cannot be abridged by contract or otherwise waived,”

Lynn’s Food,

679 F. 2d at 1352, an employee may not prospectively waive his right to a minimum wage or to overtime compensation. The employee may not stipulate, for example, that he is an exempt employee. The district court should reject a compromise that includes a prospective waiver, approval of which would “nullify the purposes of the [FLSA].”

Brooklyn Savings Bank v. O’Neil,

324 U.S. 697, 705-08, 65 S.Ct. 895, 89 L.Ed. 1296 (1945) (“No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act.”).

iv. The Compromise Must Award the Plaintiff’s Counsel a Reasonable Fee

Finally, the FLSA requires the award of attorneys’ fees to a prevailing employee.

Dale v. Comcast Corp.,

498 F. 3d 1216, 1223 n. 12 (11th Cir.2007). The district court must “review ... the reasonableness of counsel’s legal fees to assure both that counsel is compensated adequately and that no conflict of interest taints the amount the wronged employee recovers under a settlement agreement.”

Silva v. Miller,

307 Fed.Appx. 349, 351 (11th Cir.2009) (unpublished decision). As Judge Presnell states in

Bonetti v. Embarq Management Co.,

— F. Supp. 2d -, 2009 WL 2371407 (M.D.Fla. Aug.⁴, 2009), which elucidates the reasonableness of an attorney’s fee award in an FLSA case:

[T]he best way to insure that no conflict has tainted the settlement is for the parties to reach agreement as to the plaintiffs recovery before the fees of the plaintiffs counsel are considered. If these matters are addressed independently and seriatim, there is no reason to assume that the lawyer’s fee has influenced the reasonableness of the plaintiffs settlement.

In sum, if the parties submit a proposed FLSA settlement that (1) constitutes a compromise of the plaintiffs claims; (2) makes full and adequate disclosure of the terms of settlement, including the factors and reasons considered in reaching same and justifying the compromise of the plaintiffs claims; and (3) represents that the plaintiffs attorneys’ fee was agreed upon separately and without regard to the amount paid to the plaintiff, then, unless the settlement does not appear reasonable on its face or there is reason to believe that the plaintiffs recovery was adversely affected by the amount of fees paid to his attorney, the Court will approve the settlement without separately considering the reasonableness of the fee to be paid to plaintiffs counsel. However, if the parties can only agree as to the amount to be paid to the plaintiff, the Court will continue the practice of determining a reasonable fee using the lodestar approach.

B. External Factors: Does the Compromise, Although Reasonable, Otherwise Frustrate Implementation of the FLSA

In evaluating a compromise, the district court should also consider an array of “external” or contextual factors pertinent to the statutory purpose of the

*1244

FLSA. Compromise of a retrospective dispute may be permissible if, for example, the FLSA issue in a case is unresolvably close on the facts or the law or some extraordinary circumstance (say, a suddenly disabled claimant or an employer in liquidation) commends a speedy or certain resolution. On the other hand, several factors may commend rejecting a proposed compromise, including the presence of other employees situated similarly to the claimant, a likelihood that the claimant’s circumstance will recur, a history of FLSA non-compliance by the same employer or others in the same industry or geographic region, or the requirement for a mature record and a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace. In all instances, the district court should faithfully execute the congressional mandate for “minimum wages, promptly paid ... for the lowest paid segment of the nation’s workers.”

D.A. Schulte v. Gangi,

328 U.S. 108, 116, 66 S.Ct. 925, 90 L.Ed. 1114 (1946).

IV. The Effect of Judicial Review: “Confidential” FLSA Settlement Agreements and Public Access to Court Records

“Parties who settle a legal dispute rather than pressing it to resolution by the court often do so, in part anyway, because they do not want the terms of the resolution to be made public.”

Jessup v. Luther,

277 F. 3d 926, 928 (7th Cir.2002).

See generally

Laurie Kratzky Dore,

Secrecy by Consent: The Use and Limits of Confidentiality in the Pursuit of Settlement,

74 Notre Dame L.Rev. 283 (1999). In an FLSA action, the employer worries that compromise with an employee who has vindicated a valuable FLSA right will inform and encourage other employees, who will vindicate their FLSA rights (or who will wrongly, but expensively for the employer, conclude that additional wages are due). Although perhaps both uncomfortable and expensive to an employer, vindication of FLSA rights throughout the workplace is precisely the object Congress chose to preserve and foster through the FLSA.

In the typical settled case, the district judge remains unaware of the terms of compromise, and the parties enforce the settlement agreement, if necessary, only through a separate action.

18

The parties maintain the confidentiality of their compromise by submitting a stipulation for dismissal under Rule 41, Federal Rules of Civil Procedure. In an FLSA case, however,

Lynn’s Food

requires the parties to obtain judicial approval of the compromise. Forced to submit the agreement to the court after filing a motion for approval, the parties often seek to preserve the confidentiality of the compromise either by moving to submit the agreement under seal or by requesting an “in

camera

review” of the agreement.

In the typical FLSA case, however, neither attempt to conceal the compromise comports with the public’s right of access to a judicial proceeding, which right is “an essential component of our system of justice [and] instrumental in securing the integrity of the process.”

Chicago Tribune Co. v. Bridgestone/Firestone, Inc.,

263 F. 3d 1304, 1311 (11th Cir.2001). The judge’s “approving” a settlement constitutes a “public act,” and the public “has an interest in knowing what terms of settle

*1245

ment a federal judge would approve.”

Jessup,

277 F. 3d at 929.

19

As an active component of the judge’s decision, the settlement agreement is presumptively a public record.

See Brown v. Advantage Eng’g, Inc.,

960 F. 2d 1013, 1016 (11th Cir.1992) (“Once a matter is brought before a court for resolution, it is no longer solely the parties’ case, but also the public’s case.”);

Bank of Am. Nat’l Trust & Sav. Ass’n v. Hotel Rittenhouse Assocs.,

800 F. 2d 339, 343 (3d Cir.1986) (“[T]he common law presumption of access applies to motions filed in court proceedings and to the settlement agreement ... filed and submitted to the district court for approval.”). The public enjoys the right both to attend a trial or hearing and to inspect and copy a judicial record.

20

The presumption that the record of a judicial proceeding remains public “is surely most strong when the ‘right at issue is of a ‘private — public character,’ as the Supreme Court has described employee rights under the FLSA.’ ”

Stalnaker,

293 F. Supp. 2d at 1264 (quoting

Brooklyn Savings Bank v. O’Neil,

324 U.S. 697, 708, 65 S.Ct. 895, 89 L.Ed. 1296 (1945)). Sealing an FLSA settlement agreement between an employer and employee, reviewing the agreement

in camera,

or reviewing the agreement at a hearing without the agreement’s appearing in the record (in any event precluding other employees’ and the public’s access to, and knowledge of, the agreement) thwarts Congress’s intent both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA in the workplace.

21

Furthermore, before sealing a document, the district court must identify and articulate “an overriding interest based on findings that [a seal] is essential to preserve higher values and is narrowly tailored to serve that interest. The interest is to be articulated along with findings specific enough that a reviewing court can determine whether the [sealing] order was properly entered.”

Press-Enterprise Co. v. Superior Court of California,

464 U.S. 501, 510, 104 S.Ct. 819, 78 L.Ed.2d 629 (1984). Preventing the employee’s coworkers or the public from discovering the existence or value of their FLSA rights is an objective unworthy of implementation by a judicial seal, which is warranted only under “extraordinary circumstances”

22

*1246

typically absent in an FLSA case. Absent an “overriding interest” in the preservation of some “higher value,” the court should not abide the parties’ request for a seal.

The parties’ stipulation to seal the agreement (and the absence of a third-party objection to sealing the compromise agreement) fails to justify a seal. In

Citizens First National Bank of Princeton v. Cincinnati Insurance Co.,

178 F. 3d 943, 944-45 (7th Cir.1999), Judge Posner states:

The parties to a lawsuit are not the only people who have a legitimate interest in the record compiled in a legal proceeding .... [T]he public at large pays for the courts and therefore has an interest in what goes on at all stages of a judicial proceeding. That interest does not always trump the property and privacy interests of the litigants, but it can be overridden only if the latter interests predominate in the particular case, that is, only if there is good cause for sealing a part or the whole of the record in that case. The determination of good cause cannot be elided by allowing the parties to seal whatever they want, for then the interest in publicity will go unprotected unless the media are interested in the case and move to unseal. The judge is the primary representative of the public interest in the judicial process and is duty-bound therefore to review any request to seal the record (or part of it). He may not rubber stamp a stipulation to seal the record.

See also Wilson v. American Motors Corp.,

759 F. 2d 1568, 1571 (11th Cir.1985) (“[I]t is the rights of the public, an absent third party, which are preserved by prohibiting closure of public records.... ”).

Reviewing an FLSA settlement agreement under seal conflicts with the public’s access to judicial records, frustrates appellate review of a judge’s decision to approve (or reject) an FLSA compromise, contravenes congressional policy encouraging widespread compliance with the FLSA, and furthers no judicially cognizable interest of the parties. A proper consideration of the intent of Congress and the public’s interest in judicial transparency permits only one method to obtain judicial review of a compromise of an FLSA claim. The parties must file the settlement agreement in the public docket.

See Stalnaker,

293 F. Supp. 2d at 1262-64;

see also Hanson v. Wells Fargo Bank,

No. 08-80182-CIV, 2009 WL 1490582 (S.D.Fla. May 26, 2009) (requiring the parties to submit an unsealed copy of their settlement agreement).

V. Conclusion

To ensure that “all our able-bodied working men and women [receive] a fair day’s pay for a fair day’s work,”

23

the FLSA requires a covered employer to pay each employee a minimum wage and overtime. To combat the typically unequal bargaining power between employer and employee, Congress prohibits a private agreement altering FLSA rights. An employee entitled to FLSA wages may compromise his claim only under the supervision of either the Department of Labor or the district court.

If presented in an FLSA action with a notice of settlement, a stipulation for dismissal, an offer of judgment, or the like, the judicial approval required by

Lynn’s Food

and the public’s right of access to a judicial proceeding compel the

*1247

parties to file their agreement in the public docket of the district court. As an initial matter, the district court must determine whether the employee purports to compromise an FLSA right. If judicial scrutiny confirms that the parties’ settlement involves no compromise, the district court should approve the settlement and dismiss the case (if the employer has paid) or enter judgment for the employee (if the employer has not paid). If the parties’ proposed resolution requires the employee to compromise an FLSA right, the district court must scrutinize the compromise for “fairness.”

An employee’s right to a minimum wage and overtime is unconditional, and the district court should countenance the creation of no condition, whether confidentiality or any other construct, that offends the purpose of the FLSA. An employer is obligated unconditionally to pay a minimum wage and overtime to the complainant and his fellow employees; the district court should not become complicit in any scheme or mechanism designed to confine or frustrate every employee’s knowledge and realization of FLSA rights. Accordingly, the district court evaluating an FLSA compromise should examine first the “internal” fairness of the compromise, including the existence of a bona fide dispute and the absence of a prospective waiver, confidentiality agreement, or other provision antithetical to the FLSA. If the proposed compromise is fair and reasonable to the employee, the court should consider whether any other external factor, such as the need to resolve definitively an issue affecting similarly situated employees, recommends rejecting the compromise. If the compromise is fair and reasonable to the employee and furthers the implementation of FLSA rights in the workplace, the court should approve the compromise.

For the reasons stated in this order, the parties’ stipulation of dismissal (Doc. 13) is REJECTED. On or before April 30, 2010, the parties shall request approval of the proposed agreement, which the parties must attach to the motion. In the motion, the parties should describe the bona fide dispute or disputes resolved by the compromise and confirm that the filed agreement includes every term and condition of the parties’ resolution (in other words, confirm the absence of any “side deal”). In addition, the parties must either (1) demonstrate the reasonableness of the proposed attorney’s fee using the lodestar approach

24

or (2) represent that the parties agreed to the plaintiffs attorney’s fee separately and without regard to the amount paid to settle the plaintiffs FLSA claim.