In Gilstrap v. Sushinati LLC, the U.S. District Court for the Southern District of Ohio rejected the notion that the parties’ private agreement to settle claims under the Fair Labor Standards Act (FLSA) required court approval.

The district court’s decision in Gilstrap follows a growing body of case law nationwide reaching similar conclusions. If other federal courts continue to follow the reasoning outlined in Gilstrap and related case law, it could significantly alter litigation practice under the FLSA, and result in further review by federal courts of appeals.

Quick Hits

• Many federal courts and litigants over the years have assumed that FLSA settlements require court approval.
• In Gilstrap v. Sushinati LLC, the U.S. District Court for the Southern District of Ohio ruled that it lacked authority to rule on the fairness or propriety of a proposed private settlement agreement resolving the plaintiff’s FLSA claims.
• In so doing, the court noted that neither the Supreme Court of the United States nor the U.S. Court of Appeals for the Sixth Circuit have held that such approval is required.
• The Gilstrap decision is relevant because it deviates from the standard practice of seeking district court approval of settlement agreements resolving claims under the FLSA.

Summary

Megan Gilstrap worked as a server for Sushinati LLC. Gilstrap sued her employer, alleging violations of the FLSA and related Ohio laws, and sought to certify an opt-in collective action class under § 16(b) of the FLSA, 29 U.S.C. § 216(b). The parties consented to conditional certification and resolved the dispute after engaging in early settlement negotiations. Gilstrap subsequently filed an unopposed motion for settlement approval.

The U.S. District Court for the Southern District of Ohio denied Gilstrap’s unopposed motion for settlement approval for four primary reasons. First, the district court held there was nothing in the FLSA’s text supporting the court approval rule. Second, the district court held there was no binding case law requiring court approval because the issue has never been addressed by the Supreme Court of the United States or the U.S. Court of Appeals for the Sixth Circuit.

Third, the district court analyzed case law supporting the court approval rule and determined it was unpersuasive. The district court specifically focused on the U.S. Court of Appeals for the Eleventh Circuit’s decision in Lynn’s Food Stores, Inc. v. United States, which provides the foundational basis for the rule. According to the district court, Lynn’s Food Stores was premised on faulty legal reasoning, and, in the court’s words, “from those humble beginnings a tsunami has followed.”

Finally, the district court observed the FLSA court approval rule conflicts with the Federal Rules of Civil Procedure (FRCP)—specifically, Federal Rule of Civil Procedure 41(a)(1)(A), which permits parties to freely dismiss lawsuits under “any applicable federal statute” without court approval by filing “a stipulation of dismissal signed by all parties.” According to the district court, the FLSA does not displace FRCP 41’s unqualified allowance of parties’ right to stipulated dismissals when all parties agree to the same.

Key Takeaways

Federal courts are increasingly questioning whether court approval is required for private agreements to settle claims asserted under the FLSA. This issue may significantly alter the process for settling claims asserted under the FLSA, but for now, federal courts remain fragmented on whether court approval is required.