Last Tuesday, a divided panel of the Fourth Circuit Court of Appeals (which includes North and South Carolina) affirmed its earlier decision in Taylor v. Progress Energy. In its original 2005 decision in the case, the Fourth Circuit concluded that Department of Labor (“DOL”) regulations prohibit private waivers and releases of claims under the Family and Medical Leave Act. The decision’s reasoning also indicated that private releases of Fair Labor Standards Act claims would also be unenforceable. This decision meant that in the absence of court or DOL supervision, employers and employees could not agree to binding compromises of FMLA or FLSA claims. For example, in the context of a reduction in force, a release signed by an employee in return for severance will not prevent a later suit for unpaid overtime.
The Fourth Circuit agreed to rehear the case based on a request from the DOL. The DOL argued that the court misconstrued its rules, and that the prohibition on releases only applies to agreements made in advance of possible violations. On review, the three judge panel upheld its original decision by a 2-1 margin. The employer may petition the full Fourth Circuit for a hearing on this matter, and if unsuccessful, may appeal the decision to the U.S. Supreme Court. In the meantime, employers and employees in the Fourth Circuit will continue to struggle with their inability to fully compromise claims before court or administrative complaints are filed.