Last week, the U.S. Supreme Court declined to review the Fourth Circuit Court of Appeal’s decision in Taylor v. Progress Energy. This case held that releases of claims under the Family and Medical Leave Act and Fair Labor Standards Act negotiated between employers and employees without court or Department of Labor supervision are unenforceable. The decision was based upon an old DOL regulation restricting the use of such releases. This decision has caused major problems for employers in North and South Carolina (which are both in the Fourth Circuit), because it prevents parties to a dispute or potential dispute from resolving claims prior to the filing of a lawsuit of administrative charge.
Initially, the Supreme Court asked the U.S. Solicitor General for the government’s position on the matter. The Solicitor General responded that while the government disagrees with the Fourth Circuit’s reasoning in Taylor, DOL intends to fix the problem by rewriting the regulation that formed the basis for the decision. Based upon this explanation, the Supreme Court denied review, viewing the issue as likely to be resolved in the near future.
This denial leaves employers in the Carolinas with no short-term relief from the current problem. Any DOL revision to the release regulation will require public notice and comment. The final rule is also subject to legal challenge as incompatible with the underlying statutes. For the time being, employers in the Fourth Circuit will have to approach claims settlement with the understanding that it will not release all potential actions that could be asserted against them.