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Fourth Circuit Upholds Private Settlement of FMLA Claims

    Client Alerts
  • April 08, 2011

In 2007, the Fourth Circuit Court of Appeals (which includes North Carolina and South Carolina) concluded that federal regulations prevented employers from settling outstanding claims, or receiving releases from employees for issues arising under the Family and Medical Leave Act without court or Department of Labor oversight. This decision in the Progress Energy case caused great consternation among both plaintiffs and defense counsel due to the inability of the parties to reach a private comprehensive settlement of legal claims.

In 2008, the Department of Labor issued new FMLA regulations. Included in the rules was an interpretation of the release restrictions, requiring court or DOL approval only for releases of claims relating to prospective conduct. Employers and employees were free to privately settle claims relating to past conduct.

Last month in an unpublished decision, the Fourth Circuit upheld a challenge to these new release interpretations. In Whiting v. Johns Hopkins Hosp., the plaintiff signed a private release with the hospital in 2007 before the new DOL rules were issued. She later sued for FMLA violations, and the employer raised the release as a barrier to the claim. The plaintiff contended that the release pre-dated the new DOL rule interpretation, and also that DOL had overstepped its authority in allowing private releases under the FMLA.

The Fourth Circuit rejected both of these contentions, affirming dismissal of the lawsuit. The court concluded that the 2008 DOL regulations constituted an affirmation of prior intent, and not a change in the rules governing releases. Therefore, the clarification from DOL applies to settlement agreements signed before its issuance. In addition, DOL has the discretion to allow private settlement of FMLA claims as a reasonable way for employers and employees to resolve legal issues between themselves.

The court repeated prior holdings that do not allow settlement of wage claims under the Fair Labor Standards Act absent court or DOL supervision. The Fourth Circuit distinguished FLSA from FMLA claims, stating that the former involves a remedial statute intended to protect the most vulnerable workers, justifying the additional restrictions on private settlements.

This decision gives employers confidence that comprehensive settlement agreements can include effective releases of past FMLA claims.