That's a No-No! Employers Beware of Conditioning Severance Benefits on Waiver of FLSA Claims!

In this age of numerous class or collective actions pending against large employers for alleged FLSA violations and increasingly poor economic outlooks, layoffs and reductions in force may become a bit trickier in the standard documents and releases required to be executed by employees being terminated. The courts are ever suspicious of attempts by employers to avoid potential liabilities through coercive tactics, such as conditioning severance benefits on execution of a release of all potential claims against the employer, including wage-and-hour claims. courts know that employees already facing economic hardship through a RIF are likely to consent to just about anything so as to get additional compensation when future compensation is uncertain at best. The waiver of FLSA claims must be approved by a court or the Department of Labor to be effective. See 29 C.F.R. § 825.220(d).

The United States District Court for the Northern District of Georgia enjoined SunTrust Banks, Inc. from this practice earlier this spring and similar rulings should be expected by employers and employees alike. See Allen v. SunTrust Banks, Inc., No. 1:06-CV-3075, 2008 WL 1925082 (N.D. Ga. April 30, 2008). For the order conditionally certifying the Allen class and the notice related to the Allen lawsuit, click here. The interesting aspect of the SunTrust Banks case was that of the 178 offered severance benefits, 21 had pending FLSA claims as class members. A court's decision may differ if laid off employees have not opted in yet, are merely potential class members of an uncertified class, as opposed to actual class members. This developing area of law should be watched.