Eighth Circuit Holds Independent Agreements For Attorneys' Fees In FLSA Settlements Are Not Subject To Judicial Review

Last month, in Barbee v. Big River Steel, LLC, No. 18-2255 (June 20, 2019), the United States Court of Appeals for the Eighth Circuit held that an independent agreement for attorneys' fees in connection with a Fair Labor Standards Act (FLSA) settlement does not require court approval—without intimating any position on the current circuit split as to whether FLSA settlements in general require judicial approval. As stated by the court, under the express language of the FLSA, 29 U.S.C. § 216(b), attorneys' fees are allowed "in addition to any judgment awarded," such that the merits of an FLSA claim and the attorneys' fees are distinct. As a result, the court observed, "any court judgment on the settled merits would necessarily be separate from any court review of the settled attorney fees." The Court of Appeals vacated the district court's underlying ruling that had modified the attorneys' fees portion of the parties' settlement agreement, finding that "no law gave the district court authority to interfere with [their] unconditional right" to settle the attorneys' fees issue on their own terms.

In reaching its decision, the court addressed the origin of the existing circuit court split as to whether all FLSA settlements require judicial approval. Two cases decided by the Supreme Court of the United States in the 1940s, D.A. Schulte, Inc. v. Gangi, 328 U.S. 108 (1946) and Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697 (1945), held that courts must approve releases of some FLSA claims, but left open the question of whether the FLSA required judicial approval to settle bona fide disputes over hours worked or wages owed. The Second, Fourth, and Eleventh Circuits have declined to extend Gangi and O'Neil to permit settlement of bona fide FLSA disputes over hours worked or wages due without judicial or Department of Labor (DOL) approval. In Walton v. United Consumers Club, Inc., 786 F.2d 303, 306 (7th Cir. 1986), the Seventh Circuit suggested likewise in dicta. The Fifth Circuit, however, has permitted the enforcement of such settlements without judicial or DOL approval.

Although other circuits have not expressly ruled on the issue, district courts within...