Thomas v. State of La.

• Decision Date: 01 July 1976
• Docket Number: No. 75-1801,75-1801
• Citation: 534 F.2d 613
• Parties: 22 Wage & Hour Cas. (BN 1146, 79 Lab.Cas. P 33,397 Maggie THOMAS et al., Plaintiffs-Appellees, v. STATE OF LOUISIANA, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 613

534 F.2d 613

22 Wage & Hour Cas. (BN 1146, 79 Lab.Cas. P 33,397

Maggie THOMAS et al., Plaintiffs-Appellees, v. STATE OF LOUISIANA, Defendant-Appellant.

No. 75-1801.

United States Court of Appeals Fifth Circuit.

July 1, 1976.

Frank Trosclair, Jr., Asst. Atty. Gen., Baton Rouge, La., for the state of la.

Robert B. Neblett, Jr., Daniel E. Broussard, Jr., Alexandria, La., for plaintiffs-appellees.

Appeal from the United States District Court for the Western District of Louisiana.

Before DYER, CLARK and GEE, Circuit Judges.

GEE, Circuit Judge:

The State of Louisiana challenges the lower court's order setting aside its settlement agreement with 1,941 state employees in compromise of a claim for unpaid overtime compensation. Finding the agreement valid and binding, we reverse.

Appellees, employees of various state agencies who had sued their employer under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. (1970), ¹ for unpaid overtime compensation, won a verdict in 1972 for three years of overtime pay, liquidated damages, and attorneys' fees. But before final judgment was entered, the Supreme Court in Employees of the Department of Public Health & Welfare v. Department of Public Health & Welfare, 411 U.S. 279, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973), held that because section 16(b) of the FLSA, 29 U.S.C. § 216(b) (1970), was silent on whether a state could be sued for recovery under the Act by its own employees, Congress would not be deemed to have caused a state to forfeit its eleventh amendment sovereign immunity to suit ² by citizens of its own state. At this point, our appellees had claims of no value. ³ In early 1974, the two parties agreed to a settlement by which the state agreed to pay each appellee overtime compensation for two years, but no liquidated damages, attorneys' fees, or costs. Shortly thereafter, in April 1974, Congress amended section 16(b) of the FLSA to overturn the Supreme Court decision and authorize such suits. ⁴

Appellees persuaded the lower court to void the settlement agreement on the authority of Schulte v. Gangi, 328 U.S. 108, 66 S.Ct. 925, 90 L.Ed. 1114 (1946), which held that the remedy of liquidated damages under the FLSA cannot be bargained away by an agreement between employer and employee in settlement of a bona fide dispute over whether the employer was subject to the FLSA. Basing its decision on the danger that one-sided bargaining might frustrate the congressional purpose of insuring minimum wage payments, ⁵ the Schulte Court noted, id. at 113 n.8, 66 S.Ct. 925, that it might countenance an exception for stipulated judgments, subject as they are to judicial scrutiny. Several courts, including this circuit, subsequently elevated the Schulte dictum to law. ⁶

Although no court ever approved this settlement agreement, the same reason for enforcing a court-approved agreement i. e., little danger of employees being disadvantaged by unequal bargaining power applies here. Initially, appellees had three alternatives to filing suit in federal court. First, they could have requested the Secretary of Labor to exercise his discretionary power under 29 U.S.C. § 216(c) (1970) to intervene and prosecute the action in their behalf in a federal proceeding, but they would thereby have waived their claim to liquidated damages and attorneys' fees. ⁷ Second, they could have sued in state court. Finally, they could have attempted to negotiate an out-of-court settlement. After Employees, only the last option remained, and appellees wisely pursued it. Appellants, equally wisely, were amenable.

Settlement agreements have always been a favored means of resolving disputes. ⁸ When fairly arrived at and properly entered into, they are generally viewed as binding, final, and as conclusive of rights as a judgment. ⁹ We see no reason here to depart from the general rule. There is no problem of disproportionate bargaining power when a settlement gives employees everything to which they are entitled under the FLSA at the time the agreement is reached. Thus, the agreement is enforcible, and the lower court erred in setting it aside.

REVERSED.

CLARK, Circuit Judge (specially concurring):

Today's decision is necessarily narrow. I concur because it cannot be construed to approve nonjudicial settlements of wage and hour claims in situations removed from the unique facts of this case. As Judge Gee demonstrates, these plaintiffs entered into a fair compromise agreement at a time when no viable forum existed to enforce their rights. Each side was correctly apprised of the law as it then existed and intelligently assessed the impact of the Supreme Court opinion. The short-lived Employees decision had the effect of rendering the district court's award a nullity, because it enucleated the court's jurisdiction. The 1974 amendments, though designed to legislatively overrule Employees, did not address the specific question of the validity of compromise made during this jurisdictional gap. In this limited sphere, Schulte is not controlling since it only outlaws nonjudicial agreements executed to terminate bona fide disputes as to coverage and leaves open the possibility of settling other legal controversies out of court.

The singular posture of this case is unlikely to reoccur. By amending the Portal-to-Portal Act to toll the statute of limitations, Congress insured that public employees who were ousted from federal courts on jurisdictional grounds during the Employees era are given a second chance to enforce their rights in that forum. 29 U.S.C. § 255(d) (1974). I deem this concurrence necessary to emphasize that Schulte continues to raise a barrier to even fair bargaining between employee and employer where there is a dispute as to existing law.

It also seems apropos to specify the limited significance of the Eleventh Amendment issue presented. Employees did necessarily imply that citizen employees of a state hospital were not barred from federal court to assert wage and hour claims against their state employer. However, the subsequent 1974 amendments to FLSA purported to confer the right to sue in a federal forum on all nonsupervisory state employees. The constitutional right of Congress to regulate commerce must coexist with the bar of the Eleventh Amendment. Employees did not undertake to balance the interests of the Eleventh Amendment and the Commerce Clause in the context of the issues and interests there present. This would be necessary if the suing citizen employee were engaged by a state institution which was essential to the conduct of state government, e. g., police protection or tax collection. In the comparable Twenty-first Amendment vs. Commerce Clause situation, the Court set this standard:

Both the Twenty-first Amendment and the Commerce Clause are parts of the same Constitution. Like other provisions of the Constitution, each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case.

Hostetter v. Idelwild Bon Voyage Liquor Corp., 377 U.S. 324, 332, 84 S.Ct. 1293, 1298, 12 L.Ed.2d 350 (1964).

Clearly, this would be the test where Parden's waiver theory should not apply. Such a case is not theoretical. See National League of Cities v. Dunlop (3-judge court) prob. jurisd. noted, 420 U.S. 906, 95 S.Ct. 823, 42 L.Ed.2d 835, 43 U.S.L.W. (1975). We do not face it here.

1 Section 16(b) of the...