Mei Xing Yu worked as a sushi chef at a restaurant owned and operated by Hasaki Restaurant, Inc. Yu sued Hasaki in New York State, on behalf of other similarly situated employees, for violating the Fair Labor Standards Act (FLSA) overtime provisions and New York labor laws. About three months later, Hasaki sent Yu a settlement offer for $20,000 plus reasonable attorneys’ fees pursuant to Federal Rule of Civil Procedure 68 (Rule 68 offer).
Within a month, Yu sent the court notice that he was accepting the Rule 68 offer. The judge did not enter judgment. Instead, the judge directed the parties to submit a joint letter explaining why the settlement was fair and reasonable. Alternatively, the judge allowed the parties to argue why they believed that the judge was not required to approve their Rule 68 settlement.
The parties submitted a joint letter stating their opinion that the judge was not required to approve their settlement. The US Secretary of Labor submitted an amicus brief stating that judicial approval was required for FLSA settlements. Although Rule 68 contains mandatory language requiring the clerk of the court to enter judgment without judicial approval, the judge noted that there were narrow exceptions to that rule for bankruptcy and class action settlements. The judge decided that FLSA settlements also fell within that narrow exception of Rule 68 offers that require judicial approval. The parties appealed to the US Court of Appeals for the Second Circuit.
The Second Circuit reviewed whether a Rule 68 offer of judgment that disposes of an FLSA claim in litigation needs to be reviewed by a district court or the US Department of Labor (DOL) for fairness before the clerk of the court can enter judgment.
The Second Circuit found that although FLSA authorizes the DOL to bring FLSA actions and to supervise the payment of unpaid wages or overtime pay, nothing in the FLSA commands that FLSA litigation can only be settled with a judge’s approval. Conversely, the bankruptcy law, for example, explicitly requires judicial approval of settlements.
The Second Circuit also reviewed and dismissed several arguments that the amici parties raised to support their contention that judicial review and approval was required for FLSA settlements. The Second Circuit decided that no implied requirement for judicial approval could be read into the Supreme Court or other court precedents, the FLSA’s legislative history, or the remedial purpose of the FLSA.
Mei Xing Yu, et al v. Hasaki Restaurant, et al., 2019 WL 6646618 (2nd Cir.2019).
Note:
This case is limited to FLSA cases that are filed in the Second Circuit and settled through Rule 68 offers of compromise. It is unknown if the Ninth Circuit, which covers California, would follow this precedent. Because this case is thorough and well-reasoned, however, it is persuasive.