Orange County Employment Lawyers Blog
When wage-and-hour disputes are investigated by state or federal authorities, there may be a finding of wrongdoing and the company may agree to settle the matter with the government, in an effort to avoid litigation. However, workers may be free to pursue additional litigation, assuming they didn’t sign away their rights by cashing the check offered in the settlement. 
That’s what nearly happened in the recent case of Adams v. Action Link, LLC, reviewed recently by the U.S. Court of Appeals for the Eighth Circuit. The case reveals why it’s so imperative for workers in this situation to have the settlement agreement reviewed by a lawyer before signing and/or cashing the check. They may be signing away rights to additional compensation by doing so.
Here, according to court records, the Department of Labor launched an investigation into the labor practices of a marketing company after receiving a complaint alleging the firm was mis-classifying some workers as non-exempt and failing to pay them the overtime they were due.
The workers in question were titled “brand advocates,” who were given sales scripts and assignments of 20 stores weekly, with instructions to go to those locations and try to convince store managers and/or employees to push certain products. These workers were in frequent contact with supervisors and were required after each visit to fill out detailed reports.
Despite all this, the company classified the workers as “independent outside sales,” meaning they were exempt from overtime pay. The problem is the level of control the company had over the workers in any given day made it clear these workers were not “independent,” but rather employees.
In the midst of the investigation, the company agreed it would re-classify the workers in question and pay them missing back wages. Those employees at the center of the controversy each received a check. On those checks were disclaimers, indicating the checks represented full payment from the firm for wages earned, including overtime and minimum wage, up to the date of the check.
Some employees cashed those checks. Some did not.
Later, several of the employees sued the company, alleging under the Fair Labor Standards Act, they were entitled to additional payment. The judge granted them partial summary judgment on their non-exempt status, meaning they would not have to prove that fact in court. That meant the only thing that was to be decided was payment.
This is where the issue of those cashed checks came in. The employer moved for summary judgment against all plaintiffs who had cashed those back-wages checks. Defense argued plaintiffs waived their right to additional compensation under federal law. The federal district court agreed, and dismissed those pending cases.
The workers appealed. They claimed they weren’t blocked from pursing additional litigation because the company didn’t notify them that one of the consequences of cashing those checks from the settlement was that they’d be giving up future rights to sue.
The district court agreed, reversed in part and remanded. The court determined the release language on those checks was not sufficient to notify workers of the potential consequences of cashing those checks. There was nothing on the checks that indicated that by cashing it, the workers were forfeiting or waiving any future right to pursue additional legal action under FLSA.
Other courts, meanwhile, have ruled that waivers on settlement checks do result in revocation of the right to litigation, so it’s important for an experienced employment lawyer to carefully review any settlement offer before any paperwork is signed or checks cashed.
Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 949.375.4734.
Additional Resources:
Adams v. Action Link, LLC, March 20, 2015, U.S. Court of Appeals for the Eighth Circuit
More Blog Entries:
California Equal Pay Act Introduced by Female Democrats, April 6, 2015, Orange County Wage and Hour Lawyer Blog