Adams v. By Design L.L.C.

Background

Claudia Adams asserted claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour statute, and other statutes, including Title VII of the Civil Rights Act of 1964, against By Design LLC, Jay Lee, and Russel Kemp. The parties reached a settlement on or about January 27, 2022. Because private parties may not settle FLSA claims without approval from the court or the Department of Labor, the parties submitted their agreement for court approval.

On June 3, 2022, the court rejected an earlier settlement because it included a provision denying Adams the ability to work for the defendants in the future. On June 24, 2022, the parties submitted a revised settlement and a joint letter asking for approval. They stated that they had removed the earlier no-rehire provision.

Reasons for Rejection

The revised settlement stated that Adams’s employment had ended before the lawsuit began and required her to refrain from communicating with or contacting any of the “Releasees.” The agreement defined that term broadly to include the defendants and numerous related companies, individuals, agents, employees, professionals, family members, successors, and others.

The court concluded that the no-contact provision effectively barred Adams from seeking future employment from a very broad group of people. It could also prevent her from requesting a post-employment reference letter. The court found that this restriction conflicted with the FLSA’s remedial purpose, and noted that Adams had provided no explanation or legal authority justifying the provision.

The settlement also contained a broad non-disparagement clause barring Adams from disparaging any of the Releasees. Its only stated exception allowed truthful testimony in response to a lawfully issued summons or subpoena. The court found that this exception was too narrow because an FLSA plaintiff must be able to speak truthfully about her experiences, claims, and the resolution of her lawsuit.

Disposition

The court rejected the settlement. Within 28 days, the parties were ordered to file a new settlement agreement that cures the identified problems, together with a letter motion explaining why the new agreement is proper, or to indicate that they wish to proceed with litigating the action. The court also encouraged the parties to review the agreement’s other terms for consistency with law in the district. The opinion addressed whether the proposed settlement could be approved; it did not decide the underlying claims.