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Friday, August 9, 2013

Private FLSA Settlement a Train Wreck




Candace Nall worked for Mal-Motels, which is owned by Mohammad Malik as a front desk clerk and night auditor. For the first four months Nall used a time clock to keep track of the hours but later Malik told her to stop using the time clock and said that he would pay her a “salary” of $8.75 per hour. Nall then started verbally reporting her hours to Malik. There were no accurate written records of the hours that Nall actually worked.

Nall claimed to Malik that she “periodically” worked more than forty hours per week but was not paid one and one-half times her regular hourly wage for that overtime work, which was in violation of the Fair Labor Standards Act. She figured that she was owed at least $3,780 in unpaid overtime.  Any employer who violates the FLSA is liable to the employee or employees affected in the amount of their unpaid overtime compensation and in an additional equal amount as liquidated damages. Nall pointed to the guest registry to support her overtime claim.

Nall then quit her job because she was not being paid for her overtime, hired an attorney, who filed a lawsuit on her behalf against Malik individually and Mal-Motels, claiming a violation of the FLSA. Malik, without the assistance of an attorney, filed an answer for himself and for Mal-Motels.

In May 2010, still acting without an attorney, Malik called Nall about settling her lawsuit. The two of them agreed to meet at the motel. Malik told Nall not to bring her attorney, and she didn’t. When the two of them met and talked, Malik told Nall that she was “ruining his business” and that it would be better for him if she would settle the case. He presented her with two documents to sign and offered her a check for one thousand dollars and another one or two thousand dollars in cash if she agreed to sign them and dismiss her lawsuit. Nall felt that Malik was pressuring her, but she agreed to sign the two documents because she trusted him and she “was homeless at the time and needed money.”

What Nall had signed was a voluntary dismissal with prejudice of her complaint and a letter to her attorney informing him that the case had been settled. There was no written settlement agreement.  The 11th Circuit Court of Appeals in Hall v. Mal-Motels on July 29 invalided all that Malik had tried to do to end his FLSA nightmare. The Court reaffirmed that FLSA settlements must be supervised by a court or the Department of Labor even in cases where the employee no longer works for the employer. 

Common Sense Counsel: This case is like doing your own plumbing, when thing go wrong it can ruin your entire home or business.   Wage and Hour law is the same. Innovative pay plans, poor record keeping, working off the clock, misclassification can all be costly and are completely avoidable. With the FLSA, self help to resolve a claim is simply not a legal option.

-----------------------Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog www.alabamaatwork.com

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