The U.S. Court of Appeals for the Fifth Circuit’s recent decision in Stuntz v. Lion Elastomers, LLC, Case No. 19-40336 (Sept. 23, 2020), offers some reassurance to employers that wage and hour issues can be properly (and finally) resolved in grievance settlements.

The employer in Stuntz permitted its production employees to clock in as early as 30 minutes before the scheduled start of the shift, which the employer referred to as the “early relief period.” While not mandatory, employees were permitted to use the early relief period to shower, put on safety equipment, discuss plant operations and receive instructions from supervisors. Given its voluntary nature, the employer did not consider this time to be compensable.

Perhaps not surprisingly, the union that represented the employer’s production employees felt otherwise. It filed a grievance claiming that the employees were owed compensation for the early relief period under the federal Fair Labor Standards Act (FLSA). The employer and the union negotiated a settlement of the grievance, which included payments to employees based on their actual punch times over the preceding three years. The employer furthermore agreed to pay twice the amount owed as a penalty.

Subsequently, the plaintiff in Stuntz filed a proposed FLSA collective action against the employer (along with various additional claims), alleging that the employer had not paid out the appropriate amounts to employees under the grievance settlement with the union. The employer moved for summary judgment based on its argument that the plaintiff’s FLSA claim was “preempted” by federal labor law. The district court agreed and granted the defendant’s motion.

The appellate court, in contrast, approached the issue as one involving the question of the union’s capacity to resolve and release FLSA claims on the employees’ behalf. The court held that, where there is a genuine “dispute as to the amount of hours worked or compensation due” under the FLSA and the union reaches a “bona fide settlement” of the issue with the employer, employees are precluded from pursuing their own FLSA claims individually. Quoting precedent, the court observed that “FLSA rights [are] not waived [in such circumstances], but instead, validated through a settlement of a bona fide dispute.” Rather than proceeding under the FLSA, the court held that the plaintiffs should pursue a grievance over the employer’s alleged noncompliance with the grievance settlement.

Bottom line: A well-drafted grievance settlement can prove invaluable when it comes to wage and hour claims.