Can Just Cashing a Paycheck Waive an Employee’s FLSA Overtime Claim?

By Eric B. Meyer

I’ve gotta hand it to the company in this recent federal appellate court opinion in Beaufort v. ActionLink, LLC. The company almost — soooooo close — avoided several claims for unpaid overtime.

Let me set the stage for you. Back in 2011, the U.S. Department of Labor began investigating a complaint that a marketing company had misclassified some employees and failed to pay overtime.

A primer on back pay waivers

During the DOL investigation, the company sent the employees checks for back wages. Each check bore the following note in fine print:

“Full payment from Actinlink [sic] or [sic] wages earned, including minimum wage and overtime, up to the date of the check.”

A bunch of employees deposited these checks. So, the marketing company claimed that, voila, those employees had agreed to waive their right to any additional back pay.

The Fair Labor Standards Act requires employers to pay minimum wage to all employees and overtime premiums to non-exempt employees. There are two ways for employees, like the ones in this case, to waive their rights to unpaid overtime under the FLSA:

  1. Before they sue, they agree to accept full payment of a settlement offered by their employer, they receive full payment of that settlement, and the settlement was supervised by the U.S. Secretary of Labor.
  2. After commencing litigation, the parties agree on a settlement amount and the district court enters a stipulated judgment.

A note on a paycheck is NOT a waiver

So, let’s see what we have here: While the Department of Labor was investigating, the marketing company cut checks noting “full payment,” and many employees deposited them. But, the St. Louis-based Eighth Circuit Court of Appeals held that these facts were not enough to support an FLSA waiver:

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Simply tendering a check and having the employee cash that check does not constitute an “agreement” to waive claims; an agreement must exist independently of payment. Indeed, an employee may waive his rights to sue even if he does not cash a settlement check, provided that he signs a waiver of any legal claims and receives a valid check from the employer….The DOL investigated ActionLink and worked with ActionLink to determine the appropriate amount of back wages due to a number of brand advocates. But when ActionLink printed and distributed the checks, the DOL investigator was on vacation.”

Plus, the appellate court concluded that fine-print note on the check did not “adequately notify employees of the rights they are waiving or even suggest that employees are waiving any statutory claim.”

Takeaway for employers

Wage and hour claims can quickly morph into a big hot mess. And, as you can see, they can be tough to resolve, too.

S0, if it’s been a while since you’ve audited your pay practices, consider moving that up on your HR checklist.

This was originally published on Eric B. Meyer’s blog, The Employer Handbook.

You know that scientist in the action movie who has all the right answers if only the government would just pay attention? Eric B. Meyer, Esq. gets companies HR-compliant before the action sequence. Serving clients nationwide, Eric is a Partner at FisherBroyles, LLP, which is the largest full-service, cloud-based law firm in the world, with approximately 210 attorneys in 21 offices nationwide. Eric is also a volunteer EEOC mediator, a paid private mediator, and publisher of The Employer Handbook (www.TheEmployerHandbook.com), which is pretty much the best employment law blog ever. That, and he's been quoted in the British tabloids. #Bucketlist.

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5 Comments on “Can Just Cashing a Paycheck Waive an Employee’s FLSA Overtime Claim?

  1. Just another outfit trying to screw their workers lol. Government penalties I feel are to weak in these cases. Each count should be at least a $100,000 fine, progressive with the size of the company, and the ability to go after the boards personal assets to pay the fines. I had my own company. I know what a headache payroll can be. I paid my workers by the book. Was it costlier at times? Yes it was. Did it sometimes cut into my profits? YES IT DID. DID I HAVE ANY LEGAL PROBLEMS? NO I DID NOT.

  2. Awww man, if this had worked I was going to pay my speeding tickets with a 5 dollar check with a note stating “depositing this check constitutes an agreement that full payment has been accepted for the fine.”

    There goes that plan…

  3. Cashing a check that is missing mandatory overtime in no way can relieve that employer from the legal obligation of paying that overtime. That would be the
    same as me raping a woman then handing her a hundred dollar bill….if she takes
    the money from my hand I can then claim it wasn’t rape…..but a consensual act
    for money…..prostitution. Neither action would be legal.

  4. Special endorsements on checks do matter, but in this case the management, separate from the company, should be nailed with a penalty.

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