3 Key Takeaways
- Under the Fair Labor Standards Act (FLSA), courts must approve most settlements — but a landmark Second Circuit ruling confirmed that judges cannot rewrite the terms of a deal the parties already agreed to.
- There is no legal cap on attorney's fees in FLSA cases. Courts evaluate reasonableness using the lodestar method, and blanket percentage caps imposed by judges are not permitted.
- Broad settlement releases that try to waive claims beyond what was actually negotiated can be rejected — courts look closely at whether the settlement reflects a genuine dispute, not just an employer pressuring an employee to sign away their rights.
What the court has to say; post settlement
When a wage and hour case settles, most people assume the hard part is over. Both sides agreed, the client signed off, and the numbers are set. But under the FLSA, a judge still has to approve the deal — and that approval process raises real questions about how much say a court should have over terms the parties already agreed to.
Why FLSA settlements require court approval
The FLSA is a protective statute. Congress wrote it to safeguard workers from being pressured into waiving their wage rights, and the courts have taken that seriously. The foundational rule, established in Lynn's Food Stores v. United States (1982), is that FLSA settlements must either be approved by a court or supervised by the Department of Labor (DOL). Private settlements that bypass both of those routes generally aren't enforceable.
The Second Circuit, which covers New York, reinforced this in Cheeks v. Freeport Pancake House (2015), holding that parties can't use procedural shortcuts to avoid judicial review. Even a voluntary dismissal can't be used to sidestep the approval requirement if it's really just a private settlement in disguise.
There is one notable exception: if a defendant makes a Rule 68 offer of judgment (Rule 68 normally penalizes a plaintiff who rejects a settlement offer and then recovers less than that offered at trial, by shifting post-offer costs onto the plaintiff) and the plaintiff accepts, the Second Circuit has held that formal court approval isn't required — distinguishing that scenario from the stipulated dismissal situation Cheeks addressed.
What judges can and can't do
Here's where it gets important. In Fisher v. SD Protection Inc. (2020), the Second Circuit drew a clear line. A district court judge had rejected a settlement and restructured the payout, cutting the attorney's fees from $23,000 to $8,250 and increasing the plaintiff's share accordingly. The Second Circuit reversed, holding that while judges can reject a settlement, they cannot rewrite it.
That distinction matters in practice. A court that disagrees with how the money is divided can say no and send the parties back to the negotiating table. But it can't substitute its own preferred numbers for those the parties agreed to. As the Second Circuit confirmed, there is also no explicit legal cap on attorney's fees in FLSA cases, judges cannot impose a percentage ceiling as a matter of routine practice.
How attorney's fees are evaluated
When attorney's fees are included in a settlement, courts evaluate their reasonableness before approving the deal. The standard method is the lodestar: a reasonable hourly rate for the market, multiplied by the reasonable number of hours spent on the case. That calculation creates a presumptively reasonable fee.
Even when a fee is structured as a percentage of the total recovery, courts will typically run a lodestar cross-check to validate the result. Proper documentation supporting the hours and rates claimed is required — vague or unsupported fee requests won't hold up.
One thing the FLSA does not cover: expert fees. The statute's fee-shifting provision doesn't authorize recovery of expert costs beyond standard witness and travel allowances.
Broad releases and what courts reject
Judicial scrutiny doesn't stop at the fee calculation. Courts also look carefully at the scope of any release included in a settlement. A broad general release that purports to waive all possible claims, including FLSA claims that were never discussed or negotiated, can be rejected as inconsistent with the statute's protective purpose.
For a settlement to be approved, the record needs to show that the specific FLSA claim was actually at the center of the negotiation. If there's no evidence of a genuine dispute over wages, hours, or overtime, the settlement doesn't reflect the kind of compromise the law is designed to protect, and a judge can and will say no.
What this means for workers
If you're an employee who's owed unpaid wages or overtime, these rules exist to protect you. The approval process is designed to make sure you're not being pressured into settling for less than you're owed or signing away rights you didn't even know you had.
If your employer is asking you to settle a wage claim, or if you believe you've been underpaid, reach out to our team to understand what a fair resolution actually looks like.









