District court invalidates releases signed by employees discouraged from joining FLSA collective

By Ronald Miller, J.D.

Releases signed by mortuary drivers after the filing of a collective action alleging that they were misclassified as independent contractors were invalided by a federal district court in California. During the opt-in period, an employer began contacting putative class members and offered to settle their claims outside the litigation. Finding that the employer engaged in ex parte communications that discouraged drivers from participating in the lawsuit, and provided drivers with a misleading and inaccurate release, the court concluded that the releases signed by the employees were invalid (Johnson v. Serenity Transportation, Inc., September 25, 2017, Corley, J.).

Mortuary drivers brought an FLSA collective action alleging that they were misclassified as to independent contractors and denied benefits of the FLSA and California’s wage-and-hour-laws. On March 16, 2016, the drivers filed a motion for conditional certification of their claims. Currently, 28 drivers have joined in the collective action, including two named plaintiffs. About 30 days into the collective action opt-in period, the employer began contacting putative class members in an attempt to secure their exclusion from this litigation. Among other things, the employer sent drivers a letter concerning the lawsuit, and a “Settlement and Release Agreement.”

Settlement offer and release. The letter stated that “a settlement offer has been structured which is intended to provide you with compensation in return for complete release of all potential claims related to this lawsuit.” It asserted that the employer has complied with all state and federal wage and hour laws, and informed the driver that a copy of the amended complaint could be obtained, and referenced the conditional certification notice that the drivers should have received. The letter described litigation as an uncertain process for all those involved, and explained that because of the “time, expense, and uncertainties of litigation,” the employer had “decided to offer monetary compensation to you to resolve these potential issues with you.”

The release accompanying the letter stated that the payment is for “any and all claims that Driver has, had or could have had arising out of the Ongoing Litigation or in any way related thereto.” Moreover, it provided that the driver agreed to “Opt-Out of the Ongoing Litigation and not participate in future.”

Discouragement from participating in lawsuit. Additionally, the drivers alleged that the employer held a meeting in March 2016 in which it discouraged them from participating in the lawsuit. Specifically, the employer warned the drivers that if they participated in the lawsuit, it would have to take them off of rotation and terminate their contract because participation in the lawsuit would be a conflict of interest. Other employees reported that the employer often spoke about the lawsuit, and discouraged employees from participating in the litigation. The employer commented that anyone who joined the lawsuit would no longer work at the company because of a conflict of interest. Thereafter, the employer brought up the release almost every time he encountered a certain employee. He further told the employee that if he did not sign the release he was not going to have a good work environment.

The employer’s COO approached a former employee at his new workplace, after he had already left the company. The former employee was presented with the release and a $100 check and informed that the employer wanted to pay him money for “unpaid hours for meetings.”

Every driver who was working for the employer during the opt-in period signed the release and did not opt in to the lawsuit. The executed releases reflect varying amounts of payment as compensation. By contrast, 51 percent of former drivers opted into the lawsuit.

Releases invalid. Now pending before the court was a motion to invalidate releases signed by the drivers. Here, the court found that the employer engaged in ex parte communications that discouraged drivers from participating in the lawsuit, and provided drivers with a misleading and inaccurate release. First, the court credited the employees’ accounts that the employer held a drivers’ meeting in which they were told that anyone who joined the lawsuit would have a conflict of interest, and could not work for the employer. Moreover, those accounts were consistent with the fact that not a single current driver opted in to the lawsuit, while 51 percent of former drivers did so.

Further, a text message to an employee supported a finding that the employer discouraged drivers from participating in the lawsuit. Specifically, after the employee left the employer’s employ and joined the lawsuit, the employer texted that he had “screwed him” again. Additionally, another employee’s testimony that the employer hounded him for weeks about signing the release supported a finding that the employer engaged in a campaign to discourage drivers from participating in the lawsuit. Moreover, the undisputed fact that the employer sent its COO to a former employee’s new job to get him to sign a release was further evidence that the employer actively discouraged drivers from joining this action. Consequently, because the court found that the employer actively discouraged current drivers from participating in this lawsuit, their releases were invalidated and a curative notice issued.

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