What happens when a company settles an overtime lawsuit but refuses to pay?

Failing to pay a wage and hour case is a breach of contract.

An interesting development took place in Moctezuma v. Islas, No. 4:18-CV-00342-ALM-CAN, 2019 U.S. Dist. LEXIS 226492 (E.D. Tex. Dec. 28, 2019) Magistrate Christine Nowak out of United States District Court for the Eastern District of Texas, Sherman Division was faced with an employer that settled a lawsuit under the  Fair Labor Standards Act (“FLSA“) and the Texas Minimum Wage Act (“TMWA”) but refused to pay. The plaintiffs filed a motion with the court asking for enforcement of the settlement. Normally the case is over once the case has been settled. However, the employer failed to follow through on the settlement. None of the payments for back wages on an installment plan were made. The Plaintiffs asked the court for help. Magistrate Nowak, held that the court has legal authority to enforce a settlement in this wage and hour case. Under both federal law and Texas law, a settlement agreement is generally an enforceable contract.

Enforcing a wage and hour settlement

Under federal law a binding settlement agreement exists where there is a expression of “mutual assent”. This is usually in the form of an offer and an acceptance. The court held that “Where a party has knowingly and voluntarily agreed to settle his claims and no change of circumstances warrants repudiation of the agreement, the courts will enforce the settlement agreement.” 

Attorney’s fees to be awarded in enforcing a settlement

Attorney’s Fees

In addition to asking the court to enforce the Settlement Agreement the workers argue that they are entitled to attorney’s fees under Texas statute.

Chapter 38 of the Texas Civil Practice and Remedies Code [Dkt. 69 at 3]. Under the Texas law, “[a] person may recover reasonable attorney’s fees from an individual or corporate, in addition to the amount of a valid claim and costs, if the claim is for . . . an oral or written contract.” Tex. Civ. Prac. & Rem. Code § 38.001(8).

The court held that the settlement should be enforced but denied the legal fees sought by the workers. The basis for the denial of fees is that the workers did not met their burden as to the amount and/or any calculation of reasonable attorney’s fees. This would have been an easy fix had their lawyer filed a fee petition with supporting records and declarations.

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