Tolling Agreement FLSA: What Employers Need to Know
The Fair Labor Standards Act (FLSA) is a federal law that sets minimum wage, overtime pay, recordkeeping, and child labor standards for employers. It protects employees by ensuring that they receive fair compensation for their work. However, FLSA lawsuits have increased significantly in recent years, leading employers to explore options for avoiding or mitigating legal fees and damages. One such option is a tolling agreement.
What is a Tolling Agreement?
A tolling agreement is a legal contract between two parties that extends the statute of limitations for a particular claim. In the context of FLSA, it is an agreement between an employer and employee that temporarily suspends the running of the statute of limitations on FLSA claims. The parties agree to extend the time frame for filing a lawsuit, giving them more time to reach a resolution outside of court.
Benefits of a Tolling Agreement
Employers may choose to enter into a tolling agreement with an employee for several reasons. The most significant benefit is that it provides both parties with more time to negotiate a settlement and avoid costly litigation. Employers can use the additional time to conduct an internal investigation into the employee`s claims, gather evidence, and prepare a defense, while employees have the opportunity to negotiate a fair settlement without the added pressure of a looming legal deadline.
Additionally, tolling agreements can help employers maintain confidentiality. By negotiating a settlement outside of court, they can avoid public exposure of any wrongdoing, which can be particularly damaging to a company`s reputation.
While there are many benefits to implementing a tolling agreement, there are also potential risks to consider. One such risk is that the agreement may not be enforceable. Courts have been known to invalidate tolling agreements that are overly broad or unfair to employees. Employers must ensure that the agreement adheres to the state and federal laws governing contracts and that the terms are reasonable.
Another potential risk is that the agreement may not cover all claims. Employees may still have the option to file claims under other federal or state laws, even if the FLSA claims are tolled. Employers must carefully evaluate all potential claims and ensure that the tolling agreement covers all possibilities.
A tolling agreement can be an effective tool for employers to avoid the time and expense of litigation while also providing a fair resolution for employees. However, it is crucial for employers to approach tolling agreements with caution, ensuring that they are enforceable and comprehensive. Employers must also be prepared to negotiate in good faith and address all claims to avoid future legal disputes. By understanding the benefits and risks of a tolling agreement, employers can make informed decisions about their legal strategy.