Opinion ID: 1133718
Heading Depth: 3
Heading Rank: 2

Heading: Private Settlement of AWHA Claims

Text: The parties dispute whether an employer and employee can privately settle an AWHA claim. Their arguments focus on the effect of McKeown v. Kinney Shoe Corp . [16] That opinion concerned a class action for alleged AWHA violations. Kinney offered monetary settlements to the potential class members in exchange for waivers of any rights [the employees] might have against Kinney ... for all of the claims which were or could have been asserted in the class action lawsuit [including] ... unpaid overtime, bonuses and certain deductions from paychecks. [17] We held that permitting private settlement of liquidated damages claims under the AWHA is contrary to the strong policy behind the AWHA and its liquidated damages provisions, and declared void the settlements purporting to compromise AWHA claims for unpaid overtime. [18] We also stated, [o]f course, Kinney may offset damages ultimately awarded to particular employees by any amount that it has already paid to those employees in its attempt to settle their claims. [19] Alyeska argues that McKeown permits Alyeska to set off the separation payment against any recovery Shook could obtain. Alyeska reasons that, because the separation payment greatly exceeds Shook's maximum possible recovery, including interest and liquidated damages, it completely extinguishes his claim. Shook responds that the offset in McKeown was for the money the settling employees had received for the very claims that were in dispute in that lawsuit. He argues that McKeown is distinguishable from his case because there is no indication that Alyeska or the separated employees considered potential claims based on AWHA violations when they entered into the severance agreements. The superior court distinguished McKeown from Shook's case for the reasons Shook suggested. The court found that Alyeska made its severance payment for a number of reasons, including maintaining good will with [Alyeska's] employees generally. The superior court therefore concluded that Alyeska was not clearly entitled to a setoff. When Shook and Alyeska signed the agreement, the AWHA contained no provision that would have expressly rendered unenforceable a settlement agreement not approved by the Department of Labor or the court. The AWHA now has such a provision, AS 23.10.110(j). It applies to written settlements entered into after August 21, 1995. Shook and Alyeska entered into their agreement on April 18, 1995. Alaska Statute 23.10.110(j) therefore does not apply to the Shook-Alyeska agreement. [20] Our resolution of the public policy question turns on the rationale that controlled McKeown. McKeown contemplated a settlement in which the employee received less than the full amount due. We there explained: If the liquidated damages available under the AWHA were meant mainly to compensate the wronged employee, one might reasonably argue that compromise or settlement by the wronged employee might be appropriate. Because the liquidated damages are not compensatory, an employee's capacity to compromise or settle for a lesser amount should be extremely restricted. [21] By contrast, the case at bar did not arise out of a settlement for less than the amount prescribed by the AWHA. Shook received about twice his maximum possible AWHA recovery, including compensatory and liquidated damages and interest. Assuming Shook also was entitled to recover costs and reasonable attorney's fees, [22] we can safely say that the amount he received substantially exceeded his total potential AWHA recovery. Although Shook suggests that a factual issue remains regarding the value of his AWHA claim, he does not explain what the issue is or challenge Alyeska's calculations. He was not asked to accept, and did not accept, less than the full amount he might have recovered under the AWHA. Assuming that the Fair Labor Standards Act (FLSA) is a model, [23] we have not found any case that declined to enforce a settlement for an amount that substantially exceeded the full amount recoverable under the FLSA. We hold that the public policy reflected in the AWHA and McKeown is not offended when an employee unquestionably receives the full amount the AWHA requires. We also note that, at oral argument before us, Shook's attorney forthrightly conceded that Shook's wage and hour claim was his only employment-related claim. Shook does not argue that when his employment terminated Alyeska had any duty to pay him anything in addition to all amounts due under the AWHA. Because Shook had no other potential employment-related claims against Alyeska, we must conclude that the entire severance payment can be attributed to his wage and hour claim and, thus, that it fully satisfies the AWHA's damages requirements. We consequently agree with Alyeska that the resulting setoff extinguishes Shook's AWHA claim.