David v. Atlantic Company

Where a bona fide dispute exists between an employer and his employee regarding a claim of the employee against the employer for alleged unpaid minimum wages and for overtime compensation claimed under the provisions of the Fair Labor Standards Act (29 U.S.C.A. §§ 201-219), said dispute involving the question of law whether the particular work of the employee comes within the scope of the act, and a question of fact regarding the number of overtime hours worked by the employee, the employer and the employee may in good faith compromise and settle their dispute, and both are bound thereby.

DECIDED JULY 9, 1943. B. H. David sued Atlantic Company for certain alleged unpaid minimum wages and for overtime compensation, plus an additional equal amount as liquidated damages, and for attorney's fees, under sections 6 and 7 of the Fair Labor Standards Act of 1938 (29 U.S.C.A., §§ 201-219). The petitioner alleged that he was an employee of the defendant when the said act became effective, and that he and the defendant were engaged in interstate commerce within the meaning and scope of the act. The defendant in its answer denied any liability, denied that the plaintiff as its employee had been engaged in interstate commerce within the meaning and scope of said act, and denied that the plaintiff had worked the number of overtime hours claimed by him. The defendant further alleged that subsequent to the time the alleged cause of action accrued, the parties executed a written contract (a copy thereof being attached to the answer as Exhibit A), that the contract had been fully performed, and that under it the defendant had paid to the plaintiff $100, and that the plaintiff had accepted that sum in full satisfaction and settlement of all the claims now sued on.

Exhibit A reads as follows: "State of Ga. County of Fulton. This agreement, entered into this the 5 day of Sept., 1941, between B. H. David, hereinafter referred to as the first party, and Atlantic Company, a corporation of Fulton County, Georgia, hereinafter referred to as the second party, witnesseth that the first and second parties hereto do covenant and agree the one with the other as follows: 1. The first party has heretofore been employed by the second party to work for it at Atlanta, in the State of Ga., under which employment the first party rendered services as Clerk. 2. The first party claims that while so employed by the second party, the second party was subject to and the first party was entitled to the benefits of the Fair Labor Standards Act adopted by Congress and which became effective on October 24th, 1938. 3. The first party claims that the second party failed at one time or another to pay to the first party the minimum wages provided for in Section 6 of said Fair Labor Standards Act. 4. The first party also claims that he worked not less than 2532 hours of over-time as defined by Section 7 of said Fair Labor Standards Act, and that the second party failed to pay to him the amount of over-time compensation as required by said Section 7 of said Act. 5. The second party disputes each and all of these contentions of the first party and especially does the second party deny that the first party worked the amount of over-time hours claimed by him, and the second party contends that the first party did not in any event work in excess of 800 over-time hours since October 24th, 1938, for which the second party could be liable to the first party under the Fair Labor Standards Act. Now, Therefore, the parties hereto expressly agree and covenant that they desire to compromise their differences in respect to the foregoing matters and desire to settle the same amicably and without litigation and to this end the first party has agreed to and does hereby agree to accept from the second party the sum of $100, which is paid by the second party and received by the first party as full satisfaction, settlement and compromise of each and every claim the first party has or may have had against the second party for wages, salary, compensation or liquidated damages claimed by the first party to be due to him by the second party under and by virtue of any provisions of any contract or agreement between the parties hereto. The first party acknowledges receipt of said sum and accepts the same as full settlement and satisfaction of all of his demands against the second party down to this date."

On October 19, 1942, the following stipulation was filed: "1. That the plaintiff was employed by the defendant on October 24, 1938, and was continuously so employed through August 2, 1941. 2. Plaintiff was employed by defendant in several different capacities during the period mentioned. Some of the work which plaintiff did was in connection with the production of goods for interstate commerce, but other work in which the plaintiff was engaged was in intrastate commerce and for a part of the time he was not engaged either in interstate commerce or the production of goods for interstate commerce. 3. That prior to September 5, 1941, plaintiff asserted and made demand on defendant for payment of the claim sued on in this case, and the defendant disputed the validity thereof and especially denied that the plaintiff had worked the number of over-time hours claimed by him. Neither the plaintiff nor defendant knew the exact number of hours which the plaintiff had worked and neither party knew, on September 5, 1941, how many hours of regular time or overtime the plaintiff had worked, nor did either party know the number of regular or overtime hours which the plaintiff had worked in interstate commerce or in the production of goods in interstate commerce. As used herein ``regular hours' means the maximum number of hours prescribed by Section 7 of the Fair Labor Standards Act of 1938, at which a person may be employed at the regular rate of pay, and by ``overtime hours' is meant all hours in excess of such hours, and for which Section 7 of said Fair Labor Standards Act requires pay at the rate of one and one-half times the regular rate. 4. On September 5, 1941, the plaintiff and defendant entered into an agreement to settle and compromise their differences, said agreement being in writing and a copy thereof being hereto attached, marked Exhibit ``A' and made a part of this stipulation. 5. The facts stated in said agreement set forth above are true. 6. The only questions to be passed on in this case are: (1) Is the settlement agreement hereinabove set forth in paragraph 4 valid, and does it preclude the plaintiff from maintaining the present action; (2) Is the claim for liquidated damages barred by the Statute of Limitations. 7. If question No. 1 is answered in the affirmative, question No. 2 need not be decided, but if question No. 1 is answered in the negative, question No. 2 should be answered, and if it is answered in the affirmative, the plaintiff will be entitled to recover $51.25, but if answered in the negative, he will be entitled to recover $102.50, and that a reasonable attorney's fee for plaintiff's attorney is $150."

The case was submitted to the judge, sitting without a jury, and he rendered a judgment in favor of the defendant and that judgment is assigned as error. It is stated in the briefs of both parties that the controlling question in this case is whether the settlement agreement between them is valid and whether it precludes the plaintiff from maintaining this action. Counsel for the plaintiff contends that the agreement is void in that it is a contract against the public policy of the State, and he cites, among others, the following cases: Fleming v. Warshawsky, 123 Fed. (2d) 622; Wilkinson v. Noland, 40 F. Supp. 1009; Travis v. Ray, 41 F. Supp. 6; U.S. v. Morley, 98 Fed. (2d) 781; Hutchinson v. Barry,44 F. Supp. 829; McNorrill v. Gibbs, 45 F. Supp. 363. Counsel states in his brief that the Supreme Court of the United States has not passed upon such a settlement agreement as was executed in the instant case, and that "while the decisions of the Federal District Courts and the Circuit Courts of Appeals herein cited may not be binding upon this court in their construction of a release under the Fair Labor Standards Act, the same are persuasive and should be given some consideration by this court." While in the above-cited cases certain broad language appears which, standing alone, apparently supports the plaintiff's contentions, when the language is construed in the light of the particular facts of the case in which it is used, it is obvious that it does not. The controlling difference between those cases and the instant one is that here the agreed statement of facts shows that a bona fide dispute existed between the parties as to whether the employee's work constituted interstate commerce within the meaning of the statute, and as to the actual number of overtime hours worked by the employee, while it did not appear in any of the above-cited cases that such a bona fide dispute between the parties existed.

We can not agree with the contention that the settlement contract in this case is void in that it is against the public policy of this State. "Compromises of doubtful rights are upheld by general policy, as tending to prevent litigation, in all enlightened systems of jurisprudence." Smith v. Smith,36 Ga. 184, 191 (91 Am. D. 761). "When fairly made, courts always favor the compromise of doubtful rights, and they are binding notwithstanding it may eventually turn out that the point of law was in favor of the party complaining." Collins v. Collins,165 Ga. 198 (4) (140 S.E. 501). "Moreover, in order to render valid the compromise of a claim, it is not essential that the matter should be really in doubt. It is sufficient if the parties consider it so far doubtful as to make it the subject of a compromise." City Electric Ry. Co. v. Floyd County, 115 Ga. 655,657 (42 S.E. 45). "The compromise of a contention as to property rights, the final outcome of which, if settled by litigation, the parties consider to be doubtful, furnishes a consideration sufficient to support the compromise contract."Belt v. Lazenby, 126 Ga. 767 (2) (56 S.E. 81). "Compromises of doubtful rights are upheld by public policy and by the decisions of this court. . . In order to render valid the compromise agreement, it is not essential that the matter should be really in doubt; but it is sufficient if the parties consider it so far doubtful as to make it the subject of compromise. . . But it is necessary, in order to furnish a consideration for such compromise agreement, that the contention be made in good faith and be honestly believed in. Dickerson v. Dickerson, 19 Ga. App. 269 (91 S.E. 346)." Preston v. Ham, 156 Ga. 223, 234 (119 S.E. 658). "A compromise or mutual accord and satisfaction is binding on both parties" Code, § 20-1205. And where the compromise contract is based upon a bona fide dispute on a doubtful question of either law or fact, there is a sufficient consideration to support the validity of the contract. Tyson v. Woodruff, 108 Ga. 368 (33 S.E. 981).

However, the plaintiff contends that disputes arising under the Fair Labor Standards Act constitute an exception to the ancient and general rule which permits and encourages parties to settle their controversies, and that the settlement contract in this case is against the public policy of this State. "In a judicial sense, public policy does not mean simply sound policy, or good policy, but it means the policy of a state established for the public weal either by law, by courts, or by general consent. The term has been said to mean the law of the state as found declared in its constitution, its statutory enactments, and its judicial records." 50 C. J. 858, § 62. The Fair Labor Standards Act contains no language outlawing a settlement contract between employer and employee, where the contract is based upon a bona fide dispute between them as to the facts of the employee's claim and as to the law applicable thereto; and we have found no decision of any court holding that such a contract is invalid. We are satisfied that the contract under consideration is not against the public policy of this state. It is well settled that the charging of usury is contrary to the public policy of Georgia, it being prohibited by statute and made, in some instances, a penal offense, and yet our Supreme Court in Parker v. Fulton Loan c. Asso., 46 Ga. 166 (4) held: "If a contract claimed by one of the parties to be usurious and by the other not, is compromised and settled between them, the question of dispute as to the usury, forming a distinct item of settlement, this is an accord and satisfaction even as to the usury, and the money paid can not be recovered back, but a mere compromise and settlement of the debt without a distinct reference to the dispute as to the illegality of the contract is not a bar to a suit to recover back the usury paid."

The cases cited by counsel for the plaintiff announce principles of law which, under the particular facts of those cases, are sound, but none of them supports the contention that the Fair Labor Standards Act prohibits the settlement of a bonafide dispute between an employer and his employee, where the dispute involves a question of law or a question of fact.

The judge, without a jury, did not err in rendering a judgment for the defendant.

Judgment affirmed. MacIntyre and Gardner, JJ., concur.