Court of Appeal Upholds Release of Overtime Claims

Labor Code section 206.5 invalidates releases of wage claims. But when there is a bona fide dispute over whether wages are due, releases are valid. That's what the court of appeal held in Chindarah v. Pick Up Stix.

This was an overtime class action that went to mediation but did not settle. The employer did an "end run" and settled out about 200 employees with individual releases. Employees challenged the validity of the releases under Labor Code section 206.5. But the court of appeal, agreeing with the trial court, held:

The releases here settled a dispute over whether Stix had violated wage and hour laws in the past; they did not purport to exonerate it from future violations. Neither did the releases condition the payment of wages concededly due on their executions. The trial court correctly found the releases barred the Chindarah plaintiffs from proceeding with the lawsuit against Stix.

If this case is not taken up by the Supreme Court for review, it will clarify a longstanding unresolved issue in California law regarding when settlements of wage claims will be enforced.
Employers will be able to settle claims involving uncertain liability, such as for certain meal period claims, or misclassification issues when the factual issues are in dispute.

Read the opinion here.