Third Circuit: FLSA Releases Allowed in Rule 23 Opt-Out Settlements

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October 16, 2025

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Quick Look

  • The Third Circuit ruled that unasserted FLSA claims can be released through a Rule 23 opt-out class settlement, even if employees did not affirmatively opt in.
  • This decision gives employers in the Third Circuit greater flexibility in resolving wage and hour disputes, but settlements must still meet fairness standards under Rule 23.

Discussion

In a significant decision for wage and hour compliance, in Lundeen v. 10 West Ferry Street Operations LLC d/b/a Logan Inn, the Third Circuit Court of Appeals ruled that employers may obtain releases of unasserted Fair Labor Standards Act (FLSA) claims through a Rule 23(b)(3) opt-out class settlement. This ruling clarifies that while the FLSA requires employees to affirmatively opt in to litigate claims, it does not prohibit those same claims from being waived through a class action settlement process, provided proper notice and opt-out procedures are followed. The decision resolves a previously unsettled legal question and provides employers within the Third Circuit greater flexibility in structuring wage and hour settlements.

 

For employers, this ruling expands the potential scope of releases in wage and hour litigation, allowing for broader resolution of claims without requiring every employee to opt in individually. However, the court emphasized that such settlements must still meet the fairness standards under Rule 23(e), meaning employers must ensure that notice procedures are robust and that the settlement terms are reasonable and adequate. As a result, while the decision offers a strategic advantage in resolving disputes, employers must continue to work closely with legal counsel to ensure compliance with procedural safeguards and court expectations.

 

Action Items

  1. Consult with legal counsel to assess how this ruling may impact current or future FLSA litigation strategies, settlements and releases.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase