Va. court refuses to seal employment settlement agreement

A federal trial court judge ruled last month that a settlement agreement between the restaurant chain Ruby Tuesday and several employees who accused it of violating federal employment law cannot remain sealed, even though both parties wanted the agreement to remain private.

In Miles v. Ruby Tuesday, Judge T.S. Ellis III of the U.S. District Court in Alexandria, Va., said it was crucial that the settlement agreement, which required judicial approval, be available for the public to review.

“If a court’s review of a settlement is sealed, Congress and the public lose the ability to assess whether the settlement is consistent with the statute’s terms and purposes,” he said. “Without the right of access to court decisions approving [settlements under federal labor law], the Act could be undermined without the knowledge of those in the best position to demand or enact corrective policies — namely the public and legislators.”

In the case, a group of seven employees at an Alexandria Ruby Tuesday sued the restaurant chain alleging that they were regularly denied their proper regular and overtime wages in violation of the Fair Labor Standards Act. The employees alleged that the restaurant managers did not allow them to clock in for work and receive pay until diners arrived at the restaurant. The employees also alleged that the managers required them to work for several hours beyond the end of each shift, but retroactively adjusted the time clock back to their scheduled leave time.

The parties later reached a settlement agreement. Because settlements under the Fair Labor Standards Act need to be judicially approved, the parties jointly moved for approval of the settlement and simultaneously requested that the terms of the settlement stay under seal.

Despite the urging of both parties that the secrecy of the deal was a key aspect of the agreement, the court denied the request to seal it and ordered the parties to indicate whether they wished to continue with the settlement — knowing its terms would be available to the public — or proceed to trial.

“Few principles have as long a pedigree and are as well-settled as the public’s right of access to court proceedings and judicial documents,” Ellis said. “With strong roots in the common law and the First Amendment, this principle is central to the legitimacy and independence of the judiciary. . . . While this right is not absolute, courts have uniformly emphasized that sealing should be the relatively rare exception, not the common practice.”

Ellis said the parties met procedural requirements to seal the document, including requiring the court to provide public notice of the request to seal and allow interested parties a reasonable opportunity to object. No media representatives or members of the public showed up at a hearing the court held to discuss the matter.

But Ellis said that, even though those procedural requirements were met, the parties did not overcome the common law right of access to judicial records, which can only be done if countervailing interests heavily outweigh the public’s interest in access.

The parties argued that the public has no meaningful interests in the settlement and that denying the sealing may hinder settlement because confidentiality is a material term in their settlement, but Ellis was not convinced.

The apparent lack of public interest in the case was not a sufficient grounds for sealing the settlement because "the mere fact of judicial transparency, by itself, enhances judicial accountability," Ellis said. Moreover, allowing public access to the settlement terms could also assist future efforts to study the Fair Labor Standards Act enforcement efforts at a more aggregate level, Ellis added.

The parties' confidentiality concerns did not trump the public's right of access either, Ellis said.

“To seal a settlement because the parties deem privacy material to their agreement could easily convert the exception to the commonplace, as all settlements would then be sealed if any party insisted on it as a condition of settlement,” he said. "[G]iven the benefits of transparency in [Fair Labor Standards Act] enforcement, courts should not abandon transparency simply because the parties are willing to do so."