Generally, courts recognize only two ways for an individual to release or settle a claim for unpaid wages under the Fair Labor Standards Act: 1) a DOL-supervised settlement under 29 U.S.C. § 216(c), or 2) a court-approved stipulation of settlement. Failing to use of these two options for the approval of a waiver will likely result in the invalidity of the waiver an the employee being able to sue for any unpaid balance.
If you are engaged in active litigation with an employee, the latter option is easy to achieve. You simply submit the settlement agreement to the assigned judge for his or her approval. Similarly, a DOL investigation will culminate in some combination of both options.
What are your options, though, if you are not in on-going litigation or already part of a DOL investigation? As I see it, you have 2 choices:
If you intend to pay less than the full amount owed, you can ask the employee to file a lawsuit for the sole purpose of judicial approval of the settlement; or
If you intend to pay the full amount owed, you can pay the employee in full for any wages owed and forego the release and waiver. This leaves a slight risk that the employee(s) could still bring a suit for unpaid liquidated damages (the FLSA provides for double back pay as liquidated damages for willful violations). Your voluntary mitigation, however, will go a long way to deterring any future lawsuits.
What shouldn’t you do? Contact the DOL for its supervision of the settlement. That is a radar that you do not want to be on. The supervised settlement will beget a full-blown wage and hour audit, which will beget an OSHA on-site, which will beget an OFCCP inquiry, which will beget an ERISA audit…. You get the picture. With the Obama administration pumping more funds into the DOL and promising increased enforcement, there is no need to throw yourself under its bus.