February 11, 2026|Franchise Frontlines
February 11, 2026 | U.S. Court of Appeals for the Eleventh Circuit | Published Opinion
Executive Summary
In a published decision, the Eleventh Circuit clarified the reach of its seminal opinion in Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982), holding that while an unapproved settlement cannot bar Fair Labor Standards Act (“FLSA”) claims, it may still be enforceable as to non-FLSA claims under state contract law. In O’Neal v. American Shaman Franchise Systems, Inc., the court affirmed dismissal of a franchisee’s state-law fraudulent transfer claims based on a broad mutual release contained in a settlement agreement that had not been approved by the Department of Labor or a district court. The court further held that the franchisor did not breach the agreement’s confidentiality clause when it disclosed the settlement to a court in order to enforce it. The decision provides important guidance for franchisors resolving mixed FLSA and contract disputes in a single settlement agreement.
Relevant Background
Thomas O’Neal, a franchisee of American Shaman CBD, filed suit in the Middle District of Florida asserting breach of contract, unjust enrichment, violations of Florida statutes, and multiple FLSA wage claims. Approximately one year into the litigation, the parties entered into a settlement agreement under which O’Neal received $50,000 in exchange for a mutual release covering “any and all” claims. The agreement was not submitted to the Department of Labor and was not approved by the district court.
The parties filed a stipulated dismissal with prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). Several months later, O’Neal initiated supplemental proceedings alleging fraudulent transfer and other state-law claims. American Shaman moved for judgment on the pleadings, arguing that the mutual release barred those claims. The district court agreed and dismissed the supplemental complaint. The court later granted summary judgment in favor of American Shaman on its counterclaim for breach of the settlement agreement.
O’Neal appealed.
Decision
The Eleventh Circuit began by reaffirming its longstanding rule under Lynn’s Food that “there are only two ways in which back wage claims arising under the FLSA can be settled or compromised”: supervision by the Secretary of Labor under 29 U.S.C. § 216(c), or court approval after scrutiny for fairness. The court reiterated that Congress made the FLSA’s provisions “mandatory” in light of the “often great inequalities in bargaining power” between employers and employees.
It was undisputed that the settlement agreement here was not approved under either mechanism. As a result, the release was unenforceable as to O’Neal’s FLSA claims.
The central issue, however, was whether that lack of approval rendered the entire settlement agreement unenforceable, including as to non-FLSA claims. The court held that it did not.
The court explained that the FLSA protects only FLSA rights. The statute does not invalidate settlement of unrelated state-law claims. The enforceability of the release as to non-FLSA claims is governed by state contract law, not federal FLSA law.
Citing Hayes v. National Service Industries, 196 F.3d 1252 (11th Cir. 1999), the court reiterated that settlement agreements are construed and enforced according to ordinary contract principles. Under Florida law, the settlement agreement here was supported by valid consideration independent of the FLSA claims. O’Neal received $50,000 and released not only FLSA claims but also breach of contract, unjust enrichment, and other statutory claims. The existence of “valid legal obligations” apart from the FLSA claims was sufficient to sustain enforceability as to those claims.
The court rejected the argument that inclusion of FLSA claims rendered the entire agreement void, stating in substance that nothing in the FLSA protects non-FLSA claims merely because they are included in a joint settlement.
Accordingly, the Eleventh Circuit affirmed dismissal of O’Neal’s fraudulent transfer claim based on the mutual release.
Waiver of Objection to Magistrate Judge’s Order
O’Neal also attempted to challenge the magistrate judge’s denial of his motion to amend the complaint. The Eleventh Circuit held that he waived this issue by failing to file a timely objection under Federal Rule of Civil Procedure 72(a). Relying on Smith v. School Board of Orange County, 487 F.3d 1361 (11th Cir. 2007), the court reiterated that a party who fails to object to a magistrate judge’s nondispositive order before the district court “waives his right to appeal those orders.”
The court rejected O’Neal’s contention that a motion for reconsideration directed to the magistrate judge constituted an “objection,” emphasizing that Rule 72 requires a specific objection to the district judge.
Confidentiality Clause and Specific-over-General Interpretation
O’Neal further argued that American Shaman breached the confidentiality provision by filing a redacted copy of the settlement agreement in related litigation without prior written notice.
The Eleventh Circuit analyzed the confidentiality clause under Florida law. The agreement contained a general confidentiality provision requiring prior written notice before disclosure, but it also included a specific clause stating that the parties “may be allowed to disclose the terms of this settlement to a court in order to obtain … enforcement.”
Applying the Florida principle that a “specific provision dealing with a particular subject will control over a different provision dealing only generally with that same subject,” as articulated in Idearc Media Corp. v. M.R. Friedman & G.A. Friedman, P.A., 985 So. 2d 1159 (Fla. Dist. Ct. App. 2008), the court held that the enforcement carve-out controlled.
Because the disclosure was made to obtain enforcement of the settlement agreement, the franchisor did not breach the confidentiality provision. The court therefore affirmed summary judgment on American Shaman’s counterclaim.
Looking Forward
For franchisors, O’Neal provides several important lessons.
First, the decision confirms that while FLSA settlements require approval to bar FLSA claims, that limitation does not automatically invalidate releases of non-FLSA claims. Mixed-claim settlement agreements remain enforceable under state contract law, provided they are supported by valid consideration.
Second, settlement drafting should clearly reflect independent consideration for non-FLSA claims. Where possible, separating the consideration attributable to FLSA and non-FLSA components may reduce later enforceability challenges.
Third, confidentiality provisions should be drafted with clear enforcement carve-outs and careful internal consistency. As this case demonstrates, courts will apply the rule that specific provisions control over general ones.
Finally, procedural discipline is essential. Failure to properly object to magistrate rulings can result in waiver of appellate rights, regardless of the merits.
In sum, the Eleventh Circuit reaffirmed the mandatory nature of FLSA settlement approval while simultaneously protecting the enforceability of non-FLSA releases—a meaningful clarification for franchisors navigating wage-and-hour litigation alongside contract disputes.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
