Introduction

The Fair Labor Standards Act (“FLSA”) occupies a privileged position in American labor law. Enacted during the New Deal era, it was designed to address a genuine historical problem: the exploitation of vulnerable workers lacking bargaining power, information, or economic alternatives. That purpose was legitimate then and remains legitimate now.

But statutes must be evaluated not only by their aspirations, but by their real-world effects. Law is an incentive system. When incentives are misaligned, even well-intentioned statutes can produce results that diverge sharply from their stated aims.

In contemporary litigation, the FLSA often operates less as a remedial wage statute and more as a procedural lever—one that allows plaintiffs’ counsel to impose immediate, asymmetric fee exposure on employers regardless of proportionality, context, or competing legal rights. This article examines how that transformation occurred, why it persists, and why its consequences fall most heavily not on large corporate actors, but on small, fragile businesses that the statute was never designed to destroy.

I. The FLSA’s Core Design: Rights Enforcement Through Asymmetry

The defining structural feature of the FLSA is not its minimum wage or overtime provisions. It is its mandatory, one-way fee-shifting rule. A prevailing plaintiff is entitled to reasonable attorney’s fees and costs. A prevailing employer is not.

That asymmetry is deliberate. Congress sought to encourage enforcement by making litigation economically viable for workers with small claims. But the statute does not merely encourage enforcement; it reshapes litigation behavior.

A regime that guarantees fees to one side regardless of proportionality inevitably incentivizes early filing, discourages informal resolution, and rewards volume over judgment. It also changes who drives the litigation. In many cases, the true economic beneficiary of the suit is not the employee, but counsel.

Supreme Court precedent has emphasized that FLSA rights are “nonwaivable.” Cases such as Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945), and Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 728 (1981), reflect a concern that workers may be coerced into surrendering statutory protections. But those decisions addressed direct employer overreach—not the modern phenomenon of fee-driven litigation initiated without meaningful pre-suit engagement.

II. Lynn’s Food Stores and the Institutionalization of Judicial Oversight

The Eleventh Circuit’s decision in Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982), is the cornerstone of modern FLSA settlement practice. The holding is narrow: private settlements of FLSA claims require either Department of Labor supervision or court approval to ensure fairness.

The concern animating Lynn’s Food was legitimate. The court feared that unsophisticated workers might accept inadequate settlements without understanding their rights.

Over time, however, Lynn’s Food has been transformed from a protective doctrine into a procedural gatekeeper that reshapes settlement dynamics. Today, it is invoked to justify mandatory judicial review of settlements between represented parties, heightened scrutiny of otherwise standard release provisions, and routine judicial involvement in attorney’s fee arrangements that often dwarf the wage recovery itself.

The irony is difficult to ignore. A doctrine intended to protect workers from unfair settlements now routinely functions to protect fee structures that no ordinary market would sustain.

III. The Disappearance of Offset and the Breakdown of Proportional Justice

At the heart of ordinary civil justice lies a simple principle: obligations are netted, not isolated. If Party A owes Party B money, and Party B owes Party A more, the law does not pretend these claims exist in separate silos.

The FLSA disrupts this principle in practice, if not in theory.

Employers are routinely advised—sometimes explicitly—that valid counterclaims will not meaningfully reduce fee exposure. Even where an employer possesses evidence of misconduct, misappropriation, or outright theft by the plaintiff, the risk of catastrophic attorney’s fees can overwhelm any rational decision to litigate.

The result is a system in which economic fear supplants adjudication. The employer may have the stronger case on the facts and the law, yet settlement becomes the only rational option.

IV. The Forgotten Employer: Small Businesses and Sole Proprietors

Much of the judicial rhetoric surrounding the FLSA implicitly assumes a world of large, well-capitalized employers—entities with compliance departments, outside counsel, and the financial resilience to absorb litigation costs.

That assumption is false.

A substantial number of FLSA defendants are small businesses, sole proprietors, and closely held companies operating on thin margins. These are not Fortune 500 corporations. They are family-run operations, tradespeople, contractors, and service providers who often work alongside their crews and struggle to meet payroll themselves.

For these employers, FLSA litigation is not an inconvenience; it is an existential threat.

When a small business faces a claim for a few thousand dollars in wages, the wage amount itself is rarely the problem. The problem is the fee-shifting mechanism, which can transform a modest dispute into a six-figure risk overnight.

In such cases, settlement is not a concession of wrongdoing. It is a survival strategy.

V. A Real-World Illustration: When Litigation Replaces Common Sense

Consider a scenario grounded in real practice.

A one-owner moving company operates on narrow margins. The owner works in the business daily. A worker claims a missing paycheck of approximately $2,500. The employer does not dispute that the check is owed. The physical check is prepared and available.

Instead of retrieving the check or requesting payment, the worker immediately retains counsel and files a federal lawsuit. No demand letter. No conversation. No attempt at resolution.

At the same time, the employer possesses evidence that the same individual misappropriated company property and funds exceeding $5,000—conduct that would support a state-law civil theft claim with treble damages and reciprocal fee-shifting.

In any rational civil system, these claims would be litigated together. The trier of fact would determine who owes whom, and the outcome would reflect economic reality.

Under the FLSA’s litigation structure, that does not occur. The employer faces immediate pressure to settle the wage claim, not because the claim is strong, but because the fee risk is intolerable. The statute converts a straightforward dispute into a coercive negotiation.

VI. Independent Contractor, Partner, or Joint Venturer: Complexity Ignored

Adding further distortion is the statute’s tendency to flatten complex working relationships into binary categories. In many small businesses, workers are not neatly classified. They may use their own equipment, exercise discretion, share risk, or participate in profits.

In the scenario described above, the individual used his own truck, exercised operational discretion, and functioned more like a partner or joint venturer than a traditional employee. These are fact-intensive questions ordinarily resolved through litigation.

Yet the FLSA’s fee dynamics discourage courts from ever reaching them.

VII. Federalism and the Marginalization of State Law Remedies

Most civil law in the United States is state law. Property rights, theft, contract, and tort are traditionally matters of state concern. The FLSA does not expressly preempt these remedies.

Nevertheless, in practice, federal wage claims often neutralize state-law counterclaims. The threat of fee exposure forces defendants to abandon otherwise valid claims in order to cap risk.

This dynamic unsettles basic principles of federalism articulated since Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803). Federal law is supreme within its domain, but it is not meant to erase the ordinary operation of state civil justice.

VIII. Attorney’s Fees and the Illusion of Judicial Oversight

Courts routinely emphasize their obligation to review attorney’s fees for reasonableness. Decisions such as Silva v. Miller, 307 F. App’x 349 (11th Cir. 2009), and Bonetti v. Embarq Management Co., 715 F. Supp. 2d 1222 (M.D. Fla. 2009), articulate standards designed to prevent conflicts of interest.

In practice, however, meaningful fee reduction is rare—particularly when the plaintiff receives full wages. Once that threshold is met, judicial scrutiny often becomes perfunctory.

IX. What Is Lost When Fear Governs Outcomes

The cumulative effect of these dynamics is not merely unfairness to employers. It is the erosion of confidence in civil justice itself.

When litigation outcomes are driven by fee exposure rather than merits, truth becomes secondary. When small businesses are pressured into settlement regardless of fault, accountability dissolves. When state-law remedies are effectively sidelined, federalism suffers.

Conclusion

The FLSA remains an important statute. But its modern enforcement regime has drifted far from its original justification. What began as a shield for vulnerable workers has, in many cases, become a sword wielded through economic pressure.

This is not a call to weaken wage protections. It is a call to restore balance—to ensure that fee-shifting does not eclipse proportionality, that small businesses are not crushed by procedural leverage, and that civil justice remains a forum for truth rather than fear.

That conversation is long overdue.