Are oral settlements worth the paper they are not written on?

In an interesting case, the Maryland District Court dismissed an oral settlement on the grounds it was void under the Maryland Statute of Frauds provision. Let’s take a closer look.

Background

A group of employees alleged violations under the Fair Labor Standards Act (FLSA), the Maryland Wage and Hour Law, and the Maryland Wage Payment and Collection Law. The parties reached the essential terms of the settlement on June 13, 2019. Afterward, counsel agreed to draft a settlement agreement. On July 25, the employees’ counsel sent a draft agreement signed by his clients to the employer’s counsel. On August 9, the employer’s counsel told him, “my client indicated that he will send me the signed agreement today.”

By September 4, however, the employer’s counsel alerted the employees’ counsel his client’s financial circumstances had changed and requested that the draft agreement needed to be revised. The revision involved changing the agreement so one of the named defendants would no longer be jointly and severally liable for the total settlement amount. The employees rejected the proposal and instead filed a request with the court to enforce the oral settlement agreement reached on June 13.

Statute of frauds