finding that a nondisclosure agreement was "contrary to well-established public policy"Summary of this case from Arango v. Scotts Co.
Counsel of Record: Jodi Jill Jaffe, Esq. Jaffe Glenn Law Group, P.A. Lawrence Office Park Building 2, Suite 220 168 Franklin Corner Road Lawrenceville, NJ 08648 Counsel for Plaintiff Jagat P. Lall, Esq. Lall & Associates, P C 101-13 101 Avenue Ozone Park, NY 11416 Counsel for Defendants
MEMORANDUM & ORDER
Plaintiff Gabriel Guareno filed this action on March 10, 2014 alleging claims against his former employer, a wholesale grocer, under the Fair Labor Standards Act (FLSA) and New York Labor Law. He intended to pursue the case as an FLSA collective action on behalf of similarly situated employees. Instead, on September 2, 2014, the parties executed a settlement agreement. The parties now seek this Court's approval of the settlement. For the following reasons, that request is denied.
The FLSA was designed "to correct and as rapidly as practicable to eliminate" the practice of employers failing to pay their employees proper wages. 29 U.S.C. § 202(b). "The FLSA places 'strict limits on an employee's ability to waive claims . . . for fear that employers would coerce employees into settlement and waiver.'" Armenta v. Dirty Bird Group, LLC, 2014 WL 3344287, at *1 (S.D.N.Y. June 27, 2014) (quoting Le v. SITA Info. Networking Computing USA, Inc., 2008 WL 724155, at *1 (E.D.N.Y. Mar. 13, 2008)). "[A]n employee may not waive or otherwise settle an FLSA claim for less than the full statutory damages unless the settlement is supervised by the Secretary of Labor made pursuant to a judicially supervised stipulated agreement." Wolinsky v. Scholastic Inc., 900 F. Supp. 2d 332, 335 (S.D.N.Y. 2012); see also Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981).
There are many problems with the proposed settlement. First, "[b]efore a court will find a settlement fair and reasonable, the parties 'must provide enough information for the court to examine the boda fides of the dispute.'" Mamani v. Licetti, 2014 WL 2971050, at *1 (S.D.N.Y. July 2, 2014) (quoting Dees v. Hydradry, Inc., 706 F. Supp. 2d 1227, 1241 (M.D. Fla. 2010)). "The 'employer should articulate the reasons for disputing the employee's right to a minimum wage or overtime, and the employee must articulate the reasons justifying his entitlement to the disputed wages.'" Mamani, 2014 WL 2971050, at *1 (quoting Dees, 706 F. Supp. 2d at 1241). If the parties dispute the computation of wages owed, they must each provide an estimate of the number of hours worked and the applicable wage. Mamani, 2014 WL 2971050, at *1. The parties have done none of this. The settlement includes a blanket denial of liability from the employer, with no articulation of the merits of the dispute. And Guareno does not provide an estimate of the wages he is owed, making it impossible to determine if the settlement is reasonable.
Second, while Guareno filed the settlement on the public docket, the agreement states it will be kept "strictly confidential" and includes a nondisclosure agreement. Such a provision is contrary to well-established public policy. See, e.g., Mamani, 2014 WL 2971050, at *2; Armenta, 2014 WL 3344287, at *2; Wolinsky, 900 F. Supp. 2d at 337-38; Joo v. Kitchen Table, Inc., 763 F. Supp. 2d 643, 646-47 (S.D.N.Y. 2011). And the nondisclosure agreement impedes one of the goals of the FLSA—to ensure that all workers are aware of their rights. See Dees, 706 F. Supp. 2d at 1242 ("By including a confidentiality provision, the employer thwarts the informational objective of the [FLSA's] notice requirement by silencing the employee who has vindicated a disputed FLSA right.").
Third, there is an insufficient showing as to the reasonableness of the settlement's award of attorney's fees. Counsel must provide a factual basis for a fee award, typically with contemporaneous time records. See Wolinsky, 900 F. Supp. 2d at 336 (citing N.Y. State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1154 (2d Cir. 1983)). The agreement here allots $14,000 of the $30,000 settlement—almost half—to Guareno's attorney. And this hefty amount is supported with little more than a conclusory statement that it is a discount from the $16,250 in fees and $725 in costs actually incurred. If the parties submit another proposed settlement and it awards Guareno less than a full recovery of his lost wages, this Court suggests that the parties allocate a larger percentage of the settlement to Guareno and a lesser percentage to his attorney.
Fourth, the settlement includes a pledge from Guareno's attorney that her firm will not represent any person bringing similar claims against Defendants. But this contravenes the FLSA's intent to permit plaintiffs to bring suit on behalf of themselves and "other employees similarly situated." 29 U.S.C. § 216(b). Such a provision raises the specter of defendants settling FLSA claims with plaintiffs, perhaps at a premium, in order to avoid a collective action or individual lawsuits from other employees whose rights have been similarly violated. While this Court would not approve such a provision in any FLSA settlement, the timing of this settlement raises concerns this may have happened here. Three days before Guareno was scheduled to move to certify a collective action, the parties requested an extension in anticipation of a settlement. Thereafter, they entered an agreement requiring Guareno to keep silent about his settlement and barring his lawyer from representing any of his fellow employees. Both requirements contravene public policy.
For the foregoing reasons, the parties' request for approval of their settlement agreement and dismissal of this action is denied. By October 10, 2014, the parties are directed to notify this Court of their intention to either (1) publicly file a revised settlement agreement and supporting documentation in accordance with this opinion or (2) abandon settlement and continue litigating this case. Dated: September 26, 2014
New York, New York
WILLIAM H. PAULEY III
Counsel of Record:
Jodi Jill Jaffe, Esq.
Jaffe Glenn Law Group, P.A.
Lawrence Office Park
Building 2, Suite 220
168 Franklin Corner Road
Lawrenceville, NJ 08648
Counsel for Plaintiff Jagat P. Lall, Esq.
Lall & Associates, P C
101-13 101 Avenue
Ozone Park, NY 11416
Counsel for Defendants