Khan v. Dunwoodie Gas Station, Inc.

Background

Jawaid I. Khan sued Dunwoodie Gas Station, Inc., Reyad Mussa, Yonkers Auto Center, Inc., and Raymond Albano under the Fair Labor Standards Act and the New York Labor Law. Khan alleged that he worked approximately 68 hours per week as a cashier, was paid between $9 and $11 per hour, did not receive the required overtime rate, and was not given uninterrupted half-hour meal breaks.

Khan and Dunwoodie Gas Station and Mussa—the “Dunwoodie Defendants”—jointly asked the court to approve a proposed partial settlement. The settlement concerned only Khan’s claims against the Dunwoodie Defendants. His case against Yonkers Auto Center and Albano was to continue.

Court’s analysis

The court explained that settlements resolving claims under the Fair Labor Standards Act generally require approval by the district court or the Department of Labor. The court must determine whether the agreement is fair and reasonable, considering factors such as the plaintiff’s possible recovery, litigation risks and costs, the bargaining process, and possible fraud or collusion.

Under the proposed agreement, the Dunwoodie Defendants would pay $14,000. The parties represented that this amount was approximately two-thirds of Khan’s estimated potential recovery of $23,000. The proposed allocation included base damages, liquidated damages, damages under New York’s Wage Theft Prevention Act, and attorney’s fees. The court found the settlement amount reasonable, noting that it exceeded Khan’s potential recovery under the federal law’s base and liquidated damages and would allow him to avoid the costs and risks of continued litigation.

The court also found that the agreement appeared to have been negotiated competently, in good faith, and at arm’s length, with no fraud or collusion. It found the proposed $4,666 attorney’s fee reasonable, including because counsel documented the hours worked and the fee was consistent with both a percentage-of-the-settlement calculation and an hourly-rate calculation.

The court’s objection concerned the release. The agreement stated that Khan would release all claims raised or that could have been raised in the lawsuit, including all claims under the Fair Labor Standards Act and New York Labor Law. The court held that this language was too broad because those laws cover more than the specific wage-and-hour conduct at issue. The release was not expressly limited to claims based on the same facts as Khan’s claims in this case.

Disposition

The court denied the parties’ request without prejudice. It stated that the parties may reapply for approval of a settlement with a release limited to the wage-and-hour-related conduct underlying the lawsuit.