Villar v. AHRC Home Care Services, Inc.

Background

Francisco Villar brought claims under the Fair Labor Standards Act (FLSA), a federal wage-and-hour law, and the New York Labor Law. He alleged that he worked more than 40 hours per week as a residential habilitation counselor and was paid only for time spent with clients, not for travel between clients or the office. He also alleged that other employees had similar schedules and pay practices and that the overtime violations were willful.

The parties proposed a $400,000 settlement covering payments to approximately 1,500 people, a service payment to Villar, attorneys’ fees and costs, and estimated settlement-administration costs of $50,000. The proposed attorneys’ fee request was $133,333.33. The agreement included a proposed Rule 23 class for the New York-law claims and a proposed FLSA collective for the federal claims.

Reasons for Denial

The court explained that FLSA settlements require court or Department of Labor approval and must be fair and reasonable. The court identified structural problems that made the agreement impossible to approve.

First, the FLSA requires each employee who joins a collective action to give written consent and file that consent with the court. The agreement instead treated cashing a settlement check as consent to join the collective and did not require the consent to be filed on the docket. The court held that this did not satisfy the FLSA’s requirements.

Second, the agreement required the court to review the settlement before collective members had opted in. The court concluded that this conflicted with the requirement that the court evaluate the fairness of an FLSA settlement after the collective members had joined.

The court also found that the parties had not provided enough information for a fairness review. They did not state how much Villar or each proposed collective member would receive, explain what would happen to unendorsed checks, or provide information about the risks faced by the defendants. The parties focused on Villar’s risks if the case proceeded to trial.

Finally, Villar’s counsel requested $133,333.33 in fees without providing a factual basis, such as contemporaneous time records. The court stated that fee information was necessary for approval of an FLSA settlement.

Disposition

Judge Ona T. Wang denied without prejudice the proposed settlement’s preliminary approval. The parties were ordered to provide a revised settlement agreement and revised memorandum of law by October 8, 2020, addressing the problems identified in the opinion. The court warned that a settlement that did not comply with the FLSA’s requirements would be denied. The clerk was directed to close ECF 48.