Cronk v. Hudson Valley Roofing & Sheetmetal, Inc.

Background

Thomas Cronk sued Hudson Valley Roofing & Sheetmetal, Inc. (HVRS), Palisades Equipment Co., Inc. (Palisades), Hayden Building Maintenance Corporation (HBMC), and Gregory P. Hayden under the Fair Labor Standards Act (FLSA) and New York Labor Law. Cronk alleged that the defendants jointly employed him from 1985 until January 24, 2020, and that he regularly worked about 55 hours per week. He claimed that the defendants failed to pay the required overtime rate for hours over 40 per week, failed to keep records of his work hours, and failed to provide required wage statements.

The parties submitted a proposed settlement agreement for approval. The opinion states that the parties had separately resolved Cronk’s alleged discrimination claims through a confidential agreement; the order addressed approval of the FLSA wage settlement.

Proposed Settlement

The proposed agreement required the defendants to pay Cronk $3,485.66. The parties described this as $1,742.83 in unpaid overtime and an equal amount in liquidated damages. Their calculation used an $85,000 annual salary asserted by the defendants, producing an estimated overtime rate of $61.30, and stipulated that Cronk may have accumulated 28 hours of unpaid overtime.

The court identified an arithmetic error: 28 hours multiplied by $61.30 equals $1,716.40, not $1,742.83. Using the parties’ stated method, the total would therefore be $3,432.80. The court nevertheless evaluated the proposed agreement using the actual settlement amount of $3,485.66.

Court’s Analysis

Under the court’s reading of the Federal Rules of Civil Procedure and controlling precedent, an FLSA settlement that dismisses the claims requires approval by the court or the Department of Labor. The court therefore had to determine whether the agreement was fair and reasonable. That review includes the plaintiff’s possible recovery, the parties’ litigation risks and expected costs, whether the negotiations were conducted at arm’s length, and whether fraud or collusion was possible.

The court held that it lacked enough information to decide whether the settlement amount was fair and reasonable. Cronk’s complaint estimated his unpaid overtime at approximately $45,000, but the parties did not explain the method or underlying data used to reach that estimate. The court required a more detailed explanation of Cronk’s potential recovery at trial.

The court also had concerns about the size of the proposed payment. The parties described $3,485.66 as approximately 7% of the $45,000 estimate. But the court explained that the $45,000 figure did not include an equal amount of possible liquidated damages and might not include up to $5,000 in statutory damages under New York law for alleged failures to provide wage notices. The court therefore calculated Cronk’s best-case potential recovery as $95,000, making the proposed settlement approximately 3.67% of that amount. The defendants disputed liability, asserting that Cronk was exempt from overtime, that they were not joint employers, and that he did not work more than 40 hours per week. The court recognized those risks but found the proposed recovery unusually low without more support.

The court was satisfied that the settlement had been negotiated competently, in good faith, and at arm’s length, without fraud or collusion. It also noted that no other similarly situated employee was known and that Cronk would be the only employee affected by the settlement and dismissal. The proposed release was appropriately narrow because it covered only claims asserted in the action, which concerned wage-and-hour issues. Cronk’s counsel waived attorneys’ fees relating to the FLSA claim, so the court did not review a fee request.

Disposition

Judge Kenneth M. Karas denied without prejudice the parties’ request for approval of the proposed settlement agreement. The parties may reapply for approval after providing the additional information requested and submitting an agreement that complies with the court’s determinations. The order did not approve the proposed settlement.