Lim-Tom v. Carlay Gas Heat Corp.

Background

Bryan Lim-Tom settled his claims under the Fair Labor Standards Act (FLSA) and New York Labor Law against Carlay Gas Heat Corp. The parties jointly asked the court to approve their settlement under the court-review requirement described in Cheeks v. Freeport Pancake House, Inc. The court also directed Lim-Tom to submit his retainer agreement and his lawyer’s time and expense records.

The agreement required Carlay Gas Heat Corp. to pay $21,000. It provided for $13,688 to Lim-Tom, $468 to his attorney, Abdul K. Hassan, as reimbursement for expenses, and $6,844 as Hassan’s fee. The parties stated that Lim-Tom’s unpaid overtime damages were about $2,340 before any additional liquidated damages or penalties. The agreement had no confidentiality provision or other restriction on speaking about the case or settlement. The court found that the payment terms, attorney fee, and expense reimbursement were fair and reasonable.

Release provisions

A release is a contractual promise not to pursue specified claims. The agreement’s release applied not only to Lim-Tom but also to broadly defined “Releasors,” including certain affiliated people and entities. It protected Carlay Gas Heat Corp. and broadly defined “Released Parties,” including affiliated people and entities, successors, assigns, counsel, insurers, representatives, employees, and other related persons and entities.

The release covered “any” claims arising from Lim-Tom’s employment with the released parties, rather than limiting the release to the wage-and-hour claims in the case. The agreement carved out certain rights, including vested benefits, workers’ compensation and unemployment claims, claims that legally could not be waived, enforcement of the agreement, and challenges to the agreement’s validity. The agreement did not provide a release from Carlay Gas Heat Corp. to Lim-Tom.

Court’s reasoning

The court held that it could not approve the agreement because the release was one-sided, extended beyond wage-and-hour claims, and used expansive definitions of the people and entities protected. The court identified employment-discrimination and workplace-health-and-safety claims as examples of claims that appeared to fall within the release. It explained that such a release was impermissible in an FLSA settlement because the court must protect employees against unequal bargaining power and overbroad waivers.

The court noted that some general releases had been approved in other cases when the employee was no longer working for the employer and the releases were mutual. It found that those circumstances did not apply here because the proposed release was not mutual and was broader than the claims being settled.

Disposition

Judge Barbara Moses denied the parties’ letter application for approval of the settlement without prejudice to renewal. The court directed that any revised agreement or appropriate addendum be submitted under the required review standard no later than March 1, 2021.