Chevalier v. Staffpro, Inc.

Background

Nathanael Chevalier sued Staffpro, Inc., Sharp Management Corp., Brook-Sharp Realty LLC, and Sharp Pros LLC under the Fair Labor Standards Act (FLSA) and New York Labor Law. The parties submitted a settlement agreement for court approval. The agreement provided for a total settlement of $35,680 and a one-third contingency fee for Chevalier’s counsel.

Under Second Circuit precedent, district courts must review FLSA settlements to determine whether they are fair and reasonable. The court evaluates the circumstances as a whole, including the plaintiff’s possible recovery, the burdens and expenses of continued litigation, litigation risks, whether experienced counsel negotiated at arm’s length, and the possibility of fraud or collusion.

Court’s Analysis

The court stated that it was prepared to approve most of the proposed settlement. It found the overall settlement amount and one-third attorney-fee provision acceptable. It also found acceptable the agreement’s confidentiality provision, which restricted the parties’ contact with the press but did not require them to keep confidential facts or information already in the public record or domain.

The court could not approve the agreement’s “Mutual General Releases.” The provision required Chevalier to release the defendants from all known and unknown claims of every kind, including claims related to employment, termination, federal and state laws, discrimination, benefits, contracts, torts, defamation, and other matters arising from conduct occurring before the agreement was signed. The court explained that FLSA settlements generally may not use a wage-and-hour settlement to eliminate unrelated or unknown claims.

The fact that the release was mutual did not cure the problem. The defendants also would release claims arising from Chevalier’s employment, but the parties did not explain what claims the defendants might have against Chevalier or how the broad release would provide him a comparable practical benefit. Their settlement motion did not address or justify the mutual release.

Disposition

The court denied the parties’ request for approval of the settlement without prejudice to renewal under the order. It directed the parties, by March 26, 2021, to choose one of four options: file a revised agreement limiting the release to the wage-and-hour claims asserted in the case; renew the motion with a sound explanation of how the broad release benefits Chevalier; stipulate to dismissal of the action without prejudice; or inform the court that they were abandoning the settlement and would continue litigating. The Clerk was directed to terminate the pending motion at Docket 24.

Judge Ronnie Abrams did not decide the underlying FLSA or New York Labor Law claims in this order.