Teran v. Nai Tapas Restaurant Corp.

Background

Andres Emeterio Teran sued Nai Tapas Restaurant Corp. and Ruben Rodriguez under the Fair Labor Standards Act (FLSA) and New York Labor Law. Teran alleged that he worked as a food runner from September 2011 through May 2019, worked more than 40 hours per week, and was not paid overtime or the required spread-of-hours premium. He also alleged that Defendants failed to provide proper wage statements and took an improper tip credit.

The parties reached a settlement in principle after mediation and submitted their proposed settlement agreement for court approval. The opinion states that all parties consented to Magistrate Judge Ona T. Wang’s jurisdiction.

Settlement Review

Under Second Circuit precedent, an FLSA settlement that dismisses claims with prejudice requires approval by the court or the Department of Labor. The court reviewed the settlement for fairness and reasonableness using factors that included Teran’s possible recovery, the burdens and risks of continued litigation, the parties’ negotiations, and the possibility of fraud or collusion.

Teran alleged a maximum recovery of approximately $62,841.56. The proposed settlement totaled $28,200, with $18,667.67 allocated to Teran and $9,333.33 allocated to his attorneys for fees and costs. The court found the settlement amount reasonable in light of the litigation risks. It also found the attorneys’ fees reasonable, noting that counsel reported $22,337.50 in fees and costs for 41.9 hours of work.

The court further found that the negotiations were conducted at arm’s length by experienced wage-and-hour counsel, that the release was limited to employment-related claims, and that the agreement did not contain a confidentiality provision. The court found no indication of fraud or collusion.

Non-Disparagement Provision and Ruling

The settlement agreement included a non-disparagement provision. The court explained that courts generally do not approve broad provisions restricting negative statements in FLSA settlements unless they include an exception allowing truthful statements about the plaintiff’s experience litigating the case. This agreement contained no such exception.

For that reason, the court declined to approve the proposed Settlement Agreement. Judge Ona T. Wang directed the parties to file a revised settlement agreement by April 8, 2021. The opinion does not state whether the parties later submitted or obtained approval of a revised agreement.