Gomez v. Shine Services LLC

Background

Luis Gomez alleged that he worked as a building superintendent from May 2017 through April 2020 but received no cash wages, instead receiving only a free apartment in the building where he worked. He also alleged that he worked about 46.5 hours per week without overtime pay and did not receive wage notices or wage statements. He brought claims under the Fair Labor Standards Act (FLSA) and the New York Labor Law against Shine Services LLC, Firstservice Residential New York, Inc., 604 West 178th Corp., and Ramesh Sarva.

The parties settled and jointly asked the court to approve their agreement under the rule requiring court review of FLSA settlements. The agreement required a total payment of $27,500: $17,835.73 to Gomez, including $3,333.33 described as a payment for moving out of his apartment, and $9,664.27 to his attorneys for fees and expenses.

Terms the Court Found Acceptable

The court found the settlement amount reasonable in light of the risks surrounding Gomez’s minimum-wage claim. Defendants had produced canceled checks suggesting that Gomez may have been paid wages, although Gomez denied receiving or endorsing them. The court also noted the absence of time records for the alleged overtime and Gomez’s acknowledgment that proving some damages could be difficult.

The court found the proposed attorney-fee award—one-third of the settlement after costs—fair and reasonable. It was consistent with Gomez’s contingency-fee agreement and was approximately $500 higher than counsel’s estimated lodestar, meaning the fees calculated using the lawyers’ hourly rates and time spent. The court also accepted the agreement’s lack of confidentiality provision, its mutual non-disparagement clauses with exceptions for truthful statements, and the requirement that Gomez move out of the building.

Problems with the Releases

The agreement contained two one-sided releases protecting defendants but providing no release from defendants to Gomez. The releases covered not only the named defendants but also a broad list of past, present, and future related people and entities, including predecessors, successors, affiliates, officers, directors, employees, attorneys, and others acting with them.

The court held that this language could release claims against unknown people and entities with little or no connection to the dispute. It also could reach claims unrelated to wage issues. One provision appeared to cover contract, benefit, retirement, pension, severance, and other claims, including possible claims under the Employee Retirement Income Security Act, even though no such claims were pleaded or litigated. Another provision appeared to release claims involving termination of employment, including possible discrimination claims that also were not part of the case.

The court explained that these provisions went beyond what could be approved as fair and reasonable in an FLSA settlement. The court also rejected the argument that the releases could be treated separately because the second release was tied to the move-out payment. In the court’s view, the broader release could undermine any narrower release of wage claims.

No-Rehire Clause

The agreement also barred Gomez from ever applying for or accepting employment or independent-contractor work with any defendant or any affiliate, parent company, subsidiary, related entity, or successor. The parties said defendants had concerns about Gomez’s job performance and that the restriction would not significantly harm him because construction was his primary profession.

The court stated that this explanation might justify a clause limited to the named defendants. But the agreement extended the restriction to undefined “related entities.” As written, Gomez could potentially face liability, including responsibility for defendants’ legal fees, merely for applying to a job with an employer later found to be related to a defendant. The court therefore found that the no-rehire clause also prevented approval of the agreement.

Ruling

Judge Barbara Moses denied the parties’ application to approve the settlement without prejudice to renewal. The court directed that any revised agreement or appropriate addendum be submitted under the settlement-review rule no later than May 4, 2021. The order addressed approval of the settlement agreement; it did not decide the underlying wage claims on their merits.

Name Note

The caption identifies the plaintiff as “LUIS GOMEZ,” while the body of the opinion refers to him as “Luiz Gomez.” This summary follows the caption’s spelling.