Tapia v. Huaquechula Restaurant Corp.

Background

The parties reported that they had settled part of their dispute, including claims under the Fair Labor Standards Act (FLSA), a federal law governing wages and working conditions. They also consented to the magistrate judge’s jurisdiction over all remaining proceedings under 28 U.S.C. § 636(c).

The court explained that, in the Second Circuit, parties generally cannot privately resolve FLSA claims through a stipulated dismissal with prejudice under Federal Rule of Civil Procedure 41 unless the district court or the U.S. Department of Labor approves the settlement.

Required submissions

The court ordered the parties to submit, through the court’s electronic filing system and by July 8, 2021:

- a joint letter asking the court to approve the settlement and explaining why it is fair and reasonable under the totality of the circumstances, including the nine factors identified in Wolinsky v. Scholastic Inc.; - a written settlement agreement signed by all parties; and - any contingency-fee agreement and time and expense records needed to support an award of attorneys’ fees and costs.

Settlement terms and fees

The court cautioned that confidentiality provisions are rarely appropriate in wage-and-hour settlements because of the policies underlying the FLSA. It said the same concern applies to non-disparagement provisions that would prevent plaintiffs from making truthful statements about their experience litigating the case.

The court also warned that courts in the Second Circuit consistently reject FLSA settlements that prevent plaintiffs from having a future employment relationship with the defendant. It noted that courts often approve releases limited to wage-and-hour claims asserted or that could have been asserted in the action. General releases may be approved in appropriate circumstances when they are mutual, negotiated by competent counsel, and involve former employees who have no ongoing relationship with the employer.

The court stated that its fairness review extends to attorneys’ fees and costs. Any proposed award had to be included in the signed settlement agreement and supported by authenticated fee agreements, time records, expense records, information about counsel’s experience, and hourly rates sufficient to support a lodestar calculation. Counsel also had to substantiate costs with invoices, receipts, or a sworn statement.

Disposition

The court ordered the parties to submit the specified settlement-approval materials. This order did not approve or reject the settlement and did not decide the underlying FLSA claims.