Frias v. Restoration Specialties, Inc.

Background

The parties reported that they had settled their dispute, including claims under the Fair Labor Standards Act (FLSA). The order explains that, in the Second Circuit, parties cannot privately settle FLSA claims through a stipulated dismissal with prejudice under Federal Rule of Civil Procedure 41 without approval from the district court or the U.S. Department of Labor.

Required Settlement Submission

The court ordered the parties to submit by July 15, 2021: (1) a joint letter motion 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.; (2) a written settlement agreement signed by all parties; and (3) any contingency-fee agreement and counsel’s time and expense records needed to support an award of attorneys’ fees and costs.

The court noted that confidentiality provisions would be appropriate only in a very rare wage-and-hour case because of the policy concerns 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 cautioned that courts in the Second Circuit have consistently rejected FLSA settlements that prevent plaintiffs from having a future employment relationship with the defendant.

The order explained that courts often approve releases limited to wage-and-hour claims asserted in the action and related claims that could have been asserted. It also noted that 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.

Attorneys’ Fees and Costs

The court stated that its fairness review extends to the reasonableness of attorneys’ fees and costs. Any proposed award had to be included in the written settlement agreement, signed by the parties, and supported by authenticated contingency-fee agreements, time records, and expense records. The submitted information had to support a lodestar calculation, which evaluates fees using reasonable hours multiplied by reasonable hourly rates. Plaintiffs’ counsel also had to substantiate costs with invoices, receipts, or a sworn statement about expenses incurred.

Disposition

The order did not approve or reject the settlement. It ordered the parties to submit the specified materials for judicial review and cautioned them about settlement terms that might not satisfy the FLSA’s requirements.