Pavon v. Janon Electric Corp.

Background

Tito Pavon and Rodney Castillo sued Janon Electric Corp., Michael’s Electrical Contracting Inc., Michael Posas, and Irene Posas under the Fair Labor Standards Act (FLSA) and New York Labor Law. They alleged that they worked more than 40 hours per week between July 2004 and February 2020 but did not receive the required overtime premium of one and one-half times their regular pay for hours over 40.

After negotiations and mediation on January 21, 2022, the parties reached a settlement. They asked the court to approve the agreement under the requirement that courts review settlements resolving FLSA claims.

Court’s analysis

The court applied the factors used to decide whether an FLSA settlement is fair and reasonable. Those factors include the plaintiffs’ possible recovery, the burdens and expenses of continuing the case, the litigation risks, whether the agreement resulted from arm’s-length negotiations between experienced counsel, and whether fraud or collusion was possible.

Pavon’s estimated possible recovery for unpaid overtime, excluding attorneys’ fees, ranged from $20,656.06 to $51,656.06. Under the proposed allocation, Pavon would receive $60,000, including $6,000 in back wages, $33,666.70 in liquidated damages and claims under New York Labor Law sections 195(1) and 195(3), $19,833.30 in attorneys’ fees, and $500 in costs. His take-home amount would be $39,666.70, which the court calculated as nearly 77% of his best-case recovery.

Castillo stated that he was owed approximately $56,000 in unpaid overtime. His proposed $40,000 allocation included $4,000 in back wages, $22,333.36 in liquidated damages and claims under New York Labor Law sections 195(1) and 195(3), and $14,166.64 in attorneys’ fees and costs. The court noted that these amounts totaled $40,500 rather than $40,000. It also noted that the parties allocated $1,000 of Castillo’s attorneys’ fees and expenses to costs, without explaining why his cost allocation was higher than Pavon’s. Because the plaintiffs litigated together and supplied no supporting cost documentation, the court reduced Castillo’s costs allocation to $500. His resulting take-home amount was $26,333.36, or 47% of his stated best-case recovery.

The court found that continuing the case would involve trial preparation costs and risks. Defendants had produced time and payroll records that they said did not support the hours or wages claimed by the plaintiffs, while defendants also acknowledged possible exposure on the claims. The court found that mediation and extensive negotiations supported the conclusion that the settlement was reached at arm’s length, and nothing in the record suggested fraud or collusion.

The court also found that the release was limited to employment-related claims through the date the agreement was executed. The agreement did not contain a confidentiality or non-disparagement provision. The court found Pavon’s $19,833.30 attorneys’ fee award reasonable and found Castillo’s adjusted $13,166.64 fee award reasonable as well.

Ruling

Judge Ona T. Wang approved the parties’ proposed $100,000 settlement as fair and reasonable, with the court’s modification to Castillo’s costs allocation. Pavon and his counsel were allocated $60,000: Pavon would receive $39,666.70, and his counsel would receive $20,333.30, consisting of $19,833.30 in attorneys’ fees and $500 in costs. Castillo and his counsel were allocated $40,000: Castillo would receive $26,333.36, and his counsel would receive $13,666.64, consisting of $13,166.64 in attorneys’ fees and $500 in costs. The Clerk of Court was directed to close ECF Nos. 64, 67, and 68.