In Flores v. Hill Country Chicken NY, LLC, the Court refused to approve a settlement jointly sought by the Defendant and Plaintiffs. See No. 16-CIV-2916 (AT) (HBP) (S.D.N.Y. Aug. 11, 2017). The Court refused to approve the settlement on various grounds.
First, the Parties represented that the plaintiffs’ total damages were $49,000. However, the Parties failed to state the damages alleged by each plaintiff and the basis therefore. As a result, the Court stated that it could not determine whether the settlement bore a reasonable and rational relationship to the amounts claimed by each Plaintiff.
Second, the Court found the release clause in the settlement agreement to be too broad. The Court did not take issue with the release being general and covering all claims (beyond just wage and hour claims) because it was mutual, each of the parties were represented by counsel, and the plaintiffs were former employees. Instead, the Court believed the scope of the persons and entities being released from claims by the Plaintiffs to be too overreaching: it included “former employees, members and shareholders,” which the Court believed could be “applied to absurd effect.”
Third, the Court prohibited the Parties from including a provision that barred the settling Plaintiffs from ever working or applying for work with any of the released parties. The Court found the provision to be in direct conflict with the FLSA’s remedial purpose.
Finally, the Court rejected the Parties’ mutual non-disparagement clause because it failed to “include a carve-out for truthful statements about plaintiffs’ experience in litigating their case.”
Flores serves as a reminder of the burdens faced by all parties in drafting a settlement agreement concerning FLSA claims. To be effective, such agreements must be approved by a court of the Department of Labor and they are therefore subject to (increasing) scrutiny.