In Sandoval v. Philippe North American Restaurants, LLC, the Southern District refused to grant preliminary approval to an unopposed settlement seeking to resolve FLSA and NYLL claims directed at allegedly unpaid wages, illegal retained tips, and “spread of hours” pay. See 16-CV-0615 (VSB) (S.D.N.Y. Aug. 31, 2017). The Court based its decision on what it determined to be an overbroad release contained in the settlement agreement.
The Court referred to a series of cases holding that Court “routinely reject release provisions that ‘wave practically any possible claim against the defendants, including unknown claims and claims that have no relationship whatsoever to age-and-hour issues.’” The Court then analyzed the release at issue and held that “it places almost no limitations on Plaintiffs’ waiver of claims and requires Plaintiffs to waive virtually any claim, of any type, without regard to whether the claim is related to the wage and hour violations alleged here.” As such, the Court found the release to be sufficiently overbroad so as to render the settlement agreement itself unreasonable. The Court denied the motion for preliminary approval without prejudice for renewal after the release was narrowed.
Sandoval reiterates a point that employers must be cognizant of when attempting to resolve FLSA and/or NYLL claims through settlements: the release itself must be narrowly tailored to the claims at issue in the litigation. However, Sandoval should not be read so as to foreclose the possibility of a broader release in all circumstances. Arguments can be advanced for broader releases as to Named Plaintiffs, those receiving service awards, or where another separate yet legitimate benefit is provided to the affected plaintiff.
