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Confidential FLSA Settlement Rejected by the SDNY

Ever since Cheeks, the Second Circuit courts must review and approve a proposed settlement before any Fair Labor Standards Act (FLSA) case can be resolved. The FLSA is usually utilized by employees to combat wage theft or cases were employees are not paid minimum wage, their tips are stolen from them or such employees were not paid overtime when the employees were entitled to overtime. The FLSA regulates minimum wage, overtime, equal pay, recordkeeping, and child labor for employees of enterprises engaged in interstate or foreign commerce and employees of state and local governments. The FLSA is enforced by the Wage and Hour Division of the United States Department of Labor and applies in all states. While New York State Law (New York Labor Law) has additional protections for its employees, this case only concerns the settlement of an FLSA case.

A settlement offer was made and proposed to the Court. The SDNY Court rejects the stipulation, citing four reasons for not approving this FLSA stipulation of settlement: (1) the agreement has a confidentiality provision to which the Court rejects; (2) the agreement bars certain disparaging statements without carving out an exception for truthful statements (contrvening the remedial purposes of the FLSA); (3) the full general release requires the Plaintif to waive any claim she might ever have against the defendants or any related individuals; and (4) the agreement provides for $2,500 in attorneys fees, 36 percent of the total settlement amount, which is over one third of the settlement amount.

Although not the first and certainly not the last rejection of such a settlement, New York State District Courts within the Second Department can and will reject this FLSA stipulation should it feel that the public policy goals of the FLSA are not met. Here, the confidentiality and release seemed to be dispositive on the Court refusing to accept such terms and conditions. New York Labor Law Attorneys should also note that the Court is also not readily accepting of attorney's fees in excess of one-third.

The Case is Martinez v. Gulluoglu LLC, 15 Civ. 2727, NYLJ 1202747569355, at *1 (SDNY, Decided January 15, 2016).

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