Vol. 34 Symposium Overview: Post-Cheeks Wage & Hour Settlements

 

By: Jessica Schild

The Hofstra Labor and Employment Law Journal held a round table discussion that took place on Wednesday, January 25 at the Harvard Club in New York City. The discussion focused on wage and hour settlement agreements after the recent Second Circuit decision of Cheeks v. Freeport Pancake House, Inc. The round table included the author of this landmark decision in the Eastern District of New York, the Honorable Judge Seybert, as well as, the Honorable Judge Sullivan of the Southern District of New York, the Honorable Judge Ellis, the Honorable Judge Locke, Allan Bloom, A. Jonathan Trafimow, Molly Brooks, and D. Maimon Kirchenbaum, (hereinafter, the “Panel”).[1]  David Feldman, a shareholder in the New York City office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C. acted as the moderator for the panel.

Mr. Feldman began the discussion by allowing Judge Seybert to give a brief synopsis of her opinion in Cheeks and its wide-reaching impact on wage and hour settlement agreements. Cheeks worked at Freeport Pancake House as a restaurant server and manager over the course of several years.[2]  In August 2012, Cheeks sued Freeport Pancake House seeking to recover overtime wages, liquidated damages, and attorney’s fees under both the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”).[3]  Cheeks also alleged he was demoted, and ultimately fired, for complaining about Freeport Pancake House’s failure to pay him the required overtime wages he was entitled to under the FLSA and NYLL.[4]  Cheeks sought back pay, front pay in lieu of reinstatement, and damages for the unlawful retaliation.[5]

The main issue in Cheeks was whether or not the FLSA was an “applicable federal statute” within the meaning of Rule 41(a)(1)(A).[6]  Judge Seybert reasoned that the FLSA did fall within the “applicable federal statute” under the Federal Rules of Civil Procedure (“FRCP”) section 41.[7]  Further, the decision in Cheeks noted that settling FLSA claims with prejudice required the approval of the district court or the Department of Labor to take effect.[8]  The Panel agreed that the best way to resolve the issue presented in Cheeks was to follow the statute.[9]  In doing so, the Panel noted that prior to the decision in Cheeks, courts entered into about 800 wage and hour settlements.[10]  Since the decision in 2015, there have been around 1100 settlements, increasing the number of cases by only 300.[11]

After giving an overview of Cheeks, the Panel then engaged in a discussion about confidentiality provisions in FLSA settlement agreements.[12]  The plaintiffs counsel on the panel expressed the strong value that they place on confidentiality provisions in settlement negotiations; stating that having no confidentiality usually decreases the money in the settlement as a whole.  Some of the Judges on the panel agree that it is not about the individual provision, but rather the totality of the circumstances.  It is important not to lose sight of the fact that each case is about individuals who have been victims of loss of wages.  Many of the practitioners noted however, that the FLSA does not actually impose a per se ban on confidentiality.[13]

The Panel then shifted to a discussion about the difference between confidentiality provisions in individual and class action cases, as well as discrimination cases, and general and mutual releases.[14]  Post Cheeks, the panelists noted that general and mutual releases may need to be handled differently. One practitioner even suggested breaking up the release into two documents to address the FLSA or NYLL claims, as well as a second document to effectuate a more broad general waiver that makes it easier to allocate amounts.[15]  The panel rounded out with a quick look into non-disparagement clauses and Rule 68 offers of judgment in the wake of Cheeks.  A later blog-post will dive more deeply into these issues and their effects.

The Second Circuit affirmed and remanded the district court’s decision in Cheeks and the Supreme Court denied cert., allowing the circuit courts to review settlement agreements that fall under the FLSA.[16]  For now, there is no uniform law governing these types of settlements, but understanding how Judges and practitioners view, dissect, and analyze these agreements is half the battle. The Panel gave valuable insight into their differing approaches and how they value the diverse parts of wage and hour settlements under Cheeks.

[1] Judge Ellis is a United States Magistrate Judge for the Southern District of New York. Judge Locke is a United States Magistrate Judge for the Eastern District of New York. Allan Bloom is a partner at Proskauer Rose LLP, New York office. A. Jonathan Trafimow is a partner at Moritt Hock & Hamroff LLP, Melville, Long Island office. Molly Brooks is a partner at Outten & Golden LLP, New York office. D Maimon Kirschenbaum is a partner at Joseph & Kirschenbaum LLP, New York office.

[2] Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199, 200 (2d. Cir. 2015).

[3] Id. at 201

[4] Id.

[5] Id.

[6] Id.

[7] Id. at 206.

[8] Id.

[9] Panel at Hofstra Labor and Employment Law Journal Round Table Discussion: Post-Cheeks Wage & Hour Settlements (Jan. 25, 2017).

[10] Id.

[11] Id.

[12] Panel at Hofstra Labor & Employment Law Journal Round Table Discussion: Post-Cheeks Wage & Hour Settlements (Jan. 25, 2017).

[13] Id.

[14] Id.

[15] Id.

[16] Cheeks, 796 F.3d at 207.

 

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