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Leon v. Alvarez

United States District Court, D. Maryland, Southern Division

September 22, 2017

HECTOR OVANDO LEON, et al., Plaintiffs,
ANTONIO ALVAREZ, et al., Defendants.


          Charles B. Day, United States Magistrate Judge

         The parties submit before this court their Joint Motion for Approval of Settlement (the “Motion”) (ECF No. 31). The Court has reviewed the Motion, the related memorandum, and has reviewed the applicable law. No hearing is deemed necessary. See Local Rule 105.6 (D. Md.). For the reasons presented below, the Court GRANTS the Motion.

         I. Factual Background

         Plaintiff Hector Ovando Leon (“Plaintiff”)[1] alleges he worked as a laborer for Antonio Alvarez d/b/a A and C Precise Construction and Christian Alvarez d/b/a A and C Precise Construction (collectively “Defendants”). On February 15, 2016, Plaintiff brought suit alleging that during the time of his alleged employment, Plaintiff was not compensated at a rate of one and one half times his regular hourly rate for all hours worked over forty hours, as required under the Fair Labor Standards Act (“FLSA”). 29 U.S.C. § 201, et seq. Plaintiff further alleges that Defendants failed to pay his normal hour wages for the final week of his employment. Plaintiff raises these claims for unpaid wages pursuant to the FLSA, the Maryland Wage Payment and Collection Law (“MWPCL”), and the Maryland Wage & Hour Law (“MWHL”). Compl. 1. In response, Defendants assert two affirmative defenses, denying all liability. Answer 2.

         On July 28, 2017, the parties filed the Motion seeking approval of their agreement to settle the case. Under the agreement, Plaintiff agrees to settle, discharge, and terminate all claims in exchange for a payment of $8, 000.00, representing $4, 000.00 in damages to Plaintiff and $4, 000.00 in attorney's fees and costs for Plaintiff's counsel.

         II. Analysis

         Under the FLSA, Congress sought to protect workers from the poor wages and long hours that can result from significant inequalities in bargaining power between employers and employees. See Saman v. LBDP, Inc., No. DKC-12-1083, 2013 WL 2949047, at *2 (D. Md. June 13, 2013) (citing Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945)). FLSA provisions are mandatory and generally are not subject to bargaining, waiver, or modification by contract or settlement. Id.; Brooklyn, 324 U.S. at 706 (1945). Court-approved settlement is an exception to that rule, “provided that the settlement reflects a ‘reasonable compromise of disputed issues' rather than ‘a mere waiver of statutory rights brought about by an employer's overreaching.'” Saman, 2013 WL 2949047, at *2 (quoting Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1354 (11th Cir. 1982)). The Fourth Circuit has not directly addressed the factors to be considered when deciding motions for approval of FLSA settlements. See id. at *3 (citations omitted). However, district courts in this circuit typically follow the Eleventh Circuit's analysis in Lynn's Food Stores. Id. In approving FLSA settlements, the Court must first be persuaded that the settlement “reflects ‘a fair and reasonable resolution of a bona fide dispute.” Id. The Court must then evaluate the fairness and reasonableness of FLSA settlements using the following factors:

“(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; (5) the opinions of [] counsel . . .; and (6) the probability of plaintiffs' success on the merits and the amount of the settlement in relation to the potential recovery.”

Id. (citation and quotations omitted). The Court also separately evaluates the reasonableness of attorney's fees and costs. Id. (“Where a proposed settlement of FLSA claims includes a provision regarding attorneys' fees, the reasonableness of the award must also be independently assessed, regardless of whether there is any suggestion that a conflict of interest taints the amount the wronged employee recovers under a settlement agreement.” (Citations and quotations omitted)).

         A. Bona Fide Dispute

         In deciding whether a bona fide dispute exists as to a defendant's liability under the FLSA, courts examine the pleadings in the case, along with the representations and recitals in the proposed settlement agreement. See Lomascolo v. Parsons Brinckerhoff, Inc., No. 08-1310, 2009 WL 3094955, at *16-17 (E.D. Va. Sept. 28, 2009). After reviewing the pleadings, the Court finds that a bona fide dispute exists in this case.

         Under the FLSA, “no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one-and-one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(2)(C) (2010). If an employer violates Section 207, he is liable for unpaid overtime, and an equal amount of liquidated damages. 29 U.S.C. § 216(b) (2008). However, only “employees” qualify for such protections, with independent contractors exempt from the overtime pay requirements. 29 U.S.C. § 203(e)(1); (e)(4) (2008).

         Here, Plaintiff asserts that he worked more than forty (40) hours per week, that he was never compensated at the required overtime rate, and that Defendants failed to pay him for his final week of work. Compl. 4. Plaintiff claims that at all times during the employment in question, Plaintiff was an employee of Defendants, as defined in Section 203(e) of the FLSA. Id. at 3. In response, Defendants deny all liability and have raised various defenses to Plaintiff's claims. Answer 2. Defendants raise multiple affirmative defenses, including that: (1) Plaintiff was at all times employed as a “1099 worker, ” referencing tax form 1099 used by independent contractors, (2) they are exempt from paying increased overtime wages under 29 U.S.C. 203(e)(1) because Plaintiff was an independent contractor, and (3) all hours worked were paid accordingly. Answer 2. Thus, a bona fide dispute exists as to Defendants' liability.

         B. Fairness and Reasonableness of the ...

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