On The Case

Don’t even bother trying to hide wage-and-hour settlements before this N.Y. judge

(Reuters) - Employers have a powerful incentive to hide their settlements with workers claiming wage and hour violations. Keeping those agreements secret minimizes the risk that other employees will bring copycat suits. For Fair Labor Standards Act defendants, it’s probably a good bet to throw some extra money at plaintiffs who agree to keep settlements confidential. That extra money, of course, gives employees a good reason to accede to secrecy.

But federal courts in New York – and, in particular, U.S. District Judge William Pauley of Manhattan – have distinctly contrary ideas about who has a stake in wage-and-hour litigation. Last week, Judge Pauley refused to seal or docket a redacted version of a proposed settlement between the clothing designer Randi Rahm and employee Ramona Olano, who alleged she was not paid overtime when the designer required her to work late and on weekends.

The public, Judge Pauley said, has a presumptive right to know about court proceedings, and that’s especially true of FLSA litigation, which Congress enacted to advance workers’ knowledge of their rights. Pauley said he would not approve the proposed settlement unless the deal’s confidentiality provisions are stripped out.

The Olano opinion, which I first heard about at the SDNY Blog, is at least the fourth recent decision in which Judge Pauley refused to approve a confidential wage-and-hour settlement. His previous rulings involved a takeout restaurant called Dirty Bird, the restaurant chain Le Pain Quotidien; and the Sheridan Hotel. In all of the cases, the judge highlighted the public interest in the resolution of the employees' claims.

Nor is Judge Pauley alone among New York federal judges. In 2015’s Cheeks v. Freeport Pancake House, the 2nd U.S. Circuit Court of Appeals held in a case of first impression that workers and employers must obtain court or U.S. Department of Labor approval to settle FLSA cases if their settlement agreements call for suits to be dismissed with prejudice. That rule may place litigation burdens on employees looking for a quick resolution, the court acknowledged. But the burdens “must be balanced against the FLSA’s primary remedial purpose: to prevent abuses by unscrupulous employers, and remedy the disparate bargaining power between employers and employees,” the 2nd Circuit said. “The FLSA is a uniquely protective statute.”

Since Cheeks, as Judge Pauley recounted in last week’s Olano opinion, the “overwhelming majority” of judges in the 2nd Circuit have refused to allow employers and employees to keep their settlements confidential. I’m not going to list all of the cases, but U.S. Magistrate Judge Henry Pitman of Manhattan cited a bunch of them in his March 2017 decision rejecting a proposed wage-and-hour settlement with Admore Air Conditioning because the deal included secrecy provisions.

So if you’re an employer sued in New York, you’d best be prepared to disclose your wage-and-hour deals with employees. If you’re before Judge Pauley, you’re wasting your money if you even try to push through a confidential FLSA settlement.

I left phone messages for the lawyers in the Olano case, Jacob Aronauer for the employee and Yale Pollack for Randi Rahm, but didn’t hear back.