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Lopez v. El Mirador, Inc.

United States District Court, D. New Mexico

January 26, 2018

MARGARET J. LOPEZ, individually and on behalf of all others similarly situated, Plaintiff,



         The Fair Labor Standards Act (FLSA) provides certain protections to vulnerable workers. Due to concerns about the unequal bargaining power between workers protected by the FLSA and their employers, settlements of FLSA suits are only enforceable if supervised by the Secretary of Labor or approved by a court. Plaintiff Margaret J. Lopez brought suit on behalf of herself and similarly-situated workers against Defendants El Mirador, Inc. and Louis Perea to recover unpaid overtime wages under the FLSA. After discovery and negotiations, the parties reached a settlement. Ms. Lopez and El Mirador now ask the Court to approve their settlement.


         The FLSA provides protections for portions of the workforce that Congress deemed especially vulnerable to employer abuse. See generally 29 U.S.C. §§ 201-09 (explaining the provisions of the FLSA). The FLSA requires employers to pay certain employees minimum wages, as well as overtime compensation for any hours over 40 that those employees worked in a week. See 29 U.S.C. §§ 206(a), 207(a)(1). Overtime compensation must equal at least 150% of normal hourly wages. 29 U.S.C. § 207(a)(1).

         Sections 213(a)(15) and 213(b)(21) of the FLSA exempt workers who provide domestic or companionship services from the FLSA's overtime protections. See 29 U.S.C. §§ 213(a)(15), (b)(21). Originally, the Department of Labor interpreted §§ 213(a)(15) and (b)(21) to include workers who were employed by third-party agencies. See Home Care Ass'n of Am. v. Weil, 799 F.3d 1084, 1088 (D.C. Cir. 2015). Over time, however, the demand for home care increased as more people with care needs began to receive services at home rather than in institutional settings, as they had in the past. See Id. at 1089. Recognizing the change in the home care industry, the Department of Labor adopted a new regulation, 29 C.F.R. § 552.109(a) (“Final Rule”), treating certain companionship and live-in employees as non-exempt workers covered by the FLSA's overtime protections. See Home Care, 799 F.3d at 1089.

         Defendants El Mirador, Inc. and Louis Perea (collectively, “El Mirador”) provide home care services. (See Doc. 1 at 2-3.) El Mirador hires workers and sends them to its clients' homes to provide healthcare and companionship services. Plaintiff Margaret J. Lopez claims to be a home care worker employed by El Mirador between January 1, 2015, and March 1, 2016. (Id. at 2.) During that time, according to Ms. Lopez, El Mirador contravened the Final Rule by misclassifying her and other home care workers as “exempt” employees, who are not covered by the overtime and minimum wage provisions of the FLSA. (See Doc. 20 at 2.) Accordingly, El Mirador did not pay Ms. Lopez or other home care workers overtime wages of 150% of normal pay for any hours over 40 that they worked. (Doc. 1 at 5.)

         On behalf of herself and all others similarly situated, Ms. Lopez brought an FLSA collective action under 29 U.S.C. § 216(b) against El Mirador to recover unpaid overtime wages. (Id. at 1.) Ms. Lopez also brought a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure to recover unpaid wages for herself and similarly-situated employees under the New Mexico Minimum Wage Act (NMMWA), N.M. Stat. § 50-4-22. (Id. at 1-2.)

         On September 11, 2017, Ms. Lopez and El Mirador presented the Court with a joint motion to approve a settlement that the parties had reached. (Doc. 45.) According to the joint motion, the settlement negotiations between Ms. Lopez and El Mirador had centered on a dispute about when the Final Rule became effective. (Id. at 5.) Ms. Lopez believed that the Final Rule was effective on January 1, 2015, while El Mirador argued that the effective date was October 13, 2015. (Id.) Owing to the dispute over the effective date of the Final Rule, the proposed settlement agreement compromised on wages: in the disputed period from January 1, 2015, to October 12, 2015 (“Disputed Period”), Ms. Lopez and any class members would receive 60% of the overtime wages they were allegedly owed, while in the period from October 13, 2015, to the date the Court approves the settlement (“Undisputed Period”), Ms. Lopez and any class members would receive 100% of the overtime wages they were allegedly owed. (Doc. 45 at 7-8.)

         Specifically, under the terms of the settlement, El Mirador agrees to pay a maximum of $160, 484.96 (“Gross Settlement Amount”). (Doc. 46 at 7.) The Gross Settlement Amount includes a service award of $2, 500 to Ms. Lopez for coming forward as the class representative. (See Id. at 6.[1]) It also includes 60% of alleged overtime wages from the Disputed Period, totaling $57, 334.50, as well as 100% of alleged overtime wages from the Undisputed Period, totaling $63, 650.46 as of April 5, 2017. (See id.) Finally, the Gross Settlement Amount contains attorney's fees and costs of $37, 000. (Id.) Any amount of the service award, attorney's fees, or allocated payment to class members that is not awarded to its designated recipient will remain the property of El Mirador. (See Id. at 9-10.) The amount allocated to class members will be subject to withholding for taxes. (Id. at 10.)

         The settlement agreement also requires El Mirador to retain and pay for a Settlement Administrator, who will assist with the implementation of the settlement, including mailing notices to the potential settlement class members. (Id. at 6-7.) Payment to the Settlement Administrator will not come out of the Gross Settlement Amount.

         The parties ask the Court to (1) certify the class as a collective action under § 216(b) of the FLSA and (2) approve the proposed settlement. The Court now turns to the parties' requests.


         I. Overview and Certification of FLSA Collective Actions.

         Section 216(b) of the FLSA provides that an employee may bring a collective action on behalf of “similarly situated” employees. 29 U.S.C. § 216(b). The Tenth Circuit uses a two-tiered approach to determine whether named and prospective plaintiffs are sufficiently “similarly situated” such that a court may certify a collective action under § 216. Thiessen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1102 (10th Cir. 2001).

         The first tier applies during the initial “notice” stage, when discovery has not yet been completed. See Medrano v. Flowers Foods, Inc., No. CV 16-350 JCH/KK, 2017 WL 3052493, at *2 (D.N.M. July 3, 2017). At this point, the Tenth Circuit requires only “substantial allegations that the putative class members were together the victims of a single decision, policy, or plan.” Id. Later, after a class has been conditionally certified, the parties conduct discovery and send notice to prospective class members, who must opt in to the litigation as plaintiffs. Id. Because class members must opt in rather than opt out, FLSA collective actions are different from opt-out class actions brought under Rule 23 of the Federal Rules of Civil Procedure, and Rule 23's numerosity, commonality, typicality, and adequacy of representation requirements do not apply to FLSA collective actions. See Id. at *2 n.1.

         At the conclusion of discovery, or if the parties decide to settle, the court must approve final certification of the FLSA collective action. See Id. at *2; see also Koehler v., Inc., No. 12-2505-DDC-GLR, 2016 WL 1403730, at *4 (D. Kan. Apr. 11, 2016) (“[T]he Court must make some final class certification finding before it can approve an FLSA collective action settlement.”). At this point, the Tenth Circuit applies the second, more rigorous, tier of scrutiny to examine whether named and prospective plaintiffs are sufficiently “similarly situated.” Medrano, 2017 WL 3052493, at *2. Under the stricter scrutiny of tier two, courts will examine factors such as the disparate factual and employment settings of individual plaintiffs, the defendant's unique defenses against individual plaintiffs, and fairness and procedural considerations. See Thiessen, 267 F.3d at 1102-03.

         II. Settlements under the FLSA.

         Congress passed the FLSA to protect certain groups of particularly powerless employees from “substandard wages and excessive hours which endangered the national health and well-being . . . .” See Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945). These workers, whom Congress singled out for protection, were particularly vulnerable to abuse and did not have the bargaining power to match their employers. See Id. at 706-07. Given this background, Courts would undermine the FLSA's policy of protecting vulnerable workers if they allowed workers to simply bargain away their FLSA rights. See Id. at 707.

         In Lynn's Food Stores v. United States, 679 F.2d 1350 (11th Cir. 1982), the Eleventh Circuit declared, “there are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees.” Id. at 1352. Relevant to this case, the Lynn's Food Court noted that in an FLSA suit brought by employees, “the employees are likely to be represented by an attorney who can protect their rights under the statute, ” so the settlement is “more likely to reflect a reasonable compromise of disputed issues than a mere waiver of statutory rights brought about by an employer's overreaching.” Id. at 1354. Consequently, one way in which FLSA claims may be compromised or settled is “[w]hen employees bring a private action . . . under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.”[2] Id. at 1353.

         In scrutinizing the settlement for fairness, courts should consider whether (1) the litigation involves a bona fide dispute, (2) the proposed settlement is fair and equitable to all parties, and (3) the proposed settlement contains an award of reasonable attorney's fees. See Rodarte v. Bd. of Cty. Comm'rs of Bernalillo Cty., No. 14-CV-193 JAP/SCY, 2015 WL 5090531, at *7 (D.N.M. Aug. 28, 2015).


         I. Certification of the ...

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