United States District Court, D. New Mexico
MARGARET J. LOPEZ, individually and on behalf of all others similarly situated, Plaintiff,
EL MIRADOR, INCORPORATED, and LOUIS PEREA, Defendants.
MEMORANDUM OPINION AND ORDER
C. BRACK, UNITED STATES DISTRICT JUDGE.
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.
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. §
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.
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.)
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
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.)
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.) 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.)
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.
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
Overview and Certification of FLSA Collective
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).
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.
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. Freightquote.com, 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.
Settlements under the FLSA.
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
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.” Id. at 1353.
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,
Certification of the ...