SDNY Denies Approval In FLSA Settlement Based In Part On Overly Broad Non-Disparagement Clause

Author:Mr Allan Bloom
Profession:Proskauer Rose LLP

In its November 17, 2017 opinion in Galindo v. East County Louth, Inc. (No. 16 Civ. 9149), the Southern District of New York denied a motion to approve an individual FLSA settlement, including on the ground that the settlement agreement contained what the Court deemed to be an overly broad non-disparagement provision.

In the settlement agreement submitted for the Court's approval, the parties "mutually agree[d] that they will not disparage each other and will say or do nothing to bring discredit upon the other."  The Court held that the provision was "overly restrictive," noting that:

Although not every non-disparagement clause in an FLSA settlement is objectionable, clauses that effectively bar plaintiffs from making any negative statements about the defendants cannot stand.  Such clauses "must [at least] include a carve-out for truthful statements about plaintiffs' experience litigating their case."  [citing Lopez v. Nights of Cabiria, LLC, 96 F. Supp. 3d 170, 180 (S.D.N.Y. 2015).]  The non-disparagement clause in the proposed settlement agreement provides no such carve-out and is contrary to public policy "because it inhibits one of FLSA's primary goals—to ensure 'that all workers are aware of their rights.'"

In an earlier stage of the litigation, the Court had denied the plaintiff's motion for conditional certification of a collective under the FLSA, noting that the plaintiff's "allegations regarding whether the two corporate defendants operate as a single integrated enterprise and whether there was a common policy that violated the FLSA are textbook examples of the [conclusory] assertions that district courts in this circuit have repeatedly found to be insufficient."

In denying approval of the individual settlement, the Court...

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