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Mitchell v. People For People Charter School, Inc.

United States District Court, E.D. Pennsylvania

April 27, 2018



          GERALD J. PAPPERT, J.

         Wayne Mitchell sued People for People Charter School, Inc. and several individuals under the Fair Labor Standards Act, the Pennsylvania Minimum Wage Act, the Pennsylvania Wage Payment and Collection Law and Pennsylvania common law for Defendant's failure to pay Mitchell overtime. (Compl., ECF No. 1.) Mitchell and People for People have resolved these claims. They jointly move for approval of their Settlement Agreement pursuant to the Court's duty to ensure that FLSA wage-payment settlements represent a “fair and reasonable resolution of a bona fide dispute.” Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1355 (11th Cir. 1982). The Court grants the Motion for the reasons that follow.


         Mitchell worked as a janitor for People for People for approximately three years. (See Compl. at ¶¶ 48, 49; Answer at ¶¶ 48, 49, ECF No. 11.) He alleges that approximately one year into his employment, he was designated as an “overtime-exempt salaried employee, ” after which he was no longer compensated for overtime work. (Compl. at ¶¶ 52, 53, 55.) Mitchell alleges that he complained, to no avail, to his supervisors about his inadequate compensation. (Compl. at ¶¶ 56-60.) On May 26, 2017, Mitchell filed suit to recover compensation for hours worked in excess for forty hours per week from May 2015 to February 2017. (Compl. at ¶ 61)


         “[T]he FLSA was designed to give specific minimum protections to individual workers and to ensure that each employee covered by the Act would receive a fair day's pay for a fair day's work.” Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739 (1981) (quotation omitted). An employee's right to a minimum wage and overtime pay under the FLSA “cannot be abridged by contract or otherwise waived because this would ‘nullify the purposes' of the statute and thwart the legislative policies it was designed to effectuate.” Id. at 740 (quoting Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 707 (1945)). Accordingly, FLSA claims may be compromised or settled in just two ways: “(1) a compromise supervised by the Department of Labor pursuant to 29 U.S.C. § 216(c); or (2) a compromise approved by the district court pursuant to 29 U.S.C. § 216(b).” Kraus v. PA Fit II, LLC, 155 F.Supp.3d 516, 522 (E.D. Pa. 2016). Although the Third Circuit Court of Appeals has not addressed whether parties can settle FLSA actions claiming unpaid wages without court approval, district courts within the Circuit have followed the approach endorsed by a majority of courts and assumed that judicial approval is necessary. See Howard v. Phila. Housing Auth., 197 F.Supp.3d 773 (E.D. Pa. 2016); Kraus, 155 F.Supp.3d at 516; see also Bettger v. Crossmark, Inc., No. 13-cv-2030, 2015 WL 279754, at *3 (M.D. Pa. Jan. 22, 2015) (collecting cases).

         Courts therefore play an important role in ensuring that plaintiffs in FLSA lawsuits do not effectively waive their statutory rights. To that end, “[w]hen employees bring a private action for back wages 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.” Lynn's Food, 679 F.2d at 1353.

         Courts presented with a proposed settlement of an FLSA claim first determine whether it resolves a bona fide dispute, i.e., a dispute that involves “factual issues rather than legal issues such as the statute's coverage and applicability.” Kraus, 155 F.Supp.3d at 530 (quoting Creed v. Benco Dental Supply Co., No. 12-01571, 2013 WL 5276109, at *1 (M.D. Pa. Sept. 17, 2013)). If the dispute is bona fide, the Court engages in a two-part inquiry: (1) the Court must determine if the settlement is fair and reasonable to the employee or employees involved; and (2) “whether the agreement furthers or impermissibly frustrates the implementation of FLSA in the workplace.” See McGee v. Ann's Choice, Inc., No. 12-cv-2664, 2014 WL 2514582, at *2 (E.D. Pa. June 4, 2014).



         A proposed settlement resolves a bona fide dispute where the settlement's terms “reflect a reasonable compromise over issues, such as back wages, that are actually in dispute and are not a mere waiver of statutory rights brought about by an employer's overreaching.” Howard, 197 F.Supp.3d at 777 (internal quotation and citation omitted). “In other words, for a bona fide dispute to exist, the dispute must fall within the contours of the FLSA and there must be evidence of the defendant's intent to reject or actual rejection of that claim when it is presented.” Id. (quotation and citation omitted).

         The Settlement Agreement here resolves a bona fide dispute. In its answer, People for People denied Mitchell's factual allegations of wrongdoing (Answer at ¶¶ 53, 55.), a position the school maintains in the Agreement. (Mot. for Approval, Ex. A “Settlement Agreement” at 2.) See Howard, 197 F.Supp.3d at 778.


         Courts often consider a number of factors to determine whether a proposed settlement is fair and reasonable, including: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) stage of the proceedings and the amount of discovery completed; (4) risks of establishing liability; (5) risk of establishing damages; (6) risk of maintaining the class action through the trial; (7) ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. See ...

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