RUBBO v. PEOPLESCOUT, INC. et al

Filing 28

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE GERALD J. PAPPERT ON 5/11/2017. 5/12/2017 ENTERED AND COPIES E-MAILED.(kp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
JANICE RUBBO,
Plaintiff,

CIVIL ACTION
NO. 16-4903

v.
PEOPLESCOUT, INC., et al.,
Defendants.
PAPPERT, J.

May 11, 2017
MEMORANDUM

Janice Rubbo sued PeopleScout, Inc. and Seaton, LLC under the Fair Labor
Standards Act (“FLSA”) and the Pennsylvania Minimum Wage Act (“PMWA”). (Compl.,
ECF No. 1.) The parties have resolved these claims. They jointly move for approval of
their Settlement Agreement (“the 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). For the reasons explained below, the Court grants the motion in part and
denies it in part.
I.
PeopleScout hired Rubbo in 2012 to work as a recruiter. The recruiter position
was classified as nonexempt under the FLSA and Rubbo was paid hourly. (Compl. ¶ 8–
9.) In April of 2014, PeopleScout promoted Rubbo to operations manager, a position it
classified as exempt from the FLSA’s overtime provisions. (Id. ¶ 10.) In her new
position, Rubbo earned an annual salary of $71,200. (Id.) Rubbo alleges that at various
points in time after her promotion, she was asked to perform the duties of a recruiter in
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addition to her new role as operations manager. (Id. ¶ 12.) Rubbo now contends she
was owed overtime compensation under the FLSA, which PeopleScout refused to pay.
(Id. ¶ 15.)
II.
“[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-cv2030, 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

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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: First, the Court must determine if the settlement is fair and
reasonable to the employee or employees involved. See McGee v. Ann’s Choice, Inc., No.
12–cv–2664, 2014 WL 2514582, at *2 (E.D. Pa. June 4, 2014). If it is, the Court then
considers “whether the agreement furthers or impermissibly frustrates the
implementation of FLSA in the workplace.” Id.
III.
A.
“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).

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The Agreement resolves a bona fide dispute. In its answer, PeopleScout denied
Rubbo’s allegations of wrongdoing. At the settlement approval hearing, PeopleScout
explained its position that Rubbo’s work was exempt from the FLSA, (Tr. of Hr’g, at
7:6–8), a position it maintains in the Agreement. Cf. Howard, 197 F. Supp. 3d at 778.
B.
Whether a proposed settlement is fair and reasonable depends on nine factors:
(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 Girsh v. Jepson,
521 F.2d 153, 157 (3d Cir. 1975); see also, e.g., In re Chickie’s & Pete’s Wage & Hour
Litig., No. 12–cv–6820, 2014 WL 911718, at *3 (E.D. Pa. Mar. 7, 2014).1
The Agreement is fair and reasonable. Counsel investigated the claims and
exchanged documents and written discovery—this “demonstrates that counsel had an
appreciation of the merits and risks of proceeding to trial before negotiating the
Settlement Agreement.” Howard, 197 F. Supp. 3d at 778. Rubbo’s counsel also
explained three hurdles he would face at trial: show Rubbo was doing nonexempt

However, “at least some of the Girsh factors appear to be little help, if not irrelevant, in the
single-plaintiff context.” Howard v. Phila. Housing. Auth., 197 F. Supp. 3d 773, 777 n.1 (E.D. Pa.
2016). “Thus, even though Girsh may suggest the type of factors to be considered in assessing a
private FLSA settlement, courts need not fall into the alluring trap of mechanically applying Girsh
simply because it is the court’s duty to assess whether the proposed agreement is fair.” Id. (quoting
Kraus v. PA Fit II, LLC, 155 F. Supp. 3d 516, 523 n. 3. (E.D. Pa. 2016)).
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employee work, establish that the fluctuating rate2 did not apply and prove the number
of hours Rubbo worked without overtime compensation. (Tr. of Hr’g, at 8:17–9:1.)
The compensation terms are also fair and reasonable: PeopleScout has agreed to
pay Rubbo $29,000. While Rubbo alleged substantial uncompensated overtime, Rubbo’s
counsel acknowledged at the hearing that the records produced in discovery did not
fully support her allegations. Specifically, while Rubbo likely worked more than forty
hours a week, she could not show that she worked the ninety hours per week as alleged
in her Complaint. (Tr. of Hr’g, at 6:7–11; 7:22–24.) Both parties explained that
PeopleScout had a potential defense—it could argue under the fluctuating work week
method that she was not undercompensated for her time. (Id. at 8:17–23.)
The Agreement includes $6,000 in fees for Rubbo’s counsel, Robert J. Haurin.
Haurin has been practicing labor and employment law for twenty-five years, with
experience in FLSA cases. (Id. at 12:23–24.) Haurin had little out-of-pocket costs, but
spent a considerable amount of time on the case: he estimated he had accrued fees of
$10,000 at an hourly rate of $325 and offered to submit his time records to the Court.3
(Id. at 12:9–17.) PeopleScout’s counsel estimated her fees to be approximately double
this amount. (Id. at 19:2–3.) Moreover, Haurin’s $6,000 in fees represents just 17% of
the total settlement amount, a very reasonable percentage. See Howard, 197 F. Supp.
3d at 780 (approving attorney’s fees that represented 32.4% of the total settlement); see
At the settlement approval hearing, counsel explained that the fluctuating rate is calculated
by dividing the employee’s salary by the number of hours worked. (Tr. of Hr’g, at 5:4–11.)
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The Philadelphia Community Legal Services attorney fee schedule lists an hourly rate range
of $620–$650 for an attorney with over twenty-five years of experience. “The fee schedule
established by Community Legal Services, Inc. (“CLS”) has been approvingly cited by the Third
Circuit as being well developed and has been found by the Eastern District of Pennsylvania to be a
fair reflection of the prevailing market rates in Philadelphia.” Maldonado v. Houstoun, 256 F.3d
181, 187 (3d Cir. 2001) (quotation omitted). The CLS fee schedule is available at
http://clsphila.org/about-cls/attorney-fees.
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id. at 781 (explaining that “fee awards for common fund cases generally range from 20–
45% of the fund”).
C.
i.
The Agreement, however, impermissibly frustrates the implementation of the
FLSA because it includes an overly broad release provision. Paragraph five of the
Agreement provides for a “general release of claims and a promise not to sue.”
(Agreement ¶ 5, ECF No. 25-2.) Specifically, by signing the Agreement, Rubbo waives:
[A]ny and all possible claims, demands, causes of action, lawsuits,
damages, compensation, liability, or relief of any kind . . . arising from the
beginning of time until the date that the Parties sign [the] Agreement,
including but not limited to: (a) all Claims arising out of or from Ms.
Rubbo’s employment and/or the terms or conditions of her employment
with Defendants under any and all possible legal, equitable, tort, contract
or statutory theories, including but not limited to any claims for
constructive or wrongful discharge or breach of contract, or any tort,
except for any claims relating to accrued and vested rights under a
retirement plan, and (b) all claims under the Fair Labor Standards Act,
the state wage and hours statute, Age Discrimination in Employment Act,
the Americans with Disabilities Act, the Rehabilitation Act, Title VII of
the Civil Rights Act of 1964, the Older Workers’ Benefit Protection Act, 42
U.S.C. § 1981, Consolidated Omnibus Budget Reconciliation Act
(COBRA), the anti-discrimination laws of the State of Pennsylvania, and
all other federal, state or local laws prohibiting employment
discrimination, retaliation, protecting whistleblowing, and any other
Claim alleging discrimination based on disability, religion, sex, gender
identify, race, age, retaliation, mental status, genetic information or any
other legally protected category.
(Id.)
“These broad terms, for which the parties seek judicial approval, exceed the legal
basis of Plaintiff’s Complaint (i.e., wage and hour statutory protection) as well as the
factual basis of her Complaint.” Howard, 197 F. Supp. 3d at 779. Moreover, the Court
has no way to evaluate the value of the claims being released. Id. at 780. The Court
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cannot approve such a wavier—its role in approving an FLSA settlement is limited and
“rests on the public’s unique interest in FLSA rights.” Id. at 779. Accordingly, the
Court must “appreciate the limitations” of this role. Id.
In Howard v. Philadelphia Housing Authority, 197 F. Supp 3d 773 (E.D. Pa.
2016), the court rejected a similar release provision that would have precluded the
plaintiff from bringing “any and all claims . . . concerning the termination of Plaintiff’s
employment.” Id. The court worried that by “blindly approving” such a waiver, it
“risk[ed] judicially endorsing a waiver of Plaintiff’s other statutorily protected rights
that may be implicated by an allegedly unlawful termination,” such as those arising
under the Civil Rights Act and the Americans with Disabilities Act. Id.
Here, the release provision explicitly references the specific statutes (and many
others) under which Rubbo’s rights are protected and asks Rubbo to waive such rights.
In doing so, it goes far beyond the release provision rejected in Howard. At the hearing,
PeopleScout’s counsel acknowledged the overly broad scope of the release. She
explained that “payment of $35,000 was certainly far higher than what [PeopleScout]
intended to pay for this case,” (Tr. of Hr’g, 16:12–14.), but because Rubbo (who
PeopleScout had terminated) was also waiving her rights to bring additional statutory
claims, PeopleScout was willing to agree to a higher settlement. (Id. at 16:18–25.) In
so doing, PeopleScout’s counsel confirmed that this portion of the Agreement is a “mere
waiver of statutory rights brought about by an employer’s overreaching” that this Court
cannot approve. Lynn’s Food, 679 F.2d at 1355.

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ii.
The remainder of the Agreement does not impermissibly frustrate the
implementation of the FLSA. The Agreement does not contain a confidentiality
provision that would prevent either party from publicly discussing its terms. While it
contains a “non-disparagement” provision that requires Rubbo not to “speak or
otherwise communicate about her employment with Defendants or the termination
thereof in a disparaging way or in a negative light,” (Agreement ¶ 9), this provision
does not preclude Rubbo from discussing her claims against PeopleScout or the
Agreement’s terms. As such, it is not so restrictive that it frustrates the purpose of the
FLSA. See, e.g., In re Chickie’s & Pete’s, 2014 WL 911718, at * 3 (approving settlement
agreement with provision that “only prohibits Plaintiffs from disparaging Defendants
or discussing the substance and negotiations of this matter with the press and media.”).
IV.
For these reasons, the Court will grant in part and deny in part the joint motion
for judicial approval of the Agreement. The Court will not approve the overbroad
release provision. In all other respects, the Court finds that the proposed Agreement
reflects a fair and reasonable compromise of a bona fide dispute and does not otherwise
impermissibly frustrate the implementation of the FLSA. Counsel will be permitted to
file an amended settlement agreement for judicial review.
An appropriate order follows.

BY THE COURT:
/s/ Gerald J. Pappert
GERALD J. PAPPERT, J.
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