• Settlements in Overtime Cases: Preventing the Tail from Wagging the Dog
  • March 5, 2007
  • Law Firm: Buckingham, Doolittle & Burroughs, LLP - Boca Raton Office
  • In United States. district courts in Florida and throughout the country, the filing of cases under the Fair Labor Standards Act (FLSA) has proliferated. The majority of these cases are filed by a small group of attorneys who specialize in overtime and minimum wage cases. Virtually all of these cases are resolved by settlement. The cost of litigation is dear when compared with the often modest damage claims (even if one gives credence to the Plaintiff’s assumptions, regardless of their accuracy.) It is the rare FLSA case that actually gets to trial.

    To deal with this significant volume of cases, and thus of settlements, some judges developed standard procedures for handling these settlements. Judge James C. Paine wrote an extensive and instructive 13-page standard Order.

    The court “will not simply rubber stamp” an FLSA settlement. It must review the details of the settlement terms to assure it is a fair and reasonable resolution of a bona fide dispute.

    A major struggle in these cases involves plaintiff's’ attorneys' fees. In FLSA cases, the tail may wag the dog, as it is common that the amounts sought for plaintiffs’ counsel fees far exceed the worst-case scenario for damages.

    To determine the reasonable fee, one looks at the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. Detailed original records are required by the Standard Order to support claims for attorney time. Itemized time records are mandatory. The judge requires copies of “the entire daily time-sheet for each day that attorney worked on this case.” Details concerning other clients are redacted. Thus, whole days of time will be reviewed. This brings to mind the joke about the young attorney who unexpectedly found himself at St. Peter’s Gate, and was told he was long overdue, based on his age as reflected in his time records. Not before this judge.

    Judge Paine notes “the firms handling this type of case tend to be boutique firms specializing in the handling of these cases.” Thus, the Court expects an economical use of research and standardized documents.

    Finally, “the parties should note that this order has been prompted in part by this court's observation that in many FLSA cases, the sum awarded to the plaintiffs is very small, often under $1,000, and the attorneys' fee is very large, even as high as $30,000.” Thus, the equitable concern for some proportionality cries out for consideration. Judge Paine notes there is no “hard-and-fast rule” regarding excessive fees in minimal damage FLSA cases, observing that while “tempting …, there exists no rule requiring strict proportionality.”

    Judge Paine’s standard Order is but one way that federal judges are seeking to cope with this flood of FLSA litigation. Another Florida federal judge requires plaintiffs to file a statement of the specific damages sought, with detailed calculations, very early in every FLSA case. This also aids in settlement.

    Consequently, the courts are developing ways to ensure that the Congressional intent is honored, while the rights of the parties are respected, and these cases are kept in their proper perspective.

    For many clients, FLSA cases will be the only “federal case” they are ever involved in. The proper response by parties, through counsel, to these FLSA cases is essential, in order to resolve these matters in an expeditious and cost-effective manner.