Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-00279/USCOURTS-cand-5_05-cv-00279-11/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 29:201 Fair Labor Standards Act

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28 1 The holding of this court is limited to the facts and the particular circumstances

underlying the present motion.

ORDER, page 1

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

YUE ZHOU, et al.,

Plaintiffs,

v.

WANG’S RESTAURANT,

Defendant.

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Case No.: C 05-0279 PVT

ORDER RE FAIRNESS OF SETTLEMENT OF

PLAINTIFF ZHOU’S FLSA CLAIMS

On October 10 & 27, 2006, the parties appeared before Magistrate Judge Patricia V.

Trumbull for hearing on the motion to determine the fairness of the settlement of Plaintiff Yue

Zhou’s Fair Labor Standards Act (“FLSA”) claims against Defendant.1 At the hearing, after the

taking of testimony from Plaintiff Yue Zhou and one of the owners of Defendant Wang’s Restaurant,

Ching Shi Wang, the court first continued the remainder of the hearing to November 14, 2006, and

then after determining that no further testimony was needed for the court to reach its decision, the

court issued a tentative order and continued the hearing to December 12, 2006 for oral argument. 

The court also set a deadline of November 28, 2006 for any party to file a supplemental brief. No

supplemental briefs were filed, and none of the parties appeared for the December 12, 2006 hearing. 

Therefore, based on the proceedings herein to date and the file herein,

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2 One district court has opined that there is a “trend” away from finding FLSA claims nonwaivable. See Martinez v. Bohls Bearing Equipment Co., 361 F.Supp.2d 608 (W.D.Tex. 2005).

However, in that case the court, rather than relying on FLSA cases, relied on cases decided under the

Age Discrimination in Employment Act of 1967 (“ADEA”), 29 U.S.C. § 621 et seq. Moreover, it

ignored the clear expression of congressional intent implicit in congress’ decision to amend the ADEA

to allow for the release of ADEA claims when certain strict requirements are met, without any change

to the non-waivability of FLSA claims. See Older Workers Benefit Protection Act, 29 U.S.C. § 626(f).

The legislative history makes it clear that congress was well aware that courts at that time considered

FLSA claims to be non-wavable. See House Report No. 101-664. In light of this awareness, and

congress’ action on the ADEA, congress’ failure to make any amendments that would change the nonwaivability of FLSA claims (such as by removing the date restriction from 29 U.S.C. § 253) evinces a

congressional intent that FLSA claims continue to be non-waivable.

ORDER, page 2

IT IS HEREBY ORDERED that, for the reasons discussed herein, the court FINDS that the

compromise of Plaintiff Zhou’s overtime and liquidated damages claims under the Fair Labor

Standards Act, as modified by the parties at the October 27, 2006 hearing to include mutual releases

and as interpreted by the court herein to not preclude a statutory award of attorneys fees to Intervener

Adam Wang, is a fair compromise of Fair Labor Standards Act claims as to which there are bona

fide factual disputes. Based on this finding, the court will enter judgment of dismissal of Plaintiff

Zhou’s claims based on the settlement, and proceed to entertain the motion for attorneys fees by

Plaintiff Zhou’s former counsel, Intervener Adam Wang.

I. FAIR LABOR STANDARDS ACT

The Fair Labor Standards Act (“FLSA” or “Act”) requires employers to pay their employees

time and one-half for work exceeding forty hours per week. See 29 U.S.C. § 207(a)(1). The Act

provides an exemption from overtime for persons “employed in a bona fide executive,

administrative, or professional capacity.” See 29 U.S.C. § 213(a)(1). An “employer who claims an

exemption from the FLSA has the burden of showing that the exemption applies.” Donovan v.

Nekton, Inc., 703 F.2d 1148, 1151 (9th Cir. 1983). Because the FLSA “is to be liberally construed to

apply to the furthest reaches consistent with Congressional direction ... FLSA exemptions are to be

narrowly construed against ... employers and are to be withheld except as to persons plainly and

unmistakenly within their terms and spirit.” Klem v. County of Santa Clara, 208 F.3d 1085, 1089

(9th Cir. 2000) (internal quotation marks and citations omitted).

An employee’s claims under the FLSA is non-waivable,2 and thus may not be settled without

supervision of either the Secretary of Labor or a district court. See Lynn’s Food Stores, Inc. v.

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3 As used herein, “House Report No. 101-664” refers to House Report No. 101-664, P.l.

101-433, Older Workers Benefit Protection Act, H.R. Rep. 101-664, H.R. Rep. No. 664, 101st Cong.,

2nd Sess. 1990, 1990 WL 200383 (1990). This report reflects congress’ continued intent that FLSA

claims may not be waived or compromised without supervision of either the Secretary of Labor or a

district court.

4 Rule 54(a) of the Federal Rules of Civil Procedure defines “Judgment” as “a decree and

any order from which an appeal lies.” Thus, even without a document officially entitled “Judgment,”

the FLSA’s mandatory attorneys fees provision is triggered anytime a settlement of FLSA claims results

in a final appealable order of the court.

ORDER, page 3

United States, et al., 679 F. 2d 1350, 1352-53 (11th Cir. 1982); see also House Report No. 101-664.3

The proper procedure for obtaining court approval of the settlement of FLSA claims is for the parties

to present to the court a proposed settlement, upon which the district court may enter a stipulated

judgment only after scrutinizing the settlement for fairness. See Lynn’s Food Stores, Inc., 679 F. 2d

at 1353; see also Schulte, Inc. v. Gangi, 328 U.S. 108, 113 n.8 (1946); Jarrard v. Southeastern

Shipbuilding Corporation, 163 F.2d 960, 961 (5th Cir. 1947); and House Report No. 101-664. 

In reviewing the fairness of such a settlement, a court must determine whether the settlement

is a fair and reasonable resolution of a bona fide dispute. See, Lynn’s Food Stores, Inc., 679 F. 2d at

1355. “If a settlement in an employee FLSA suit does reflect a reasonable compromise over issues,

such as FLSA coverage or computation of back wages, that are actually in dispute[,] ... the district

court [may] approve the settlement in order to promote the policy of encouraging settlement of

litigation.” Id. at 1355. 

Settlement of FLSA overtime claims cannot preclude an award of attorneys fees by the court. 

Because a court supervised settlement of FLSA overtime claims is ultimately reduced to a

judgment,4 under the FLSA an award of reasonable fees is mandatory. See 29 U.S.C. § 216(b) (“The

court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a

reasonable attorney's fee to be paid by the defendant, and costs of the action”); see also Fegley v.

Higgins, 19 F.3d 1126, 1134 (6th Cir. 1994) (noting that under FLSA an award of reasonable fees is

mandatory). Allowing parties to waive an award of fees would contravene Congress’ intent that an

FLSA claimant “should receive his full wages plus the penalty without incurring any expense for

legal fees or costs.” See Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir. 1946). In any event,

Plaintiff had no authority to waive Intervener’s direct interest in an award of attorneys fees. See

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5 Hearings on the fairness of FLSA settlements normally should not need to be evidentiary

hearings. However, given the unusual circumstances of this case, and the accusations of coercion and

threats made against some of the parties and attorneys involved, the court determined that an evidentiary

hearing was warranted to allow Intervener to develop the record without subjecting the Plaintiffs to outof-court depositions.

6 This was the net amount paid, not the gross. Because the withholdings would be roughly

proportional to the net amounts, and because the court need not determine the exact amount Plaintiff

Zhou might have recovered at trial, for purposes of this motion the court will use the net amounts to

illustrate the general scope of the parties’ dispute.

7 The court makes no finding in this regard, but merely uses Plaintiff’s claimed hours to

show the general scope of the parties’ dispute.

8 This figure is the result of multiplying 15 full weeks (from Monday, August 18, 2003

through Sunday, November 30, 2003) by 18 hours of overtime per week.

ORDER, page 4

Maddrix v. Dize, 153 F.2d at 276 (noting that FLSA endows a plaintiff’s attorney with a direct

interest in the claim for attorneys fees). 

II. THE SETTLEMENT WAS A FAIR COMPROMISE OF DISPUTED CLAIMS

The testimony5 presented at the October 27, 2006 hearing was sufficient to establish that

there is a genuine issue of material fact with regard to whether Plaintiff Zhou was exempt after his

initial training period (Defendant conceded that Plaintiff Zhou was non-exempt and entitled to

overtime during his initial training period). See, e.g., McCullough v. Aramark Educational Services,

Inc., 2004 WL 813005 (M.D.N.C. 2004) (denying summary judgment because question of whether

plaintiff sous chef was exempt constituted a triable issue of fact). Because of the bona fide dispute

over factual issues, the FLSA’s non-waiver provision does not preclude the compromise of Plaintiff

Zhou’s claims. And based on the documentation and testimony in the record, the amount of the

settlement is clearly a fair compromise.

At the hearing, the parties stipulated that for the initial period of Zhou’s employment, while

he was still in training (“Period No. 1”), Defendant paid Zhou $2,400 per month.6 Assuming Zhou

would have prevailed on his claim that he was not given meal breaks, he worked 58 hours per week.7

Under 29 C.F.R. section 778.113, Zhou’s regular hourly rate is determined by multiplying his

monthly salary by 12 months, dividing by 52 weeks, and then dividing by 58 hours. $2,400 x 12

months = $28,800 ÷ 52 weeks = $553.85 ÷ 58 hours = $9.55 per hour. 

Zhou worked 270 hours8 of overtime during Period No. 1. Zhou was already paid straight

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$2,700 x 12 months = $32,400 ÷ 52 weeks = $623.08 ÷ 58 hours = $10.74 per hour. 

10 This figure is the result of multiplying 37 full weeks (from Monday, December 1, 2003

through Sunday, August 15, 2004) by 18 hours of overtime per week.

11 Defendant represents to the court that it already paid Zhou the $7,000.00. Intervener

Adam Wang questions whether the payment was actually made. The court finds this issue immaterial

to the present proceedings. As discussed above, the settlement will be reduced to a judgment in which

the court retains jurisdiction to enforce the settlement. If in fact Plaintiff Zhou has not yet received the

full consideration due under the settlement agreement, he will have the ability to enforce the obligation

in a motion to enforce settlement.

ORDER, page 5

time for the hours he worked in excess of 40 each week, but he was still owed half time pay for the

270 hours of overtime. Thus, Zhou’s claim for Period No. 1 could have been as much as $1,289.25

in unpaid overtime, plus an equal amount for liquidated damages, for a total of $2,578.50.

During the remainder of Zhou’s employment (“Period No. 2”), Defendant paid Zhou $2,700

per month. Under 29 C.F.R. section 778.113, Zhou’s regular hourly rate for Period No. 2 was

$10.74.9 Zhou worked 666 hours10 of overtime during Period No. 2. Thus, Zhou had a claim for the

additional half time pay on 666 hours of overtime, for up to $3,576.42, plus liquidated damages in an

equal amount, for a total of up to $7,152.84 for Period No. 2. 

Adding the claims for Period No. 1 and Period No. 2 together, Plaintiff Zhou had viable

FLSA overtime and liquidated damages claims for up to $9,731.34 (plus the corresponding amounts

of state and federal taxes). The settlement agreement calls Defendant to pay Zhou $7,000.00.11

Under all of the circumstances of this case, $7,000.00 represents a fair compromise of Plaintiff

Zhou’s overtime and liquidated damages claims.

III. CONCLUSION

For the reasons discussed herein, the court finds that the settlement between Plaintiff Zhou

and Defendant was a fair compromise of Plaintiff Zhou’s disputed claims for overtime pay and

liquidated damages under the FLSA. 

Dated: 1/17/07

 

PATRICIA V. TRUMBULL

United States Magistrate Judge

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