Perez et al v. Denco Construction LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 24-cv-02766-RMR-NRN
WILMAR PEREZ,
RUBY ORANTES,
EDGAR SUAREZ ACEROS,
ALEXIS CALDERON, and
GOJHAN SIERRA,
Plaintiffs,
v.
DENCO CONSTRUCTION LLC d/b/a DENCO,
ROA CONSTRUCTION LLC,
ABC COMPANIES 1-10 (names fictitious),
BRUCE RAHMANI,
YESSICA ROA, and
JOHN DOES 1-10 (names fictitious) individually,
Defendants.
REPORT AND RECOMMENDATION ON
DEFENDANT DENCO CONSTRUCTION LLC’S MOTION TO ENFORCE
SETTLEMENT AGREEMENTS (ECF No. 112)
N. REID NEUREITER
United States Magistrate Judge
This case is before the Court pursuant to an Order issued by Judge Regina M.
Rodriguez, ECF No. 113, referring Defendant Denco Construction LLC’s (“Defendant”)
Motion to Enforce Settlement Agreements, filed April 3, 2025. ECF No. 112. Plaintiffs
Wilmar Perez, Ruby Orantes, and Edgar Suarez Aceros (“Plaintiffs”) filed a response on
April 24, 2025. ECF No. 118. Defendant filed a reply on May 8, 2025. ECF No. 134. The
Court heard oral argument on May 28, 2025. ECF No. 135. The Court has taken judicial
notice of the case file and considered the applicable federal and state statutes and case
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law. As set forth below, it is hereby RECOMMENDED that Defendant’s Motion to
Enforce Settlement Agreements, ECF No. 112, be DENIED.
I. BACKGROUND1
a. Procedural History2
Plaintiffs Perez, Orantes, and Suarez were formerly employed by Defendant as
construction workers. Plaintiffs allege that Defendant, acting in concert with Defendants
Roa Construction LLC and Yessica Roa, violated the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. §§ 201 et seq., the Colorado Wage Act (“CWA”), Colo. Rev. Stat.
§§ 8-4-101, et seq., and the Colorado Overtime and Minimum Pay Standards Order
(“COMPS”), 7 Colo. Code Regs. § 1103-1, by failing to pay their employees one and
one-half times each employee’s regular rate of pay for each hour worked beyond 40
each workweek. Plaintiffs claim that Defendant required workers to use two separate
timecards. Defendant would pay employees for the first 40 hours worked. Then, rather
than being paid overtime for additional hours worked, employees would be paid straight
time by Roa Construction LLC, a shell company controlled and funded by Defendant. In
some cases, Defendant had Roa Construction LLC pay their employees for all hours
worked, even though they were in all respects employees of Defendant.
Plaintiffs Perez and Orantes were two of the four named Plaintiffs in the original
Collective Action Complaint that was filed on October 7, 2024. The pleading was
amended to include class action allegations on December 18, 2024. The First Amended
Class and Collective Action Complaint for Unpaid Wages, ECF No. 25, brought a
1 Any citations to docketed materials are to the page number in the CM/ECF header,
which sometimes differs from a document’s internal pagination.
2 The following facts are drawn from Plaintiffs’ Third Amended Complaint, ECF No. 117.
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collective action FLSA claim and new class action claims under the CWA and COMPS
against Defendant.
On February 17, 2025, Plaintiffs’ counsel filed a Second Amended Complaint on
behalf of Perez, Orantes, and new Plaintiff Suarez, bringing the same class and
collective action claims against Denco Construction LLC, and new Defendants Roa
Construction Group LLC and Yessica Roa.
On April 23, 2025, the Court granted an unopposed motion for leave to file a
Third Amended Complaint, and Plaintiffs’ counsel filed the now-operative Third
Amended Complaint on behalf of Perez, Orantes, Suarez, and new Plaintiffs Alexis
Calderon and Gojhan Sierra. ECF No. 117. On May 7, 2025, Plaintiffs filed a third
motion for conditional certification of the FLSA collective action, ECF No. 131, which
this Court granted in an Order dated September 12, 2025. ECF No. 161.
b. Private Settlement Agreements
i. Plaintiffs Perez and Orantes
Perez worked for Defendant as a laborer and an electrician from September
2019 through June 2024. ECF No. 98 at 29:21–30:4. In September 2024, a few months
after Perez’s employment with Defendant ended, Plaintiffs’ counsel sent a demand
letter to Defendant on behalf of Perez. ECF No. 114 at 4. Within 14 days, Perez
received a check from Defendant for $16,572.27.3 Defs.’ Mar. 11, 2025, Hr’g Ex. 1.
Perez did not sign anything in exchange for receiving this check. ECF No. 98 at 40:13–
15. Perez cashed the check and paid counsel $5,523.00. ECF No. 98 at 39:19–40:25;
3 The gross amount paid to Perez was $28,861.00, which came out to 16,572.27 after
tax. ECF No. 98 at 17:21–25.
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ECF No. 100-5. It is defense counsel’s position that this payment was made pursuant to
the CWA, which provides that an employer may resolve a CWA claim by making an
unconditional tender of funds within 14 days of a demand. ECF No. 98 at 17:13–20.
Perez testified that agents of Defendant called Perez on the phone “several times” to
attempt to “give [him] a settlement” in the form of money and a promise to give him his
job back. ECF No. 98 at 33:19–34:12.
On February 13, 2025, Perez signed a document (in English and Spanish) and
upon signing, received a check for $12,000, with “legal settlement” written in the memo
line. ECF No. 87-3. Perez was represented by counsel at the time but did not consult
with his counsel prior to signing the agreement. Perez testified that Defendant
encouraged him to settle directly with them and not use his lawyer. ECF No. 98 at 35:1–
4 (“They always told me that the money that they were giving to the lawyers would not
be given to me and it would be better for me to settle with them so that I wouldn’t lose
my money.”).
Similarly, Orantes received payment of $11,305.00 from Defendant on October
25, 2024. Orantes did not sign anything in exchange for this amount. Later, on February
13, 2025, Orantes signed a document (in English and Spanish) and received a check
for $12,000. ECF No. 112-5. Out of this total sum of $23,305.00, no portion was paid to
counsel. ECF No. 118 at 8. There was no demand letter sent on behalf of Orantes, only
this lawsuit. ECF No. 152 at 9.
The Court summarizes the relevant portions of the settlement agreements as
follows. The documents are titled “Confidential Settlement Agreement, Release, and
Covenant Not to Sue.” The agreements do not reference this lawsuit. See ECF No. 112-
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3; 112-5. The agreements are three pages long, single-spaced. Regarding the purpose
of the agreement, the document states:
This Agreement is entered into by the Parties to resolve any disputes that
the Parties may have that in any manner relate to, arise out of, or involve
any aspect of Employee’s employment with the Company, including, but not
limited to, any alleged owed and unpaid overtime compensation.
Id. Regarding the “settlement payment,” the document states:
In consideration for Employee’s entry into this Agreement and the resulting
acceptance of the terms and obligations of this Agreement, including but
not limited to the waiver and release of all claims against the Company, as
is described in paragraph 7 below, and subject to the other provisions of
this Agreement, the Company shall pay Employee the total gross sum of
$12,000, less all applicable withholdings and deductions (the “Settlement
Payment”).
Id. Regarding the employee’s “release of claims,” the document states:
In exchange for the Settlement Payment and in consideration of the
agreements set forth in this Agreement, Employee hereby releases and
discharges the Company and any successor, predecessor, parent, affiliate,
or subsidiary company of the Company, their present and former officers,
directors, employees, agents, representatives, legal representatives,
accountants, attorneys, insurers, reinsurers, successors, and assigns
(collectively “Released Parties”), from all claims, demands, and actions of
any nature, known or unknown, that Employee may have against Released
Parties that in any manner relate to, arise out of, or involve any aspect of
Employee’s employment with the Company, including but not limited to, any
rights or claims under [numerous federal and state laws and regulations
including the FLSA, CWA, and COMPS]. . . . This release and waiver further
include any and all claims concerning attorney fees, costs, and any and all
other expenses related to the claims released in this Agreement.
Id. The document also states that “Employee acknowledges that he or she has had the
opportunity to consult with an attorney prior to executing this Agreement.” Id.
ii. Plaintiff Suarez
Suarez worked for Defendant from November 2023 to July 2024 as an
electrician’s assistant and in other roles. ECF No. 98 at 51:17–23. He signed an
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agreement with Defendant on November 11, 2024 and received a check for $500 in
December 2024. ECF Nos. 112-7 & 112-8. The agreement signed by Suarez was
identical to the ones signed by Perez and Orantes save for the settlement amount.
Unlike Perez and Orantes, however, Suarez only received an English version of the
agreement. At an evidentiary hearing held on March 11, 2025 in connection with a
related motion, the Court learned that Suarez speaks Spanish and does not understand
English, other than the words “yes” and “no.” ECF No. 98 at 51:11–16.
Also, in November 2024, Suarez did not have a job, and Mr. Meza, a supervisor
at Defendant, helped him obtain a painting job from someone named Marta at “the Hotel
Comfort.” Id. at 53:22–54:11, 59:18–20. Suarez testified that Marta gave him an English
language document to sign. Id. at 55:18–24. He signed the document on November 11,
2024, after “Marta . . . told me I had to sign the W-9 which is for taxes, and then this,
which is for insurance.” Id. at 55:10–13; see also id. at 58:10–13; (answering “No” to the
question, “[W]ere you aware that the $500 check you deposited pertained to this
lawsuit?”). The day that Suarez signed the document, he started working for Marta, who
paid him for the work. Id. at 62:5–13. Suarez testified that Mr. Meza told him that the
check “was a return of money from the IRS.” Id. at 56:9–57:8; 61:1–4 (“[W]hen I talked
to [Mr. Meza] he said it’s okay that money is an IRS refund to Denco, and since you
worked for Denco it’s being divided among all of the people who worked for Denco.”).
Whether or not Suarez knowingly waived any rights when he signed a document in
English and received only $500 for what he was told was a tax return is disputed. Mr.
Meza, who has worked for Defendant full-time as a supervisor of remodeling,
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construction, and landscaping for five years, testified that he did not tell Suarez that the
check was an IRS refund. Id. at 81:21–25.
II. DISCUSSION
Defendant now moves to enforce the settlement agreements with Perez,
Orantes, and Suarez. Relying on Siribuor v. UHS of Denver, Inc., No. 12-cv-0077, 2012
WL 3590791, at *3 (D. Colo. Aug. 20, 2012), Defendant argues that in evaluating the
validity of the settlement agreements, the Court should apply common law principles of
contract law and that the relevant inquiry is whether there was “mutual assent to an
exchange between competent parties . . . for legal consideration.” ECF No. 112 at 5.
Next, Defendant’s motion cites to a string of cases, see Abbott v. Kidder Peabody &
Co., 42 F. Supp. 2d 1046, 1051 (D. Colo. 1999); Jones v. Jones, 188 P.2d 892, 893
(Colo. 1948); Nichols v. Orr, 166 P. 561, 563 (Colo. 1917), for the proposition that “it is
neither unethical nor unlawful for represented parties to settle claims independently of
their counsel.” Further, with respect to the agreement with Suarez, Defendant’s motion
argues that a language barrier is not sufficient ground for invalidating the contract.
Defendant cites to a case from the Northern District of California, Rodriguez v. Sim, No.
C 08-3982 JL, 2009 WL 975457, at *6 (N.D. Cal. Apr. 10, 2009), where the court there
refused to invalidate an arbitration agreement in English even though the plaintiff
claimed she could not read English and did not understand the contract because “she
had the opportunity to read the agreement (or have it explained or translated, if
needed.”4
4 In coming to this conclusion, the court in Rodriguez found the plaintiff’s allegations of
fraud not credible. The court noted that the plaintiff in that case “ha[d] the written
Arbitration Agreement at home, with her English-speaking son…who actually assisted
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Plaintiffs argue that Defendant intentionally ignores the correct standard for
evaluating a settlement agreement within the context of an FLSA claim. ECF No. 118 at
4. Plaintiffs argue that, following Lynn’s Food Stores, Inc. v. United States, 679 F.2d
1350, 1355 (11th Cir. 1982), the Court must find “(1) the agreement is the result of a
bona fide dispute; (2) the proposed settlement is fair and reasonable to all parties
involved; and (3) the proposed settlement contains a reasonable award of attorneys’
fees and costs.” Id. (citing Prim v. Ensign United States Drilling Inc., No. 15-cv-02156-
PAB-KMT, 2020 WL 4539630, at *3 (D. Colo. Aug. 6, 2020)).
In its Reply, Defendant urges the Court to adopt the reasoning in Ruiz v. Act Fast
Delivery of Colorado, Inc., No. 14-cv-00870-MSK-NYW, 2017 WL 11545275 (D. Colo.
Jan. 9, 2017), which challenged Lynn’s Food and noted that “nothing in the text of the
FLSA expressly requires court review and approval of settlements.” Id. at * 1. In Ruiz,
the court explained:
In modern jurisprudence, only a narrow range of settlements require court
approval. Among them are settlements in Rule 23 class actions and
settlements involving infants or incompetent persons. In such
circumstances, judicial review of compromises is necessary because the
parties affected – the class members or the incompetent persons – are not
directly before the court nor have they necessarily participated in the
decision to settle.
The FLSA action, however, does not necessarily reflect either
circumstance. The peculiar opt-in nature of an FLSA collective action
anticipates that all of those parties who settle are actively participating and
are represented by counsel. This Court sees no reason why the public
policies underlying the FLSA are any more important than those underlying
Title VII, the ADA, or other statutes designed to protect employees against
discrimination or oppression, all of which may be effectively compromised
by the affected employees in a private settlement without requiring court
review or approval.
her in filling out the certification of the Arbitration Agreement…. Consequently, she
cannot void the contract” Rodriguez, 2009 WL 975457, at *6.
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Id. at *2–3. With respect to employers who may “resort to subterfuge, misdirection, or
coercion to improperly induce employees into surrendering their FLSA rights,” Ruiz
decided that
the correct solution to address a narrow problem is not an overbroad rule
requiring all FLSA settlements to receive judicial review and approval.
Rather, the appropriate remedy to cure such misconduct is the same
remedy used in literally every other context where a settlement is claimed
to be coercive, deceptive, or overreaching: upon a proper showing by the
employee, the court may set aside the settlement contract and restore the
employee’s right to seek his or her FLSA remedies directly.
Id. at *3; see also Fails v. Pathway Leasing LLC, No. 18-cv-00308-CMA-MJW, 2018 WL
6046428, at 3* (D. Colo. Nov. 19, 2018) (holding that while “judicial review of bona fide
FLSA disputes is not required,” “review of FLSA settlements is still available in certain
circumstances,” such as “where a party alleges that an agreement does not actually
pertain to a bona fide dispute—which is to say that there is evidence of malfeasance or
overreaching in obtaining a settlement agreement”).
a. Validity of Unsupervised Compromises of Rights under the FLSA
The question of whether parties could privately settle claims arising under the
FLSA was first addressed by the Supreme Court in Brooklyn Savings Bank v. O’Neil,
324 U.S. 697 (1945). In that case, the bank employed O’Neil as a night watchman for
two years but failed to pay him $423.16 in overtime wages. After O’Neil’s employment
ended, the bank offered him the full amount of overdue wages in exchange for a release
all of his rights under the FLSA. There was no dispute as to the amount owed. O’Neil
signed the release and accepted the check. Since this amount did not include any
payment for liquidated damages, he subsequently sued the bank to recover liquidated
damages under Section 16(b) of the FLSA. The Supreme Court invalidated the release
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and held that signed waivers of claims for liquidated damages under the FLSA were
unenforceable in the absence of a bona fide dispute between the parties as to liability.
O’Neil, 324 U.S. at 704. The Court reasoned that “the same policy which forbids
employee waiver of the minimum statutory rate because of inequality of bargaining
power, prohibits these same employees from bargaining with their employer in
determining whether so little damage was suffered that waiver of liquidated damage is
called for.” Id. at 708. The Court explained that the liquidated damages provision is not
punitive in nature “but constitutes compensation for the retention of a workman’s pay
which might result in damages too obscure and difficult of proof for estimate other than
by liquidated damages.” Id. at 707.
A year later, in D.A. Schulte v. Gangi, 328 U.S. 108 (1946), the Supreme Court
expanded upon its holding in O’Neil. In Gangi, the employer disputed the employees’
right to overtime pay. Under the threat of suit by its employees, the employer paid the
overtime compensation in full in exchange for a release from the employees as to their
rights under the FLSA. Id. at 111–12. After signing the releases, the employees
subsequently sued to recover liquidated damages. The Supreme Court refused to
enforce the agreements and held that “the remedy of liquidated damages cannot be
bargained away by bona fide settlements of disputes over coverage.” Id. at 114. While
O’Neil and Gangi prohibited purely private compromises of claims under the FLSA
where there is no bona fide dispute as to liability or where there is only a bona fide
dispute as to coverage, they left unresolved the issue of under what circumstances
private compromises of FLSA claims may be permitted.
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This question was later addressed by the Eleventh Circuit in its seminal case,
Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982). There, the
Department of Labor (“DOL”) found that Lynn’s Food Stores, Inc. (“Lynn’s”) had violated
the minimum wage, overtime, and record-keeping provisions of the FLSA and
determined that Lynn’s was liable to its employees for back wages and liquidated
damages. After negotiations with DOL failed, Lynn’s approached its employees directly
to settle. Lynn’s offered its employees $1,000.00 to be divided among them on a pro
rata basis, in exchange for each employee’s agreement to waive any claim for
compensation arising under the FLSA. Around fourteen Lynn’s employees signed the
agreements and accepted pro rata shares of $1,000.00 in exchange for back wages
which, according to the DOL, totaled over $10,000.00. Lynn’s Food Stores, Inc., 679
F.2d at 1352. None of the employees consulted with an attorney before signing the
agreements and some of them could not speak English. Id. at 1354. The Eleventh
Circuit ruled that there are only two contexts in which compromises of FLSA back wage
or liquidated damages claims may be allowed: (1) a payment supervised by the
Secretary of Labor pursuant to 29 U.S.C. § 216(c), and (2) a stipulated judgement
entered by a court which has determined that the proposed settlement is a fair and
reasonable resolution of a bona fide dispute. Id. at 1355. Thus, the Eleventh Circuit
found that under no circumstances may parties privately settle claims under the FLSA
without the supervision of either the DOL or a district court. In making its ruling, the
Eleventh Circuit noted that “[t]he FLSA was enacted for the purpose of protecting
workers from substandard wages and oppressive working hours” and that “there are
often great inequalities in bargaining power between employers and employees.” Id. at
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1352 (internal citations omitted). Relying on O’Neil and Barrentine v. Arkansas-Best
Freight System, 450 U.S. 728 (1981), the Eleventh Circuit reasoned that “FLSA rights
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. (internal quotation and citation omitted).5
Post Lynn’s Food, courts and litigators across the country have assumed that
court approval of FLSA settlements is required in every case, even where the
settlement resolves a bona fide dispute as to the amount of compensation owed. Many
courts in this District have likewise adopted the reasoning in Lynn’s Food and applied its
holding without much question. See e.g. Baker v. Vail Resorts Mgmt. Co., No. 13-cv-
01649-PAB-CBS, 2014 WL 700096 (D. Colo. Feb. 24, 2014); Solis v. Top Brass, Inc.,
No. 14-cv-00219-KMT, 2014 WL 4357486 (D. Colo. Sept. 3, 2014); Cooper v. OFS 2
Deal 2, LLC, No. 15-cv-01291-RM-NYW, 2016 WL 1071002 (D. Colo. Mar. 17, 2016).
5 The Second Circuit followed the Eleventh Circuit in Cheeks v. Freeport Pancake
House, Inc., which held “[r]equiring judicial or DOL approval of such settlements is
consistent with what both the Supreme Court and our Court have long recognized as
the FLSA’s underlying purpose….” 796 F.3d 199, 206 (2d Cir. 2015); see also Martin v.
Spring Break ‘83 Prods., L.L.C., 688 F.3d 247, 256 (5th Cir. 2012) (“The Settlement
Agreement was a way to resolve a bona fide dispute as to the number of hours
worked—not the rate at which Appellants would be paid for those hours—and though
Appellants contend they are yet not satisfied, they received agreed-upon compensation
for the disputed number of hours worked.”). In O’Connor v. U.S., 308 F.3d 1233 (Fed.
Cir. 2002), the Federal Circuit relaxed the strict requirement of DOL or district court
supervision only within the context of unionized federal employees. Other than the
Second, Fifth, Eleventh, and Federal Circuit, other circuits have not ruled on the
propriety of private settlements of FLSA claims. As Magistrate Judge Michael E.
Hegarty summarized in Martinez v. Back Bone Bullies Ltd, No. 21-cv-01245-MEH, 2022
WL 782782 (D. Colo. Mar. 15, 2022), “[t]he Fourth, Seventh, Eighth, and Ninth Circuits
have acknowledged, either in dicta or without substantive analysis, the requirement of
court approval or DOL supervision for FLSA settlements. The First, Third, Sixth, Tenth,
and District of Columbia Circuits have not expressly addressed the issue.” Id. at *9.
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The first case to seriously challenge the holding in Lynn’s Food was Martinez v. Bohls
Bearing Equip. Co., 361 F. Supp. 2d 608 (W.D. Tex. 2005). In Martinez, the plaintiff
complained he had not been paid for overtime work. The employer offered him
$1,000.00 in full satisfaction of his claim, and the plaintiff accepted the payment even
though he believed he was owed nearly $3,500.00. Later, the plaintiff filed a federal
discrimination lawsuit against the employer and reasserted his FLSA claim. The
employer moved for summary judgment and argued that the plaintiff had released his
FLSA claim for overtime benefits when he signed the settlement agreement. Id. at 618.
After conducting a lengthy and comprehensive review of the legislative history of the
FLSA, subsequent amendments, and judicial interpretations addressing the issue,
Martinez concluded that the strict holding in Lynn’s Food was largely driven by its
facts—”‘employees had not brought suit, were largely unaware of the fact that they had
rights under the FLSA, had not consulted with an attorney before signing the
agreements, and many did not speak English.’” Id. at 628 (citing Lynn’s Food, 679 F.2d
at 1355). Martinez ruled that where there is a “bona fide dispute as to the amount of
hours worked or compensation due,” court approval of the agreement is unnecessary
and parties may reach private compromises. Id. at 631.
In coming to this ruling, Martinez observed that after O’Neil and Gangi,
an overwhelming amount of litigation was generated and employer
cooperation with the FLSA’s requirements was discouraged. . . . As was
noted by Congress in 1949, one of the most important reasons for the
decline in voluntary restitution by employers was the fact that an employer
who pays back wages which he withheld in violation of the [FLSA] has no
assurance that he will not be sued for an equivalent amount plus attorney’s
fees under the provisions of section 16(b) of the [FLSA].
Id. at 622 (internal quotations and citations omitted).
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While the Court will not repeat the in-depth analysis conducted by Martinez, it will
note the following rational provided by the decision:
Judicial caseloads, as well as the workload of the Wage and Hour
Administration, would likely be swamped with unnecessary disputes, many
dubious and with little evidence, that could not be finally settled without
approval from either a court or the Secretary of Labor. This surely cannot
be what was intended by Congress when the FLSA was passed. In fact,
less than ten years after the passage of the FLSA, Congress amended the
statute to provide for compromises of then-existing claims involving bona
fide disputes. Though Congress could have made the express availability
of such compromises prospective, rather than purely retrospective, it did not
prohibit such compromises. Congress left this decision to “determination
under other law.”
Id. at 630–631 (quoting Portal–to–Portal Act of 1947, H.R. Cong. Rep. No. 326, 80th
Cong., 1st Sess. 12 (1947)).6 Martinez recognized a clear distinction between bona fide
disputes as to coverage versus liability. The opinion acknowledged that Gangi stood for
the proposition that claims for minimum or overtime wages could not be compromised
because of disputes as to coverage, but that it contained “no discussion as to the ability
to compromise claims because of disputes as to liability, such as where the amount due
was unclear.” Id. at 625.
The holding in Lynn’s Food was first challenged in this District by Ruiz. There,
Judge Krieger found “Martinez’s reasoning to be thorough, careful, and persuasive, and
6 Section 3 of the Portal-to-Portal Act, codified at 29 U.S.C. § 253, reads as follows.
Any cause of action under the [FLSA] which accrued prior to May 14, 1947,
or any action (whether instituted prior to or on or after May 14, 1947) to
enforce such a cause of action, may hereafter be compromised in whole or
in part, if there exists a bona fide dispute as to the amount payable by the
employer to his employee; except that no such action or cause of action
may be so compromised to the extent that such compromise is based on
an hourly wage rate less than the minimum required under such Act, or on
a payment for overtime at a rate less than one and one-half times such
minimum hourly wage rate.
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adopt[ed] it with a few further observations.” Ruiz, 2017 WL 11545275, at *2. Ruiz ruled
that “an FLSA claim that is genuinely disputed by the employer may be compromised
via a private settlement between the parties, and [such] settlement will be legally
effective regardless of whether they are submitted to or approved by the trial court.” Id.
at *3 (emphasis added). Ruiz did not, however, offer any guidance on how to identify
when claim is “genuinely disputed.” The opinion drew no distinction between bona fide
disputes over coverage and bona fide disputes over liability—seemingly broadening the
holding in Martinez.
Since Ruiz, however, many cases from this District have continued to approve
FLSA settlement agreements by applying Lynn’s Food. These cases did not address
Ruiz or challenge Lynn’s Food. See e.g., Prim, 2017 WL 3641844; Swanson v.
Cathedral Energy Servs., Inc., No. 17-cv-01578-DDD, 2019 WL 4858453 (D. Colo. Oct.
2, 2019). Other cases have acknowledged Ruiz but, recognizing the legal uncertainty on
this issue, decided to review the settlement agreements anyway. See e.g., Manohar v.
Sugar Food LLC, No. 16-cv-02454-NYW, 2017 WL 3173451, at *2 (D. Colo. July 26,
2017) (“Because the issue is not yet settled by the Tenth Circuit, this court proceeds
with applying the standard utilized by courts in this District to consider whether it can
approve the settlement.”); Teague v. Acxiom Corp., No. 18-cv-01743-NYW, 2018 WL
3772865, at *1 (D. Colo. Aug. 9, 2018). In those cases, however, the request for judicial
review came before the court in the form of a joint or unopposed motion for approval of
the settlement agreement. Unlike in the present matter, those decisions were not forced
to contend with the propriety of judicial review of FLSA settlement agreements.
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This Court finds that the holding in Martinez was driven in large part by
outcomes-based considerations: reducing judicial caseloads and encouraging voluntary
restitution and FLSA compliance by employers. Martinez was concerned that in a
Lynn’s Food world, employers would have no incentive to voluntarily pay overdue
wages to employees without assurance that they would not subsequently be sued for an
equivalent amount in liquidated damages plus attorney fees. The strongest critique of
the rationale in Martinez comes from Judge Steven D. Merryday’s opinion in Dees v.
Hydradry, Inc., 706 F. Supp. 2d 1227 (M.D. Fla. 2010). As Judge Merryday points out in
Dees, whether or not unsupervised private settlements of FLSA claims are allowed,
there remain various incentives for employers to not voluntarily comply with the FSLA.
An employer who pays less than the minimum wage or who pays no
overtime has no incremental incentive to comply voluntarily with the FLSA,
if, after an employee complains, the employer privately compromises the
claim for a discount[—]an amount less than the full amount owed under the
FLSA (plus, with savvy negotiation, a confidentiality agreement to preclude
the spread to other employees of information about the FLSA). If approval
is required, the discount might become unavailable and the undiscounted
principal owed the employee might increase (for example, as a result of
liquidated damages or a more refined damage computation), both of which
unhappy prospects conduce to voluntary compliance by the employer.
Dees, 706 F. Supp. 2d at 1237. Judge Merryday further takes issue with Martinez’s
distinction between bona fide disputes that may be subject to private compromise and
the category of “non-bona fide FLSA disputes requir[ing] approval by the Department of
Labor or the district court” in the absence of any “explanation of the mechanisms by
which . . . the bona fides of the dispute are reliably identified.” Id. Indeed, the primary
difficulty in applying the holdings of Martinez and Ruiz is the lack of an agreed upon
definition of “bona fide dispute.” In the absence of a standard definition, courts have
used various criteria to identify bona fide disputes. See, e.g., Carrillo v. Dandan Inc., 51
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F. Supp. 3d 124, 133 (D.D.C. 2014) (finding the parties presented a bona fide dispute
because the parties disagreed as to the accuracy of the employee’s time slips, whether
travel was reasonably compensable, and if money was advanced to the employees);
Martinez, 2022 WL 782782, at * (finding that a bona fide dispute does not exist if the
employee is unrepresented when agreeing to settle an FLSA claim); Fails, 2018 WL
6046248, at *3 (suggesting that a bona fide dispute does not exist when “there is
evidence of malfeasance or overreaching in obtaining a settlement agreement”).
After addressing the above shortcomings of the reasoning in Martinez, the court
in Dees went on to adopt the Eleventh Circuit’s position in Lynn’s Food and proceeded
“on the logical and salutary premise that the FLSA, a statute famously designed to
preempt in certain particulars the possibility of private agreement, remains immune to
the unsupervised intrusion of a private agreement . . . .” Dees, 706 F. Supp. 2d at 1237.
The appeal of the holding in Lynn’s Food—requiring approval of each FLSA
compromise irrespective of the nature of the dispute—lies in its simplicity. On the other
hand, per Martinez and Ruiz, the court must first determine whether a bona fide dispute
existed at the time of the settlement agreement and what the dispute was about, to then
decide whether judicial scrutiny is appropriate. This is a fact-intensive inquiry that would
need to be conducted each time an FLSA agreement is presented to the court for
approval or enforcement.7 As other courts in this District have held, “[t]he mere
existence of an adversarial lawsuit is not enough to satisfy the bona fide dispute
7 In the absence of such judicial inquiry, there exists the risk that parties seeking
enforcement of an FLSA settlement will simply stipulate that their settlement resolves “a
bona fide dispute” when it, in fact, does not—undermining the purposes of the statute.
This is all the more likely to occur due to the lack of consensus on the definition of a
bona fide dispute.
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requirement.” Baker, 2014 WL 700096, at *1. The Court is not persuaded that this
approach, relative to mandating district court or DOL approval for all FLSA settlement
agreements, would have any meaningful impact on judicial caseloads. Furthermore, in
certain cases, it may not be so easy to disentangle bona fide disputes over coverage
from disputes over liability.
Having conducted a review of the existing caselaw, the Court finds the reasoning
in Dees to be persuasive and accordingly adopts the holding in Lynn’s Food. In the
absence of further guidance from the Tenth Circuit, this Court finds that an FLSA
settlement agreement must be presented to the court for approval in accordance with
the factors set forth in Lynn’s Food to be enforceable.8 An employer “undertakes the
private resolution of an FLSA dispute at his peril.” Dees, 706 F. Supp. 2d at 1237.
It is worth noting that the facts of this case are distinguishable from other cases
in this District that have found that judicial approval of settlement agreements to not be
required. Perez testified that Defendant discouraged him from consulting with counsel
prior to signing the settlement agreement. ECF No. 98 at 36:12–13 (“They said not to
talk to [counsel] because [counsel] would keep my money.”). Suarez testified that Mr.
8 In its previous Order, this Court, following Ruiz and Fails, found that “it [was] not
required to review the 61 $500 settlement agreements, but that it may do so if the
settlement agreements are ‘claimed to be coercive, deceptive, or overreaching,’” ECF
No. 160 at 18 (quoting Ruiz, 2017 WL 11545275, at *3). In that prior Order however, the
issue of the propriety of judicial review of FLSA settlements was not squarely before the
Court and was not fully briefed by the parties. Upon closer consideration, this Court
finds that judicial scrutiny of FLSA settlements serves to effectuate the legislative
policies behind the FLSA. When a settlement is submitted to the court for approval, it “is
more likely to reflect a reasonable compromise of disputed issues than a mere waiver of
statutory rights brought about by an employer's overreaching.” Lynn's Food Stores Inc.,
679 F.2d at 1354. Furthermore, even under the construction of Ruiz and Fails, the Court
has the discretion to carefully review the agreements in this case in light of the
allegations of coercion and deception.
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Meza told him the check “was a return of money from the IRS.” Id. at 56:9–57:8; 61:1–4
(“[W]hen I talked to [Mr. Meza] he said it’s okay that money is an IRS refund to Denco,
and since you worked for Denco it’s being divided among all of the people who worked
for Denco.”). Additionally, this Court has previously found 61 similar agreements that
Defendant entered into with its employees were presumptively invalid. See ECF No.
160 at 22 (“The Court is extremely troubled by the fact that [Defendant] handed out form
agreements to its employees—which did not reference this lawsuit—mere days after
class action claims arose in this case. All of the above facts lead to the conclusion that
[Defendant] was resorting to subterfuge, misdirection, or coercion to improperly induce
employees into surrendering their FLSA rights for pennies on the dollar.”) (internal
quotations and citations omitted). These allegations of fraud and overreaching, and the
history of this case, alone warrant judicial scrutiny. This case perfectly exemplifies why
“leaving an FLSA settlement to wholly private resolution conduces inevitably to
mischief.” Dees, 706 F. Supp 2d at 1237, cf. Lee v. Best Budz LLC, No. 19-cv-02430-
KMT, 2019 WL 5964966, at *3 (D. Colo. Nov. 12, 2019) (finding that judicial scrutiny
was not required where employees actively participated in negotiations, the agreement
involved payment to counsel, and there did not otherwise “appear to be a defect, in
either the [a]greement, itself, or in the settlement process”); Lawson v. Procare CRS,
Inc., No. 18-cv-00248-TCK-JFJ, 2019 WL 112781, at *3 (N.D. Okla. Jan. 4, 2019)
(finding court approval not required where “it [was] unlikely that the settlement [was] a
result of undue pressure or poor or nonexistent legal advice”).
Finally, though “there is disagreement over whether FLSA settlements must be
approved by the [c]ourt, there does not appear to be disagreement at this time over
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whether FLSA settlements may be approved by the [c]ourt.” Slaughter v. Sykes Enters.,
Inc., No. 17-cv-02038-KLM, 2019 WL 529512, at *6 (D. Colo. Feb. 11, 2019).
Accordingly, in the following sections the Court will examine the settlement agreements
at issue in this case using the standard set forth in Lynn’s Food.
b. Enforceability of Agreements Signed by Plaintiffs Perez and
Orantes
Parties seeking approval of an FLSA settlement must provide the court with
sufficient information to determine whether a bona fide dispute exists. Dees, 706 F.
Supp. 2d at 1241. To be fair and reasonable, a FLSA settlement must provide adequate
compensation to the employees and must not frustrate the FLSA’s policy rationales. Id.
In the context of a joint motion for approval of an FLSA settlement, courts in this District
have looked to the following information to determine whether a bona fide dispute
exists: “(1) a description of the nature of the dispute; (2) a description of the employer’s
business and the type of work performed by the employees; (3) the employer’s reasons
for disputing the employees’ right to a minimum wage or overtime; (4) the employees’
justification for the disputed wages; and (5) if the parties dispute the computation of
wages owed, each party’s estimate of the number of hours worked and the applicable
wage.” Baker 2014 WL 700096, at *1.
Based on the evidence in the record, the Court cannot find that the settlement
agreements signed by Perez and Orantes reflected a compromise of a bona fide
dispute as to the amount owed at the time the settlement agreements were entered into.
In its motion, Defendant does not seem to dispute the number of hours worked by Perez
and Orantes or the applicable wage rate to those hours. While the Court is in
possession of a spreadsheet put together by Plaintiffs’ counsel claiming that Perez was
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owed around $40,000 in unpaid wages for three years of employment (excluding any
punitive or liquidated damages) and Orantes was owed around $29,000, ECF No. 100-
3, Defendant has not provided the Court with their own calculations. See Archer v. TNT
USA, Inc., 12 F. Supp. 3d 373, 387 (E.D.N.Y. 2014) (“[T]he parties have not adduced
any evidence that their settlement resolves a ‘bona fide dispute’ over hours or rates of
pay and does not compromise the non-waivable substantive rights afforded by the
FLSA. Without that proof, this Court cannot approve a settlement of the plaintiff’s FLSA
claim.”).
At oral argument, when the Court asked Defendant how it arrived at the amount
of the initial unconditional tenders and subsequent checks of $12,000 to both Perez and
Orantes, counsel for Defendant was unable to provide any clear explanation. See ECF
No. 137 at 16. In fact, rather than disputing the estimates provided by Plaintiffs’ counsel,
defense counsel stated that it was her understanding that “[the amount] was based
upon what was alleged in the [C]omplaint and what [Plaintiffs’] understanding was of the
hours [Plaintiffs] worked for [Defendant].” Id. Counsel for Defendant further explained,
“sometimes employers also make decision to tender amounts that it feels are in dispute,
but in order to avoid penalties, pay it anyway.” Id. An employer’s unsubstantiated
“feeling” that an employee’s claimed amount of unpaid wages is disputed does not, by
itself, create a genuine dispute as to liability. What defense counsel is describing is a
situation where an employee (begrudgingly) cuts an employee a check for whatever
amount he claims he is owed, in order to avoid paying liquidated damages or any
statutory penalties. This is squarely the kind of conduct that the Supreme Court found
objectionable in O’Neil. See O’Neil, 324 U.S. at 708 (“[P]rohibit[ing] . . . employees from
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bargaining with their employer in determining whether so little damage was suffered that
waiver of liquidated damage is called for.”). Moreover, the fact that both Perez and
Orantes were issued a check for exactly $12,000, despite having worked for Defendant
for different lengths of time, severely undermines Defendant’s position that the
settlements were the result of any individualized determinations or meaningful
negotiations. For these reasons, the Court cannot find that a bona fide dispute existed
as to amounts owed, much less that the settlements were fair and reasonable.
The agreements are also defective under the Lynn’s Food test due to the lack of
any attorney fees provision. Rather than providing for attorney fees, the agreement
includes a waiver for “all claims concerning attorney fees, costs, and any and all other
expenses related to the claims released . . . .” ECF No. 112-5. Thus, the Court finds that
the settlement agreements signed by Perez and Orantes are not enforceable.9
9 Though this argument is not raised by Plaintiffs, the Court notes that the settlement
agreements would likely have warranted judicial scrutiny due to the extensive “Release
of Claims” provision. Pursuant to this provision, the employee agreed to release
Defendant from all claims arising under a laundry list of federal and state statutes,
including Title VII, the Age Discrimination in Employment Act (ADEA), the Americans
with Disabilities Act (ADA), the Colorado False Claims Act, Colorado Whistleblower law,
and so on. ECF No. 112-5. The provision further released Defendant from “any claims”
under tort or contract law that “relate to, arise out of, or involve, any aspect of
Employee’s employment with [Defendant].” While the agreement does contain a
severability provision, that provision reads “If one or more of the provisions, or portions
thereof, of this Agreement are determined to be illegal or unenforceable, the remainder
of this Agreement shall not be affected…. Provided, however, that if the [Release of
Claims] provision of this Agreement [is] determined to be illegal or unenforceable…this
Agreement shall be rendered null and void in its entirety.” Id. See Dees, 706 F. Supp.
2d at 1240 (M.D. Fla. 2010) (“To the extent that the employee receives a full wage but
relinquishes something else of value, the agreement…involves a ‘compromise’, and
Lynn’s Food requires judicial approval of the compromise.”).
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c. Enforceability of Agreements Signed by Plaintiff Suarez
The nature and circumstances of the settlement agreement with Suarez are
almost identical to those of the other 61 former Spanish-speaking employees of
Defendant who all signed settlement agreements that were provided only in English and
received a check for exactly $500. In each of those 61 instances, the signing occurred
between December 24, 2024 and December 31, 2024—mere days after the operative
complaint was amended to include class action claims. In an Order dated September
12, 2025, this Court found those 61 settlement agreements to be presumptively
invalid.10 See ECF No. 160 at 20 (concluding that “[Defendant] was resorting to
subterfuge, misdirection, or coercion to improperly induce employees into surrendering
their FLSA rights for pennies on the dollar”) (internal quotations and citation omitted).
While Suarez signed the settlement agreement prior to when the complaint was
amended to include class action claims, the agreement was provided only in English,
despite Suarez only understanding the words “yes” and “no.” ECF No. 98 at 51:11–16.
Suarez was unrepresented by counsel at the time he signed the agreement, which
made no mention of this lawsuit or the fact that any litigation was ongoing.11 There is no
10 At the time of the Order, none of the 61 employees had joined the suit as opt-ins and
the Court had not yet determined whether preliminary certification under Fed. R. Civ. P.
23 was warranted. Accordingly, this Court denied Plaintiffs’ request to invalidate the 61
settlement agreements without prejudice. The agreements between Defendant and
named Plaintiffs Perez, Orantes, and Suarez, were not the subject of that Order.
11 See Serna v. Bd. of Cnty. Comm’rs of Rio Arriba Cnty., No. 17-CV-196-RB-KBM,
2018 WL 4773361, at *4 (D.N.M. Oct. 3, 2018) (emphasizing that both sides were
represented by counsel and that “the facts and legal arguments have been well-
developed through the adversarial litigation process”); Lawson, 2019 WL 112781, at *2
(suggesting a bona fide dispute does not exist if a party is unrepresented); Riley v. D.
Loves Restaurants, LLC, No. CV 20-1085 WJ/KK, 2021 WL 1310973, at *4 (D.N.M. Apr.
8, 2021) (finding judicial approval unnecessary in part because plaintiff was represented
by counsel).
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evidence in the record that Suarez, in signing away his FLSA rights, knew how much
back wages or overtime he would have been entitled to under the FLSA. Indeed, the
fact that both Perez and Orantes—employees who had counsel—received significantly
larger settlement payments for giving up their FLSA claims is “prima facie evidence that
[Defendant] was trying to, and did take advantage, of [an] unrepresented employee[] to
buy themselves out of a potential lawsuit on the cheap.” ECF No. 160 at 20. Finally,
there is no logical nexus between the $500 that Saurez received and the actual back
wages he was owed. Under these circumstances, the Court cannot find that the
agreement signed by Suarez is enforceable.
III. RECOMMENDATION
For the reasons set forth above, it is hereby RECOMMENDED that Defendant
Denco Construction LLC’s Motion to Enforce Settlement Agreements, filed April 3,
2025, ECF No. 112, be DENIED.12
Dated at Denver, Colorado this 31st Day of December 2025
_______________________
N. Reid Neureiter
United States Magistrate Judge
12 Neither party raises the issue of whether the settlement agreements should be found
enforceable as to the state law claims in the event that the portions relating to the FLSA
are invalidated. Because this issue is not raised, the Court does not address it here.
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