Macaluso v. Zirtual Startups, LLC

District Court, S.D. Ohio·Decided August 17, 2021·No. 2:19-cv-03616·Unknown

Opinion

IN THE UNITED STATES DISCTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

: KRISTI MACALUSO, et al., : : Case No. 2:19-CV-3616 Plaintiffs, : : CHIEF JUDGE ALGENON L. MARBLEY v. : : Chief Magistrate Judge Deavers ZIRTUAL STARTUPS, LLC, : : Defendants. : :

FINAL APPROVAL ORDER

This matter is before the Court on the parties’ Joint Motion for Settlement Approval. (ECF No. 38). For the following reasons, the Court GRANTS the Joint Motion for Settlement Approval and the case is DISMISSED WITHOUT PREJUDICE. The parties are directed by this Court to file a Dismissal Order dismissing this case with prejudice not later than thirty (30) days after the entry of this Order. This matter is now terminated by settlement and shall be considered, pursuant to Fed. R. Civ. P. 41, dismissed without prejudice as to all claims, until the parties file the above-referenced Dismissal Order dismissing this matter with prejudice, unless the case is reopened for good cause shown upon proper motion of one or more parties to this action. The Court will retain jurisdiction over the settlement agreements. I. BACKGROUND This action for unpaid overtime wages was brought pursuant to the Fair Labor Standards Act (“FLSA”) by Plaintiff Kristi against Zirtual Startups, LLC, a company that provides virtual assistants to both companies and individuals. (ECF No. 1). Ms. Macaluso was employed by Zirtual as a virtual assistant between June 2017 through at least August 2019, when this litigation began. (Id. ¶ 12). Zirtual recruits virtual assistants via job advertisements on major employment websites, seeking candidates with experience in project management, personal and business calendar management, research, purchasing, and other administrative tasks typically performed by personal assistants. (Id. ¶ 17). Potential candidates are subject to “intense vetting procedures.” (Id. ¶ 41).

The advertisements informed candidates that they would be compensated as 1099 independent contractors and could expect average hourly rates between $13 to $18 per hour. (Id.). Ms. Macaluso contends that Zirtual set the working hours for virtual assistants and set forth expectations for virtual assistants in a “Comprehensive Virtual Assistant Handbook.” (Id. ¶ 18). Virtual assistants also sign “Independent Contractor Agreement[s].” (Id.). Ms. Macaluso challenged Zirtual’s practice of classifying most of its virtual assistants as “independent contractors,” alleging it was a misclassification that resulted in a failure to pay overtime compensation. (Id. ¶ 15). She alleged that the Defendant exercised control over “all aspects” of the working relationship with virtual assistants. (Id. ¶ 19). This control extended to

virtual assistants’ opportunities for profit or loss. (Id. ¶¶ 22–23). Virtual assistants were not to perform or accept services on a per-job or project-to-project basis or otherwise negotiates prices with Zirtual or Zirtual’s customers. (Id. ¶ 24). She also alleged that virtual assistants frequently worked in excess of forty hours per week without overtime compensation. (Id. ¶¶ 35, 44). Because Zirtual sets the working hours for virtual assistants, virtual assistants are limited in their ability to work for other companies or operate independent businesses. (Id. ¶ 42). Zirtual also maintains an on-call policy for its virtual assistants. (Id.). Ms. Macaluso argued that virtual assistants must perform uncompensated standardized tasks that are required by Defendant, in addition to their compensated tasks. (Id. ¶ 50). Ms. Macaluso brought this action on behalf of herself and similarly situated current and former virtual assistants who elected to opt in, pursuant to Section 216(b) of the FLSA. (Id. ¶¶ 58– 59). In April 2020, this Court conditionally certified the collective action and approved for notice to be sent to similarly situated employees. (ECF No. 16). After the sixty-day opt-in period, 28 individuals opted into the matter pursuant to 29 U.S.C. § 216(b). (ECF No. 38 at 3). One individual

later withdrew her opt-in consent form. (Id.). The parties proceeded to mediation in October 2020, at which time they reached a settlement agreement. (ECF No. 34). Under the proposed settlement, Defendant will pay $150,000.00 to resolve the claims of the opt-in Plaintiffs. (ECF No. 39-1 ¶ 15). Opt-In Plaintiffs will receive settlement payments and liquidated damages. (Id.). Proposed payouts were calculated proportionally based on an individual assessment of the workweeks worked by Opt-In Plaintiffs. (ECF No. 38 at 4–5). The average payout under the settlement agreement is $3,410.41. (Id. at 5). The settlement also provides $200 payments to several virtual assistants who had no damages or who could not recall working overtime hours during the period of three years prior to the settlement. (Id.). The proposed

settlement would fully resolve the Opt-In Plaintiffs’ claims for overtime compensation against Zirtual. The settlement agreement also provides for a service award of $3,000.00 to Ms. Macaluso, attorneys’ fees in the amount of $50,000.00, and litigations costs in the amount of $1,508.65. (Id. at 5–6; ECF No. 39-1 ¶ 16). This Court has reviewed the Joint Motion and Settlement Agreement and approves the proposed settlement for the following reasons. II. LAW & ANALYSIS A court shall approve an FLSA settlement if there exists a bona fide dispute that can be resolved by a settlement agreement, the agreement was reached through an arms-length negotiation, and the agreement is fair, reasonable, and adequate. Kritzer v. Safelite Solutions, LLC, No. 2:10-cv-0729, 2012 WL 1945144, at *5 (S.D. Ohio May 30, 2012) (citing In re Broadwing, Inc. ERISA Litig., 252 F.R.D. 369, 381–82 (S.D. Ohio 2006)). In evaluating a settlement agreement, a court must “ensure that the parties are not, via settlement of [the] claims, negotiating around the clear FLSA requirements of compensation.” Rotuna v. W. Customer Mgmt. Grp. LLC, No. 4:09-cv-1608, 2010 WL 2490989, at *5 (N.D. Ohio June 15, 2020).

The settlement meets this standard for approval. First, this Court finds that the settlement is the result of a bona fide dispute. Defendant denies the material allegations of the Opt-In Plaintiffs’ claims and any violation of the FLSA, and this matter has been vigorously prosecuted. There is no indication that the parties were “merely engaged in pretense and posturing.” See Moulton v. U.S. Steel Corp., 581 F.3d 344, 351 (6th Cir. 2009). As discussed below, the Court also finds that the settlement agreement was reached as the result of arms-length negotiation. A. Fairness, Reasonableness, and Adequacy of Settlement To determine whether a settlement is “fair, reasonable, and adequate,” the Court balances the following factors: “(1) the risk of fraud or collusion; (2) the complexity, expense, and likely

duration of the litigation; (3) the amount of discovery completed; (4) the likelihood of success on the merits; (5) the opinion of class counsel and representatives; (6) the reaction of absent class members; and (7) public interest in the settlement.” Vigna v. Emery Fed. Credit Union, No. 1:15- CV-51, 2016 WL 7034237, at *3 (S.D. Ohio Dec. 2, 2016). On balance, these factors weigh in favor of approving the proposed settlement agreement. 1. Risk of Collusion This Court finds that the negotiations were conducted at arm’s length and there is no reason to believe the settlement involves collusion. The parties engaged in substantial document review and data analysis in this case. (ECF No. 38 at 8).

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Macaluso v. Zirtual Startups, LLC, (S.D. Ohio 2021).

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