Wage Law

Darden Settles More Wage & Hour Class Actions

Darden Restaurants, Inc. has agreed to pay another $4 million to settle another two class action lawsuits involving California employees of Red Lobster and Olive Garden restaurants. The suits accused the company of requiring servers and bartenders to make up for cash shortages at the end of their shifts. The settlements were disclosed in recent S.E.C. filings. A company spokesman said the settlements the allegations were "almost impossible to prove one way or the other," but that the defending the cases would be too costly.

Staples to Pay $38 Million to Settle Asst. Manager OT Case

A wage & hour class action lawsuit brought against Staples Inc. on behalf of approximately 1,700 current and former assistant store managers in California has been settled for $38 million. The settlement is still subject to court approval. A trial had been scheduled to start earlier this month. The suit alleged that the stores misclassified assistant managers as exempt under overtime pay regulations. According to a 2003 SEC filing, the lawsuit alleged damages of up to $150 million. The company denied the claims and admitted no wrongdoing in the settlement. A spokesperson for the office products firm said that "Staples believes that its store labor model, which is based on a commitment to fair and respectful treatment of its associates, is fully compliant with applicable California law.''

Class Action Settlement Order Reversed Because Fees Were Too Low

Last month, the Seventh Circuit reversed a U.S. District Court order regarding attorneys' fees in a class action settlement because the trial court used the wrong method and, consequently, may not have awarded enough fees. Sutton v. Bernard (7th Cir. 2007) __ F.3d __ will be going into our research folder immediately.

MasTec To Pay Up To $12.6 Million in OT Settlement

Coral Gables-based communications construction firm MasTec will pay up to $12.6 million to settle wage disputes raised in a 2005 FLSA collective action filed in U.S. District Court in Tampa, Florida. The settlement class includes current and former employees from California, Florida, Georgia, Maryland, New Jersey, New Mexico, North Carolina, South Carolina, Texas and Virginia, who worked for the company or its affiliates from 2001 to 2007. One of the affiliates was MasTec Advanced Technologies, a firm handling DirecTV installation services. The complaint alleged that the company failed to pay overtime wages, including wages for off-the-clock mandatory meetings. Court records reflect that the settlement amount was calculated by assuming 1.61 hours of unpaid overtime for each day of work from October 10, 2002 to May 26, 2006. The settlement requires court approval, which has not yet been ordered. The $12.6 million maximum payout is based upon a 100% FLSA opt-in rate. In all likelihood, the total payout will be less than $6 million, including $3.8 million to the plaintiffs' attorneys, $750,000 for the named plaintiffs, and perhaps as much as $2 million for class members who opt in, based upon historically average opt-in rates.

We are not aware of any California class actions against MasTec for wage violations under state law, but we would be surprised if there isn't one out there.

Sony Computer Entertainment Settles $8.5M Class Action

Sony Computer Entertainment America will pay up to $8.5 million to settle a wage and hour class action lawsuit brought on behalf of current and former employees who worked as artists and modelers known as "Image Production Employees." The suit, filed in 2005, and settlement will cover employees who worked at Sony February 2001 and September 2007. Under the terms of the settlement, Sony will also reclassify class members with a job title of Associate Artist and Artist 1 as nonexempt employees. As usual, the employer denies any liability or wrongdoing. The settlement is subject to court approval at a hearing set in September.

San Francisco Settles Overtime Pay Dispute With Employees For $625,000

Approximately 75 employees of the City and County of San Francisco will share $625,000 to settle an FLSA claim filed in April 2005. The case Alba, et al. v. City and County of San Francisco (ND Cal., case number 3:05-CV-01667-TEH) is not a class action and need not be approved by the court. It is, however, still subject to approval by the Board of Supervisors.

Another Way to Blow Your Class Action Settlement and Your Arbitration Agreement

Q: May a party lose its contractual right to compel arbitration if, when negotiating and seeking approval of a class action settlement, it misrepresents the benefits of the proposed settlement to the court, opposing counsel and others?
A: Yes.

In Aviation Data, Inc. v. American Express Travel Related Services Company, Inc., the trial court refused to approve a class action settlement when it concluded that counsel for defendant American Express Travel misled the plaintiffs in the course of negotiations by offering to make significant modifications to its travel insurance program that, unbeknownst to the plaintiffs, it had already made for reasons unrelated to the lawsuit. The trial court then ruled that, that due to its misleading conduct, Amex lost its right to compel arbitration. The Court of Appeal affirmed.

By soliciting amendment of the complaint to allege a nationwide class and then crafting a proposed settlement structured around largely illusory relief, Amex forced ADI to intervene in the California action and required ADI and the plaintiff class to engage in protracted and costly discovery and appearances before the court as its deception about the implementation of the TAA code gradually surfaced. Only after the truth was unearthed and the settlement failed did Amex move to compel arbitration. Amex’s conduct smacks both of “substantive” prejudice “such as when a party loses a motion on the merits and then attempts, in effect, to relitigate the issue by invoking arbitration”; and of the situation in which a party “too long postpones his invocation of his contractual right to arbitration, and thereby causes his adversary to incur unnecessary delay or expense.” (Thyssen, Inc. v. Calypso Shipping Corp., S.A., supra, 310 F.3d at p. 105.)

It's interesting reading for anyone who does class action litigation or needs, from time to time, to challenge an arbitration agreement. You can download the full opinion here in pdf or word format.

The Largest Meal/Rest Period Settlement To Date

Last month, U.S. District Court Judge Thelton E. Henderson gave final approval to an $87 million settlement in a meal and rest period class action brought by a class of drivers against United Parcel Service for forcing employees to work off the clock. A pre-certification mediation with David Rottman was unsuccessful. After the case was certified and the class members won several key rulings, the case settled. Fully 94% of the class members participated in the settlement. The court approved attorney's fees of 25%, along with $15,000 to $25,000 in class representative enhancements. Approximately $4 million in settlement fund residue will be donated to food banks.

The lawsuit alleged that UPS package car drivers who worked more than ten hours a day routinely worked through their meal and rest breaks. They routinely had to wait more than five hours for their first meal break. The class action was filed after the class representatives were unable to change the policies through union grievances. Some of the 23,000 affected drivers received award of nearly $20,000. Congratulations to William Kershaw (Kershaw, Cutter & Ratinoff, LLP), Lyle Cook, Wendy York, Scott Cole and their entire team, for obtaining what is undoubtedly the largest meal and rest period settlement we've seen.

Darden Restaurants Pays Another $11 Million To Settle Overtime Class Actions

We haven't seen a press release, but according to its most recent SEC filings, it looks like Darden Restaurants Inc. (Red Lobster and Olive Garden restaurants) has agreed to pay up to $11 million to settle five wage and hour class actions pending in Los Angeles, Orange and Sacramento Counties. Unlike our case, which settled for $9.5 million, these cases included overtime claims on behalf of service managers, beverage and hospitality managers and culinary managers who were classified as exempt employees.

Here is what DRI had to say about our case:

Like other restaurant companies and retail employers, we have been faced in a few states with allegations of purported class-wide wage and hour violations. In March 2002 and March 2003, two purported class action lawsuits were brought against us in the Superior Court of Orange County, California by three current and former hourly restaurant employees alleging violations of California labor laws with respect to providing meal and rest breaks. Although we continue to believe we provided the required meal and rest breaks to our employees, to avoid potentially costly and protracted litigation, we agreed during the second quarter of fiscal 2005 to settle both lawsuits and a similar case filed in Sacramento County, for approximately $9.5 million. Terms of the settlement did not include any admission of liability by us, and all settlement proceeds were paid as of the end of the third quarter of fiscal 2006.

Here's what they had to say about the latest settlement:

Beginning in 2002, a total of five purported class action lawsuits were filed in Superior Courts of California (two each in Los Angeles County and Orange County, and one in Sacramento County) in which the plaintiffs allege that they and other current and former service managers, beverage and hospitality managers and culinary managers were improperly classified as exempt employees under California labor laws. The plaintiffs sought unpaid overtime wages and penalties. Two of the cases were removed to arbitration under our mandatory arbitration program, one was stayed to allow consideration of judicial coordination with the other cases, one is proceeding as an individual claim, and one remains a purported class action litigation matter. Although we continue to believe we correctly classified these employees, to avoid potentially costly and protracted litigation, we agreed in February 2006 to a tentative settlement. Without admitting any liability, we agreed to pay up to a maximum total of $11 million to settle all five cases, of which $9 million was recognized during fiscal 2006 and is included in selling, general and administrative expenses. The tentative settlement will be documented in a full settlement agreement and must have court approval. We cannot predict when the settlement will be final but estimate preliminary court approval will occur in the first half of fiscal 2007, with final court approval and payment of the settlement proceeds no earlier than the second quarter of fiscal 2007.

That last bit makes it sound like the final approval will come before the preliminary approval, which can't be the case, but we infer from it that the payments will be made shortly.

Rubio's Restaurants to Pay $7.5 Million to Settle Overtime Class Action

According to a SEC Form K-8 filed by Rubio's Restaurants, Inc., the company will pay $7.5 million over 36 months to settle a consolidated class action lawsuit filed in Orange County Superior Court on behalf of current and former general managers and assistant managers who were classified as exempt executive employees. One third of the settlement will be paid within 65 days after the court's final approval of the settlement and dismissal of the case; another third will be paid within 18 months; and the last third shall be paid 36 months after final approval. An additional interest charge of $337,500 will be paid with the final installment. The case, filed in 2001, was scheduled to go to trial in June 2007. The settlement is subject to approval by Orange County Superior Court Judge Thierry Colaw.