Labor & Employment Law Daily Wrap Up, WAGE-HOUR—CLASS ACTIONS—S.D. Cal.: Final approval granted for $4.1 million settlement of employees’ claims related to screenings, (Jan 8, 2025)

By Ronald Miller, J.D.

Because no pertinent facts had changed since the court reached its earlier conclusion in its preliminary approval order, the court reaffirmed and incorporated by reference its analysis of the Rule 23(e) requirements as set forth in its preliminary approval order.

A federal district court in California granted final approval of a $4.1 million settlement of employee claims that their employer required them to undergo COVID-19 screenings and security inspections without pay. The court reaffirmed and incorporated by reference its prior analysis under Rule 23 as set forth in its order granting the plaintiffs’ motion to conditionally certify the settlement class. Further, the court determined that the notice to class members was adequate and satisfied both the requirements of Rule 23 and due process. Finally, the court found the settlement to be “fair, reasonable, and adequate” pursuant to Rule 23(e) (Pipich v. O’Reilly Auto Enterprises, LLC, No. 3:21-cv-01120-AHG (S.D. Cal. Jan. 7, 2025)).

On June 16, 2021, the employee filed a collective action under the FLSA alleging that the employer had failed to provide proper payment of all wages to employees who were putative collective members by requiring them to undergo COVID-19 screenings and security inspections each day without pay, including during meal breaks, rest breaks, and off-the-clock pre-shift and post-shift time.

After the court found that the employee failed to state a claim under the FLSA and dismissed the action without prejudice, the employee filed a second amended complaint against the employer, bringing claims under the Private Attorneys General Act based on the same underlying allegations.

Global settlement. On February 21, 2024, the parties settled the case during a Mandatory Settlement Conference. The settlement was a global settlement including four related cases. The parties agreed to settle these cases on a class-wide basis.

Pursuant to the terms of the settlement, the employee filed a fourth amended complaint bringing class-wide claims for: (1) failure to provide meal periods under the California Labor Code; (2) failure to authorize and permit rest breaks; (3) failure to pay all wages earned at the correct rates of pay; (4) failure to indemnify; (5) failure to issue accurate and complete wage statements; (6) willful failure to timely pay final wages; and (7) unfair competition under California Business and Professional Code. In addition, the plaintiffs brought an eighth cause of action seeking civil penalties under PAGA.

On May 24, 2024, the plaintiffs filed a motion to grant preliminary approval of class action settlement, which the court granted on June 7, 2024. On October 2, 2024, the plaintiffs filed an unopposed motion for final approval of class action settlement.

Settlement agreement. The settlement class is composed of individuals employed by O’Reilly directly or indirectly through staffing agencies and who worked at one of the employer’s distribution centers in California during the class period of July 5, 2018, to May 22, 2024. O’Reilly will pay $4,100,000 (the Gross Settlement Amount), in addition to any and all employer payroll taxes owed on the wage portions of the individual class payments. The administrator will disburse the entire gross settlement amount without requiring participating class members to submit any claim as a condition of payment. None of the gross settlement amount will revert to the employer.

The administrator will deduct the following payments from the gross settlement amount:

Class representative service payments to the class representatives totaling not more than $55,000; Attorney fee payments to class counsel of up to one-third of the gross settlement amount, which is estimated to be $1,366,666.67, and a class counsel litigation expenses payment of up to $120,000; and administration expenses payment to the administrator not to exceed $40,000.

Payment to each participating class member will be calculated by: (a) dividing the net settlement amount by the total number of workweeks worked by all participating class members during the class period; and (b) multiplying the result by each participating class member’s workweeks.

PAGA penalties in the amount of $410,000 to be paid from the gross settlement amount, with 75 percent allocated to the LWDA PAGA payment and 25 percent allocated to the individual PAGA payments.

Class certification. Before granting final approval of a class action settlement agreement, the court was first required to determine whether the proposed class can be certified. Here, the court reaffirmed and incorporated by reference its prior analysis under Rule 23 as set forth in its order granting the plaintiffs’ motion to conditionally certify the settlement class. Accordingly, the settlement class was certified for settlement purposes only.

Adequacy of notice. Next, the court had to determine whether the class received adequate notice. Rules 23(c)(2)(B) and (e)(1) generally require that a Rule 23(b)(3) settlement class should receive notice in a reasonable manner, and that the notice be “the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.

In its preliminary approval order, the court approved notice of this class action and proposed settlement. The class notice, in both English and Spanish, was mailed to class members, and a settlement administration website and toll-free hotline were implemented. The class notice was mailed to the 5,053 class members. As of the close of the notice period, 4,987 class members (98.6 percent) received the class notice. As of September 6, 2024, the Settlement website had been visited 50 times since it was established on July 22, 2024. Additionally, as of September 6, 2024, the toll-free number, which opened on July 22, 2024, had received 12 calls.

The notice advised the classes of the terms of the settlement and of their rights including: (1) how to participate and how to receive payment of their share of the settlement; (2) how to object to the settlement and to appear at the final approval hearing; (3) how to request exclusion from the settlement; (4) the manner and timing for doing any of these acts; and (5) the date and time set for the final approval hearing. As of the date of this order, no class members have objected to the settlement, and one class member requested exclusion.

Accordingly, the court determined that the notice was adequate and satisfied both the requirements of Rule 23 and due process.

Fairness of the settlement. Next, the court determined whether the proposed settlement was “fair, reasonable, and adequate” pursuant to Rule 23(e)(2). In its preliminary approval order, the court found that the applicable Rule 23(e)(2) factors weighed in favor of approving the settlement. Those factors included the adequacy of class representatives and class counsel, the non-collusive nature of the settlement negotiations, the degree of recovery on behalf of the class members, the risks attendant in continued litigation, the experience of class counsel, and the effectiveness of the proposed method of distributing relief to the class.

Because no pertinent facts had changed since the court reached its earlier conclusion in its preliminary approval order, the court reaffirmed and incorporated by reference its analysis of the Rule 23(e) requirements as set forth in its preliminary approval order. Accordingly, the court found the settlement to be “fair, reasonable, and adequate” pursuant to Rule 23(e).

The case is No. 3:21-cv-01120-AHG.

Judge: Goddard, A.

Attorneys: Alexandra K. Piazza (Berger Montague) for Jeffrey Pipich. James M. Peterson (Higgs Fletcher & Mack) for O’Reilly Auto Enterprises, LLC.

Companies: O’Reilly Auto Enterprises, LLC

Cases: WageHour ClassActions WorkingTime RemediesDamages StateLawClaims CaliforniaNews