Labor & Employment Law Daily Wrap Up, WAGE-HOUR—SETTLEMENTS—E.D. Cal.: California Walmart workers get final approval of $5.2M settlement over claims of unpaid COVID-19 screening time, (Jan 15, 2025)

By Ronald Miller, J.D.

The court was satisfied that subtle signs of collusion were not present here and found that the settlement was fair, reasonable, and adequate.

Walmart store employees in California were granted final approval of a $5.2 million settlement of a class action alleging that the time they spent waiting in line to undergo COVID-19 screenings before clocking in was compensable under California law, ruled a federal district court in California. Considering the strengths and weaknesses of the employees’ case, the court found in favor of granting final approval of the parties’ settlement in this action. Further, the court concluded that the amount offered in settlement of this action provides adequate relief for the class (Haro v. Walmart, Inc., No. 1:21-cv-00239-KES-SKO (E.D. Cal. Jan. 8, 2025)).

Screening policy. In its March 18, 2024, order granting the employees’ motion for preliminary approval of a class action settlement, the court summarized the employees’ allegations as follows: In 2020, Walmart implemented a company-wide policy requiring its hourly paid employees to pass a COVID-19 health screening before clocking in for a shift. Walmart paid the employees an additional five minutes per shift to compensate for the time spent waiting in line and undergoing the screening. However, two California employees contended that five minutes’ worth of pay was insufficient because it did not account for the time workers spent walking from the testing area to the time clocks, some of which were “hundreds of feet away.”

Two California employees brought this lawsuit as both a collective action under the FLSA and as a Rule 23 class action under the California Labor Code, and claimed Walmart unlawfully failed to pay all wages and overtime, failed to provide itemized wage statements, and failed to provide wages upon separation of employment.

Under the proposed settlement, Walmart will pay a total of $5,200,000. It will also pay the employer’s share of the applicable payroll taxes.

Class certification. The court examined the class action factors in the order granting preliminary approval of the settlement and found the factors warranted certification. The court’s findings on these issues have not changed, and no objections to class certification were raised.

Specifically, the employees met Rule 23(a)’s numerosity prerequisite since they estimated there were approximately 183,750 class members. They also satisfied the commonality requirement since all claims were premised on the implications of Walmart’s screening policy, and common questions related to the application of a uniform policy generally satisfied Rule 23(a)(2). Their claims also hinged on common questions of law, such as whether Walmart violated the California Labor Code by implementing a policy requiring off-the-clock screenings, and classifying the time spent walking to the time clocks after completing the screening as non-compensable time. The typicality and adequacy of representation factors were also met.

The plaintiffs also met the predominance requirement of Rule 23(b)(3) since they challenged Walmart’s screening policy, claiming it amounted to uncompensated labor in violation of California law. The superiority requirement was also satisfied since the legal issues could be resolved for all members more efficiently and expeditiously in a single action, and class resolution was superior to other available methods for adjudication of the controversy.

Class action settlement. To approve a settlement, a district court must: (i) ensure notice is sent to all class members; (ii) hold a hearing and make a finding that the settlement is fair, reasonable, and adequate; (iii) confirm that the parties seeking approval file a statement identifying the settlement agreement; and (iv) be shown that class members were given an opportunity to object.

The parties filed the settlement agreement on December 15, 2023, and class members were given an opportunity to object on or before June 20, 2024. The court did not receive any objections, timely or otherwise, to the settlement. Next, the court turned to the adequacy of notice and its review of the settlement.

Notice. Adequate notice of the class settlement must be provided under Rule 23(e). The court previously reviewed the notice provided in this case at the preliminary approval stage and found it to be satisfactory. On June 3, 2024, the settlement administrator sent class notices to 75,657 class members. The notice advised class members they could submit a claim for exclusion or objection. In total, 2,052 class notices were undeliverable. The administrator also received 19 exclusions. The court found that Rule 23(e) was satisfied.

Fairness determination. At the final approval stage, the primary inquiry is whether the proposed settlement “is fundamentally fair, adequate, and reasonable.” In assessing the fairness of a class action settlement, courts balance the following factors: (1) the strength of the plaintiffs’ case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members to the proposed settlement.

Strength of case. A central issue in this case was whether the time Walmart employees spent waiting in line to undergo COVID-19 screenings before clocking in for work was compensable under California law. The parties disputed the amount of time it took class members to undertake the screenings. Thus, considering the strengths and weaknesses of the employees’ case, the court found that consideration of this factor weighed in favor of granting final approval of the parties’ settlement in this action.

Risk of litigation. The second and third factors, the risk, expense, complexity, and likely duration of further litigation, and the risk of maintaining class action status throughout trial, also weighed in favor of approval.

Settlement offer. To evaluate the fairness of the settlement award, the court should “compare the terms of the compromise with the likely rewards of litigation.” Here, the parties have agreed to a $5,200,000 gross settlement amount (GSA), allocated to class members after the following expenses are deducted from the GSA: (1) $37,500 in civil PAGA penalties payable to the California Labor and Workforce Development Agency (LWDA); (2) $20,000 in incentive payments to be split between the two named plaintiffs; (3) $432,522 in costs to be paid to the settlement administrator; (4) $1,733,160 of attorneys’ fees; and (5) $261,751.87 in litigation expenses.

In addition, the court noted that the allocation formula employed here is fair and reasonable because each settlement class member is allocated a payout that scales directly to the number of periods worked. None of the settlement will revert to Walmart. Thus, based on the information before it, the court concluded that the amount offered in settlement of this action provides adequate relief for the class.

Stage of proceedings. As detailed in the court’s order granting preliminary approval, the court was satisfied that the settlement was the result of “genuine, informed, and arm’s-length bargaining.” The court also found that class counsel’s experience and views weighed in favor of granting final approval.

With regard to the presence of government participation, the settlement agreement contemplated payment of a total of $50,000 in civil PAGA penalties, $35,000 of which is payable to the LWDA.

Additionally, with respect to the reaction of the class members to the proposed settlement, the court noted that no class members have filed an objection to the settlement pending final approval, and only 19 out of more than 200,000 class members have opted out of the settlement. Accordingly, consideration of this factor weighed in favor of granting final approval.

Finally, the court examined whether subtle signs of collusion were present here. First, the court found that class counsel was not seeking a disproportionate distribution of the settlement. There is no clear sailing arrangement as part of the parties' settlement agreement. Further, the parties did not arrange for any unawarded fees to revert to Walmart. Therefore, the court granted the employees’ motion for final approval of the parties’ class action settlement.

The case is No. 1:21-cv-00239-KES-SKO.

Judge: Oberto, S.

Attorneys: David W. Hodges (Hodges & Foty) for Amado Haro. Gregory William Knopp (Proskauer Rose) for Walmart, Inc.

Companies: Walmart, Inc.

Cases: WageHour ClassActions Overtime WorkingTime RemediesDamages Covid19 StateLawClaims CaliforniaNews