Woods v. Vector Marketing $6.75M Settlement Granted Prelim Approval

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In June, U.S. District Judge Edward M. Chen granted preliminary approval of a $6.75 million settlement between Vector Marketing Corporation and sales representatives for alleged violations of California, Florida, Illinois, Michigan, and New York state wage and hour laws and the national Fair Labor Standards Act. See Woods, et al. v. Vector Marketing Corp., No. 14-CV-00264 (N.D. Cal. June 30, 2016), Third Revised Order Granting Plaintiff’s Motion for Preliminary Approval of Class and Collective Action Settlement (slip op. available here). Before becoming sales representatives, the plaintiffs had been trainees who attended a mandatory training program over the course of three days to learn how to sell Cutco products through in-home demonstrations. The training lasted for five hours each day, and at some point during the three-day training, recruits were required to create lists of potential customers who might want to buy Cutco products after the training ended. Vector did not pay recruits for the training time and the plaintiffs filed a lawsuit in January 2014 alleging that they qualified as employees under the respective state laws and the FLSA.

The class and collective action covered recruits who either had completed all three days of training or who partially completed training and created the customer lists. Vector had challenged the certification of these classes in 2015, arguing that the recruits were not employees and that there were significant dissimilarities between those who completed all the days but did not create customer lists and those who did create lists. Both parties agreed that application of the Portland Terminal test would resolve the question of whether the trainees were employees. Under this test, the following factors are considered:

(1) the “training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school”; (2) the “training is for the benefit of the trainee”; (3) the “trainees do not displace regular employees, but work under close observation”; (4) the “employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion his operations may actually be impeded”; (5) the “trainees are not necessarily entitled to a job at the completion of the training period”; and (6) the “employer and the trainees understand that the trainees are not entitled to wages for the time spent in training.”

Order (1) Granting in Part and Denying in Part Plaintiffs’ Motion for Class Certification; and (2) Denying Defendant’s Motion to Partially Decertify FLSA Collective Action (N.D. Cal. Sept. 4, 2015) (quoting Harris II, 753 F. Supp. 2d 1006). Although the court did not decide whether the plaintiffs had been “employees” under the Portland Terminal test, Judge Chen granted class certification, holding that five of the six factors could be decided collectively and any dissimilarities could be addressed in a trial. Following certification, the plaintiffs and Vector engaged in extensive negotiations and eventually reached a settlement in December 2015.

Court papers indicate there are approximately 91,000 putative class members. The average recovery is estimated to be $42.50 per recruit after factoring in fees, costs, and enhancements. The final approval hearing of the settlement is scheduled for October 6, 2016.

Authored by: 
Anthony Castillo, Associate