Posts belonging to Category Settlements

The Gig Is Up: $8.75M Deal in Singer v. Postmates Courier Case Approved

In early September, Judge Jeffrey S. White preliminarily approved a nearly $9 million settlement for couriers of Postmates Inc., the on-demand delivery service, bringing the parties one step closer to resolving the proposed class action that alleged that the company misclassified couriers as independent contractors and failed to pay them minimum wages. See Singer, et al. v. Postmates, Inc., Case No. 4:15-CV-01284-JSW (N.D. Cal. Sept. 1, 2017), Order Granting Plaintiff’s Motion for Preliminary Approval of Class Action Settlement (slip op. available here). The action is another in a recent spate of misclassification cases brought about by the “gig economy,” in which temporary, flexible jobs are commonplace and workers are often asked to sacrifice certain benefits for purported freedom from the traditional workplace.

On March 19, 2015, couriers across the country sued Postmates in the United States District Court, Northern District of California. In Singer, the plaintiff and other couriers alleged that, in treating them as independent contractors, Postmates violated the federal Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq., by failing to pay them minimum wage or overtime for all hours worked in excess of forty per week. The suit further alleged violations of  California’s labor statutes (minimum wage, wage statement, and expense reimbursement laws), the Private Attorneys General Act (“PAGA”), and New York overtime and minimum wage laws, as to couriers who made deliveries in California and New York and personally bore necessary business-related expenses and costs without reimbursement from Postmates.

Although classified as independent contractors by Postmates, the couriers argued they are actually employees, given that they are required to follow detailed requirements imposed on them by Postmates, are graded or evaluated by Postmates, and are subject to termination based on Postmates’ discretion and/or their failure to adhere to those requirements (such as rules regarding their conduct with customers, their timeliness in picking up items and delivering them to customers, and the accuracy of their orders). By being misclassified as independent contractors, Postmates’ couriers alleged they were not paid proper compensation for hours worked and were required to bear many of the expenses of their employment, including those for their vehicles and bicycles, gas, and phone and data plans, without reimbursement.

In recognizing that no California court has conclusively determined whether the gig workers are, in fact, employees or independent contractors, and that both parties faced substantial risks of further litigation, Judge White preliminarily approved the $8.75 million deal, which provides reimbursement for mileage and travel expenses to couriers who submit claims. The non-reversionary settlement also provides non-monetary relief whereby Postmates will modify the terms of its Independent Contractor Agreement to permit termination of couriers only for specified material breaches of the agreement, permit couriers to appeal contract terminations through a neutral arbitration process at Postmates’ expense, provide couriers access to accident insurance at negotiated group rates, and establish a forum for receiving feedback from couriers regarding proposed changes to its business practices. The proposed settlement class includes approximately 88,000 California couriers, 28,000 New York couriers, 3,000 couriers in Massachusetts, 8,000 couriers in Washington, D.C., and 107,000 couriers throughout the remainder of the country.

The Postmates settlement is one of other similar deals either already approved or currently being considered by judges presiding over misclassification suits brought by gig economy workers.[1] Recently, several state and federal agencies—including the Internal Revenue Service—have cracked down on companies claiming to use independent contractors who perform work like employees of the company. Despite pressure from public agencies and private actions intent on curbing corporate misuse of independent contractor models similar to Postmates’, companies will likely continue to pass operating costs onto workers in the gig economy until California courts definitively decide whether gig workers are employees or independent contractors.

[1] See, e.g., grocery delivery drivers (Casey Camp, et al. v. MapleBear, Inc., dba Instacart, Los Angeles County Superior Court, Case No. BC652216); rideshare drivers (Steven Price v. Uber Technologies, Inc., et al., Los Angeles County Superior Court, Case No. BC554512; Patrick Cotter, et al., v. Lyft, Inc., N.D. Cal., Case No. 3:13-cv-04065-VC); parcel delivery drivers (FedEx Ground Package System, Inc. Employment Practices Litigation, N.D. Ind., Case No. 3:05-md-00527); call center workers (Norman, et al., v. Dell Inc., et al., D. Ore., Case No. 07-cv-06028); and exotic dancers (Roe v. SFBSC Management, LLC, N.D. Cal., Case No. 14-cv-03616).

Authored by:
Ari Basser, Associate

McKnight v. Uber “Safe Rides” Settlement for Consumers

After the district court rejected their first deal in McKnight, et al. v. Uber Technologies, Inc., et al., No. 3:14-cv-05615-JST (N.D. Cal.), the plaintiffs and Uber have submitted an amended settlement for approval. See Plaintiffs’ Notice of Motion and Motion for Preliminary Approval of Class Action Settlement, available here. The $32.5 million settlement would resolve the plaintiffs’ claims that Uber misled consumers about the quality of the background checks on the drivers and whether all of the “safe rides” fees charged by Uber go toward safety measures. The revised deal adds $4 million to the fund. More importantly, the amended settlement now excludes consumers who did not pay the “safe rides” fee, reducing the class size by over 2 million, according to the plaintiffs in their motion for preliminary approval.

The restructured deal is aimed at fixing problems identified by District Judge Jon S. Tigar in denying preliminary approval of the parties’ initial settlement. See Order Denying Motion for Preliminary Approval, Philliben, et al. v. Uber Technologies, Inc., et al., No. 3:14-cv-05615-JST (N.D. Cal. Aug. 30, 2016) (slip op. available here). According to Judge Tigar, the initial settlement fell short of the standard for preliminary approval because it failed to distinguish between consumers who paid the “safe rides” fee from those who had not—all were paid under the same payment formula. For Judge Tigar, the settlement structure unfairly diluted the payments to consumers who were more deserving of payment. By excluding consumers who did not pay the “safe rides” fee from the class definition, the amended settlement eliminates the dilution problem. Those excluded consumers also would not be releasing any claims, so they retain the right to pursue claims on their own. Judge Tigar also asked for more extensive analysis of the value of the claims had the class prevailed at trial, which the plaintiffs provide in the renewed motion for preliminary approval.

Consumer and plaintiffs’ advocates should continue to monitor this settlement to get a further read on how courts are evaluating settlements involving the controversial ride-sharing company. To be sure, the prior version of the settlement illustrates the danger of a settlement that sweeps too broadly and fails to tailor the settlement structure to the allegations in the complaint. While the amended settlement appears to represent a strong victory for consumers, the court will surely scrutinize the settlement closely. The closely-watched preliminary approval hearing scheduled for July 6 was vacated on June 27, 2017; the court is expected to issue its order shortly.

Authored By:
Ryan Wu, Senior Counsel

Third Time’s the Charm for Karapetyan v. ABM Wage-and-Hour Settlement

Following three rounds of briefing in support of Plaintiff Vardan Karapetyan’s motion for preliminary approval of his class action settlement, on June 12, 2017, U.S. District Judge George H. Wu granted preliminary approval of a $5 million wage-and-hour settlement on behalf of current and former employees of Defendants ABM Industries Incorporated and ABM Security Services, Inc. in Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order Granting Preliminary Approval of Class Action Settlement (C.D. Cal. June 12, 2017) (slip op. available here).

The plaintiff alleged that ABM violated the California Labor Code by not providing class members with meal and rest breaks; failing to pay premium wages for missed meal and rest breaks, overtime wages, other unspecified unpaid wages, and wages upon termination; and by failing to provide accurate wage statements. Following the California Supreme Court’s decision in Augustus v. ABM Security Services, Inc. (2016) 2 Cal. 5th 257, which clarified that employers may not require employees to take on-duty and/or on-call rest periods (previously covered on ILJ here), the parties agreed to participate in mediation. With the mediator’s guidance, the parties settled the claims for a $5 million non-reversionary common fund, inclusive of class member payments (proportional to the number of weeks each class member worked during the class period), administrative costs, an incentive award, attorneys’ fees and costs, a payment to the Labor and Workforce Development Agency, and payroll taxes. The plaintiff moved for preliminary approval of the class action settlement on April 19, 2017.

On May 1, 2017, Judge Wu denied the motion on class certification grounds; namely, that Karapetyan had failed to demonstrate through sufficient evidence that the typicality and predominance elements of conditional class certification had been met. Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order Denying Preliminary Approval of Class Action Settlement (C.D. Cal. May 1, 2017), at 2 (slip op. available here). Within a few weeks of the denial, the plaintiff renewed his motion for preliminary approval with an expanded typicality and predominance analysis. The renewed motion persuaded Judge Wu that conditional certification of the proposed settlement class was appropriate, but fell short of demonstrating to his satisfaction that the settlement was within the range of possible approval: “ . . . Plaintiff does not appear to provide the Court with any information of what amount he believes may have been recoverable if this case were litigated to completion. While the Court recognizes that settlement of complex actions such as the instant one are seen as favorable, . . . it may be difficult for the Court to determine whether the settlement figure is “within the range of possible approval” absent some information on the potential recovery. Plaintiff also does not indicate what the average recovery might be as a result of the settlement.” Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order on Amended Motion for Preliminary Approval (C.D. Cal. June 5, 2017), at 4-5 (slip op. available here).

In the third and final round of briefing, the plaintiff argued that that the maximum possible award at trial would be between $12 and $16 million dollars, given which, the settlement was within the range of possible approval:

Augustus provides a benchmark [for evaluating the claims in this case], as it was litigated to completion under similar facts. Augustus was a $90 million judgment covering 10 years, almost 15,000 employees and certain undisputed evidence which led to a finding of liability, damages, interest and penalties. The case before this Court has about 4 years of exposure, 7,000 employees, the possibility of arbitration agreements impacting or limiting the litigation, less pre-judgment interest, and different testimony and documentation on liability. I believe the recovery in this case, had it proceeded, would reasonably be in the range of $12 million to $16 million.

Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Declaration of Michael B. Adreani in Support of Amended Motion for Preliminary Approval, at 6 (available here).

On the strength of these recitals, Judge Wu found that the settlement was within the range of possible approval, and, after having reviewed and approved the parties’ amendments to the settlement (the parties were asked to amend the settlement to address certain “nits”), granted preliminary approval of the $5 million settlement. Note that despite having to submit three rounds of briefing in support of the motion for preliminary approval, the concise analysis above was all that was needed to establish that the settlement was within the range of reasonableness. This is because at the preliminary approval stage, the moving party need only establish that the settlement is “’within the range of possible approval’ and whether or not notice should be sent to class members” rather than whether the settlement is in fact “fair, reasonable, and adequate,” pursuant to Fed. R. Civ. P. 23(e)(2), a determination which is made at the final approval stage. Karapetyan v. ABM Industries Inc., et al., No. CV15-08313GW, Order on Amended Motion for Preliminary Approval (C.D. Cal. June 5, 2017), at 2-3.

The final fairness hearing is set for September 7, 2017, at 8:30 a.m.

Authored by:
Eduardo Santos, Associate

Ochoa v. McDonald’s: First of Its Kind Joint-Employer Case Settles for $3.75M

McDonald’s Corporation has agreed to pay $3.75 million to settle a certified wage-and-hour class action lawsuit in Ochoa, et al. v. McDonald’s Corp., et al., No. 3:14-cv-02098-JD (ND. Cal.). See Plaintiff’s Motion for Preliminary Approval of Class Action Settlement (Oct. 28, 2016) (available here). According to the motion seeking preliminary approval of the deal, the settlement marks the first of its kind in the fast food giant’s history between McDonald’s and a certified class of non-exempt “crew members” at a franchisee-operated restaurant.

In Ochoa, the plaintiffs sued McDonald’s and a franchisee alleging that the franchisee had violated various provisions of California’s Labor Code by miscalculating wages, incorrectly reporting timecards, failing to pay overtime and premium payments for noncompliant meal and rest breaks, failing to reimburse employees for the time and expense of maintaining uniforms, and issuing inaccurate wage statements. McDonald’s was named as a co-defendant on a theory of direct and vicarious liability. In August 2016, the court orally granted final approval to the plaintiffs’ settlement with the franchise owner, The Edward J. Smith and Valerie S. Smith Family Limited Partnership, leaving the claims against McDonald’s Corporation pending.

Certain preliminary rulings in the case were crucial to the first-ever settlement of its kind in McDonald’s history. In September 2015, Judge Donato of the United States District Court for the Northern District of California partially granted summary judgment in favor of McDonald’s, rejecting the plaintiffs’ claims that McDonald’s directly employs the plaintiffs and the putative class. Ochoa, No. 3:14-cv-02098-JD (N.D. Cal. Sept. 24, 2015) (slip op. available here). Critically, however, the district court denied summary judgment as to whether McDonald’s is potentially liable as a joint employer under an agency theory. The court held that the plaintiffs’ evidence demonstrating their belief that McDonald’s was their employer (being required to wear McDonald’s uniforms, serving McDonald’s food in McDonald’s packaging, receiving paystubs and orientation materials marked with McDonald’s name and logo, and applying for the job through McDonald’s website) was sufficient to follow a line of cases that found ostensible agency on similar facts. Further, the court found “that the ostensible agency theory would appear to apply with equal force against both McDonald’s USA and McDonald’s, Inc., despite the fact that the latter has no contractual relationship with Smith [the franchisee], because the plaintiffs and putative class may well not distinguish between McDonald’s corporate entities.” Slip op. at 15.

Almost a year after ruling on the summary judgment motion, in July 2016, the court handed another victory to the plaintiffs by certifying their “miscalculated wages claims, overtime claims and maintenance-of-uniform claims, and any claims that are derivative of those claims.” Ochoa, at 15, No. 3:14-cv-02098-JD (N.D. Cal. July 7, 2016) (slip op. available here). In rejecting McDonald’s argument challenging the plaintiffs’ agency theory as incapable of class-wide resolution due to individualized questions of personal belief and reasonable reliance, the court found that the “[p]laintiffs have tendered substantial and largely undisputed evidence that the putative class was exposed to conduct in common that would make proof of ostensible agency practical and fair on a class basis.” Id. at 5. That evidence included declarations showing that the plaintiffs “were required to wear McDonald’s uniforms, packaged food in McDonald’s boxes, received paystubs, orientation materials, shift schedules and time punch reports all marked with McDonald’s name and logo, and in most cases applied for a job through a McDonald’s website.” Id. The court also noted the fact that employees “spent every work day in a restaurant heavily branded with McDonald’s trademarks and name,” and found that “[t]hese facts are shared in common across the proposed class and make classwide adjudication of ostensible agency against McDonald’s a suitable and appropriate procedure.” Id.

These preliminary rulings on summary judgment and class certification are significant both because they yielded the first settlement of its kind in McDonald’s history, and because Ochoa may portend future findings of joint employer liability across franchisee and franchisor. Only time will reveal Ochoa’s true impact, but it is clear that courts will start to look past the franchisee to the franchisor as the source of violative practices that result in wage-and-hour violations.

Authored by:
Suzy Lee, Associate