Employment Law Daily $6.5M settlement of Frito Lay drivers’ wage claims gets final approval
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Wednesday, May 9, 2018

$6.5M settlement of Frito Lay drivers’ wage claims gets final approval

By Lisa Milam-Perez, J.D.

A federal court in California has given final approval to a $6.5 million settlement in a wage-hour suit brought by Frito Lay, Inc. truck drivers. Under the agreement, 254 class members stand to recover $18,377 on average, on a pro rata basis, to resolve their FLSA and state-law claims. The plaintiffs alleged that the snack food manufacturer, who paid the drivers on a piece-rate basis, failed to pay the minimum wage for all hours worked, including waiting time, and did not provide required meal and rest periods, among other related state-law claims. Class counsel will receive $1.625 million, which is 25 percent of the settlement fund. The court did, however, reduce the proposed service awards to the representative plaintiffs, and tweaked the cy pres award (Acosta v. Frito-Lay, Inc., May 4, 2018, Corley, J.).

Wage-hour claims. Frito-Lay paid the drivers on a piece-rate system at predetermined rates based on mileage and the number of cases delivered. However, the drivers alleged they often had to wait for their loads to be ready for delivery—on some occasions, for two hours or more—but they were not paid for this waiting time. They also weren’t paid for pre-trip and post-trip inspections, completing mandatory paperwork such as hours of service logs and vehicle inspection reports, among other required job duties. In addition, although the employer set their work schedule (of more than five hours per day), identifying where and when to show up, routes and delivery times, it didn’t schedule them for a 30-minute meal period or 10-minute rest period, as the California Labor Code requires. Among other Labor Code allegations: Frito-Lay didn’t pay them compensation due at termination and failed to maintain required records. According to the plaintiffs, the wage and hour violations were willful. PepsiCo, Inc., was also named as defendant in their complaint, as well as FL Transportation Inc.

The parties reached a settlement agreement after mediation. Here, the court gave its final approval, and certified a Rule 23 and FLSA collective, concluding the Rule 23(b) and FLSA collective action requirements were met.

Terms of the agreement. The $6.5 million agreement provides a payout fund of about $4.67 million for distribution to class members, 80 percent of which is to resolve the state-law claims, 20 percent to the FLSA claims. The fund will be allocated to class members on a pro-rata basis based on the number of weeks worked compared to the number of weeks worked by all class members, with an average recovery of $18,377. The proposed settlement amount also included $1.625 million (25 percent) to class counsel in fees and $60,000 in costs; $80,000 in services awards ($20,000 to each named plaintiff); $50,000 in PAGA penalties (75 percent of which will be paid to the California LWDA, with the 25 percent to remain in the payout fund), and $15,000 in administration expenses.

In exchange, class members will release the defendants from all state and federal claims based on the facts pled in their complaint “every nature and description whatsoever, known or unknown, asserted or that might have been asserted” that arose during the class period. The plaintiffs also agreed to a general release of all claims, known or unknown, prior to execution of the settlement agreement. The general release does not include claims that cannot be released as a matter of law; suspected whistleblower claims; participation in EEOC proceedings; or SEC or other governmental proceedings.

Settlement approved. The court found the terms of the parties’ settlement were objectively fair, adequate, and reasonable under Rule 23(e), particularly in light of the risk, expense, and complexity of further litigation. The proposed settlement represents 28.7 percent of the total potential damages in this case and 98.6 percent of the minimum wage damages. Moreover, the plaintiffs conceded that continued litigation carried significant risks, as Frito-Lay argued the piece-rate plan at issue here was lawful and that the class members had been compensated for all the time worked under the applicable California Labor Code and Wage Order provisions.

There was also the risk that Rule 23 requirements might not be satisfied outside the settlement context, and the employer had made it clear it would “strenuously oppose certification.” Therefore, maintaining class action status throughout the litigation could be difficult. The immediate rewards of settlement (the agreement mandates that the administrator must disburse payments to the entire class within 20 days of final approval) were preferable to the risk of lesser recovery for the class, or no recovery at all. The court also noted that no class members had opted out of the state-law settlement, and 88 percent of class members opted into the FLSA award, adding that it “may appropriately infer that a class action settlement is fair, adequate, and reasonable when few class members object to it.”

Because the settlement was reached prior to class certification, the court afforded the agreement a higher level of scrutiny for indicators of potential collusion. Despite that the settlement featured one of three “warning signs,” in the form of a “clear sailing” provision in which the defendants agreed not to oppose an attorney fee request, the court found no evidence that the settlement resulted from, nor was influenced by collusion. Here, the court cited the absence of objections as well as the fact that the settlement adequately satisfies the class members’ claims.

Cy pres award revised. The court concluded, however, that the agreement did not meet the requirements of cy pres. The parties had proposed an award to a youth job training nonprofit, but this award would not serve “the statutes’ underlying purpose to prevent employers from violating wage and hour regulations, nor will it benefit the interest of the silent class members—adult drivers who have no need for youth job training.” The “next best” distribution method, the court said, was to turn over that amount to the state controller so that silent class members could later recover their award from an unclaimed property fund.

Attorneys’ fees. The court found an attorneys’ fee award amounting to 25 percent of the settlement fund was reasonable. In its view, a number of factors supported the 25-percent benchmark: counsel took the case on a contingency fee basis, and there was an increased risk of non-payment for the protracted litigation; counsel’s significant experience and the amount of work on the case; the results obtained; and the absence of objections or disapproval by class members to the fee award. The fee award checked out against the lodestar, too. “In light of the results of this action, the contingent nature of counsel’s fee arrangement, the skill required in conducting this litigation, and succeeding in settlement, the Court believes that the 1.94 multiplier—at the lower end of the Ninth Circuit’s scale—is appropriate.”

Service awards reduced. The settlement provided for incentive awards of $20,000 to each of four named plaintiffs, but this amount is nearly four times the $5,000 amount deemed presumptively reasonable in the district. Still, “a substantial incentive award is appropriate here in light of the time and effort Plaintiffs expended for the benefit of the class—at times, to their own personal detriment—and the risks associated with initiating the litigation and representing the class,” the court said. For example, the case liaison put 448 hours into the litigation, spent $1,381 on behalf of the class, and drove his own vehicle nearly 1,500 miles to meet with his attorneys, attend the mediations, and attend the hearing for the motion for preliminary approval. One of the other lead plaintiffs, after filing the lawsuit, had been called into his manager’s office to investigate whether he was in the country legally and also was accused of sexual assault and harassment—allegations that were “completely discredited,” yet tarnished his reputation. Under these circumstances, the court awarded incentive payments of $15,000 to three of the named plaintiffs; a fourth plaintiff was awarded $10,000. “These amounts are less than the average recovery per class member and reasonable given the risks and time invested.”

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