Labor & Employment Law Daily California federal court gives final nod to $16.5 settlement in delivery driver misclassification case
Thursday, October 24, 2019

California federal court gives final nod to $16.5 settlement in delivery driver misclassification case

By Lisa Milam, J.D.

California-based drivers for a delivery company that services major retailers alleged they were improperly treated as independent contractors, in violation of the FLSA and Labor Code.

A federal district court in California has given final approval to a $16.5 million settlement resolving wage claims brought by a group of delivery drivers in the state who alleged that their employer, which provides delivery and installation services for retailers, erroneously treated them as independent contractors, and shorted them on overtime and expense reimbursements as a result. There are 832 drivers in the settlement class, and 116 opt-ins to the FLSA collective (Carter v. XPO Logistics, Inc., October 18, 2019, Orrick, W.).

Wage claims. XPO Logistics provides delivery services to retail chains like Home Depot and Lowe’s, and its drivers deliver and install merchandise in customers’ homes. A group of XPO delivery drivers in California filed suit alleging they were misclassified as independent contractors under the delivery service agreements (DSAs) they signed with the company. As a result, they contend, they were denied overtime pay due and expense reimbursements, in violation of the FLSA and California Labor Code.

The court conditionally certified the drivers’ FLSA collective action in 2016 and 116 individuals filed consents to join the collective. The parties reached a settlement in April 2019, and the court granted preliminary approval to the proposed agreement and conditionally certified the settlement class in June. No class member requested to opt out or objected to the proposed settlement. Currently pending: the drivers’ unopposed motion for final settlement approval, and motion for attorneys’ fees and service awards.

Rule 23 class certified. The court granted final certification under Fed. R. Civ. Pro. 23(b)(3) to a settlement class comprised of drivers who entered into a DSA, either in his or her individual capacity or through a business entity, and performed delivery services under that agreement, at least a portion of which were performed within California during the class period.

Settlement terms. After deductions for attorneys’ fees and costs, service awards to lead plaintiffs, PAGA penalties, and settlement administrator’s fees, a net settlement fund of $12,054,500 will be distributed to class members on a pro rata basis, based on the number of days worked during the settlement period (March 12, 2012 through February 21, 2019). Also, $150,000 of the net settlement fund will be set aside to be distributed pro rata by workdays to drivers who had opted into the FLSA collective action. The disbursements will be made automatically to class members, who will receive at least $66.77 per workday, with an additional $2.18 per workday to those who opted into the FLSA suit. The average award will be $14,775.70 and the largest award will be $142,894.66.

Settlement fair and reasonable. The court found the settlement terms fair and reasonable, noting that the benefits of the non-reversionary $16.5 million recovery outweigh the considerable risks, costs, and delays of continued litigation. This monetary relief represents approximately 20 percent of the maximum possible verdict; class members can expect to receive on average at least $14,775.70 (and 19 individuals will receive at least $100,000). Also, the agreement settles a bona fide dispute resolved by experienced counsel following voluminous discovery, 22 witness depositions, an expert engaged to work up detailed damages models, and two days of mediation. These factors weigh in favor of final approval, the court found. Likewise, the $150,000 pro rata distribution to the FLSA opt-ins, which works out to an additional $2.18 per workday, is a fair and reasonable resolution of the FLSA overtime claims. As the court pointed out, the extra sum compensates the FLSA opt-ins for agreeing to a broader release than other class member, in addition to giving up their potential right to liquidated damages not provided for under California law.

Service awards and attorneys’ fees. Also, the $20,000 service awards requested for five named plaintiffs, while high, are appropriate in this litigation given the “significant” and “atypical” demands on them and their time. The requested enhancements are justified because the named plaintiffs spent between 602 and 721 hours assisting in the preparation, prosecution, and settlement of the case, including taking multiple days off work to prepare for and have their depositions taken, and attending the mediation. They also provided discovery and assisted counsel in interpreting the class member discovery and data. In addition, the service awards, $102,500 in total, is approximately 0.6 percent of the total settlement, and the $20,000 per named plaintiff is only about 1.3 times the average payout to the absent class members and 14 percent of the maximum expected recovery. “Measured against the total settlement and average pay out to absent class members, the awards sought here are within the range of reasonableness,” the court said.

Finally, class counsel’s request for $4.125 million in attorney fees (and litigation expenses incurred) is reasonable; it represents 25 percent of the total gross settlement fund—the Ninth Circuit benchmark which is routinely awarded in this court.

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