Labor & Employment Law Daily Walmart agrees to $8.7M settlement in hotly litigated overtime suit stemming from ‘shift-jamming’ practices
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Thursday, February 27, 2020

Walmart agrees to $8.7M settlement in hotly litigated overtime suit stemming from ‘shift-jamming’ practices

By Marjorie Johnson, J.D.

The significant risk of continued litigation and the lawsuit’s “specific, nuanced, and complex legal issues,” some of which had been litigated and some of which the settlement would avoid, supported the proposed settlement amount.

A federal district court in Nevada preliminarily approved an $8.7 million settlement of a class action lawsuit revived by the Ninth Circuit asserting that under state law, Walmart owed 30 days’ wages for approximately 4,300 class members who were terminated during the company’s “shift-jamming” period and not paid daily overtime within 30 days. The court also approved an attorneys’ fee award of $2.9 million—about one third of the class settlement amount—finding it “well within the range of reasonable attorney fees in such cases” (Evans v Wal-Mart Store, Inc., February 21, 2020, Mahan, J.).

Already settled “shift-jamming” overtime claim. This putative class action lawsuit was brought in 2010 by an hourly Walmart employee who worked as a stocker-cashier. She alleged that the retail giant violated Nevada’s overtime law by using a shift-jamming practice, under which employees were required to work shifts beginning less than 16 hours after the end of their prior shift. This caused them to work more than eight hours a day and/or 40 hours a week without receiving overtime pay. Walmart corrected the practice after receiving complaints but did not retroactively compensate affected employees.

“Waiting time penalties” claim revived. After the employee filed suit, Walmart settled her claims for unpaid overtime with the Nevada Labor Commissioner (claims which the district court then dismissed), but the Commissioner’s order did not address her claims for “waiting time penalties.” Under Nevada law, if wages are not paid within three days of discharge, or on the day an employee resigns, the wages continue at the same rate until paid or for 30 days, whichever is less. Thus, the class action also sought 30 days’ wages for each class member terminated during the shift-jamming period who was not paid daily overtime within 30 days of termination. While the district court had previously tossed those claims on summary judgment, they were revived when the Ninth Circuit reversed that decision in 2016.

Mediation leads to proposed settlement. In August 2018, the remanded case was stayed to allow the parties to engage in private mediation. After a year of negotiations, they reached a resolution and the plaintiffs filed an unopposed motion for preliminary approval of the class action settlement.

Certification of “involuntarily” terminated class. Before reviewing the settlement, the district court agreed to amend its prior certification order to include two classes for the purpose of settlement—the voluntary termination settlement class (which it had already certified) and the involuntary termination settlement class (which hadn’t been certified). The plaintiffs claimed that both classes were entitled to 30 days of pay under Nevada law.

The parties did not dispute that numerosity was satisfied and represented that the classes consisted of more than 4,300 individuals. The remaining Rule 23(a) requirements were also met, as were Rule 23(b)(3)’s requirements of predominance and superiority. Predominance was present because this litigation stemmed from a single nucleus of fact—Walmart’s failure to pay overtime wages for shift jamming. Superiority was satisfied since the thousands of individual plaintiffs’ claims were for continuation wages that amounted to no more than a few thousand dollars. Thus, the class action would allow them to “pool claims which would be uneconomical to litigate individually.”

Preliminary approval of settlement. The court also preliminarily found that the proposed settlement was fair, adequate, and reasonable. It first considered the strength of the case, considering “the risk, expense, complexity, and likely duration of further litigation.” Notably, litigation had already lasted 10 years, during which time both parties had mixed success. Furthermore, the lawsuit’s “specific, nuanced, and complex legal issues” some of which had been litigated and some of which settlement would avoid, also supported the settlement.

Significant risk of continued litigation. The plaintiffs also faced significant risk if they moved forward without the proposed settlement as Walmart had asserted many “potentially dispositive” defenses, including that the waiting time penalties were unconstitutional; that their calculation of damages was incorrect; and that the involuntarily terminated employees had no claim. The risk of future litigation and complexity of this case was also demonstrated by the court’s prior orders granting summary judgment and denying reconsideration, which the Ninth Circuit reversed.

Incentive award. This factor also supported the proposed “incentive” awards for the named plaintiffs, particularly since the original plaintiff risked being held liable for Walmart’s costs if she was ultimately unsuccessful. However, because such incentive awards must be “modest,” the court reduced the proposed amounts to $15,000 for the original named plaintiff, and $5,000 to the representative of the involuntarily terminated class.

The court also considered the risk of maintaining class action status throughout the trial, noting that it had previously denied the plaintiffs’ motion to amend its certification, finding it was barred by the statute of limitations. Thus, the proposed settlement was particularly fair to the involuntary termination settlement class who would not be able to recover their continuation wages without the settlement, and whom Walmart had consented to allocate one-third of the net settlement amount.

Amount of award. The amount offered in settlement also supported preliminary approval. The potential liability for Walmart for the plaintiffs’ claim for 30-day wages for all terminated employees (both voluntarily and involuntarily) was about $9.6 million. Thus, the settlement of $8.7 million represented a “significant recovery” of over 90 percent of the potential recovery.

The experience and views of counsel also supported the proposed award of $2.9 million in attorneys’ fee and up to $65K in litigation costs. The fee award of about one third of the class settlement amount was “well within the range of reasonable attorney fees in such cases.”

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