A federal magistrate judge in California gave final approval to a $1.65 million settlement in a wage action brought by a class of CorePowerYoga customers who had traded a few hours of unpaid work around the studio in exchange for free classes. The parties settled the case before the court made any determination as to whether the students were “employees” or independent contractors, and as such, before any determination as to whether the nationwide yoga studio chain violated the FLSA or California wage laws. The court also certified a California settlement class and FLSA collective, signed off on a (modified) fee award of $412,000, and approved a $10,000 service award to the named plaintiff (Walsh v. CorePower Yoga LLC, October 3, 2017, James, M.).
Will work for yoga classes. At dozens of its yoga studios in California and across the country, CorePower had operated a “Yoga for Trade” (YFT) program, through which customers could work scheduled shifts of 2-3 hours per week, cleaning and performing other project-based work in exchange for free yoga classes. The “YFT Cleaners” were not paid for their work.
CorePower eventually phased out the YFT program, and replaced it with a Studio Experience Team (SET) program, under which CorePower customers could work regular shifts of one-and-a-half hours a week and receive an hourly wage for their efforts. However, SET Cleaners had to apply a large portion of those wages toward purchasing a discounted yoga membership. Consequently, their hourly pay fell below the applicable minimum wage, according to the plaintiff, who brought claims under the FLSA and California law. Specifically, he alleged that CorePower committed minimum wage violations by failing to pay YFT Cleaners any wages for the hours they worked, and by paying California SET Cleaners subminimum wages (by requiring them to purchase yoga memberships as a condition of their employment).
There are approximately 6,482 potential members of the FLSA collective who participated in the YFT program, and 4,873 California class members who participated in the YFT program at California CorePower studios. There are 3,519 California class members who cleaned CorePower studios in California through the SET program, 653 of whom overlap with the individuals in California who worked in the YFT program.
Vocal objectors. Notably, there were four objectors who opposed not just the settlement, but the lawsuit itself. They each asserted, in writing, that they liked the YFT and ET programs and wanted to continue participating in them; they felt the suit against CorePower was unwarranted. They clearly were told from the start that their cleaning services would be paid for in unlimited yoga classes during the week they performed the work, and they felt they got the better of the bargain, in fact. In the eyes of some potential class members, CorePower was wrongly being sued “for something that was such a wonderful gift.” One class member asked to be excluded because the claims were “ridiculous,” and another asked to be excluded because they were more than fairly compensated and “in no way feel entitled to monetary compensation.” In the end, only 16 percent of potential members of the FLSA collective opted in. And, notably, almost 550 California class members elected to receive their settlements in the form of a CorePower gift card (which doubles the amount of their settlement award).
Factors favor settlement. Employers cannot legally accept free labor—even from individuals who are willing to work for free, the plaintiffs correctly pointed out. Still, were they employees? Were the free yoga classes merely wages in another form? It was not evident to the court, and it had not issued a finding as to whether the YFT and SET Cleaners were CorePower employees. For its part, CorePower denied any liability and insisted that the cleaners were independent contractors who had voluntarily purchased their yoga memberships.
Barriers to success. This key point of contention suggested the plaintiffs would face significant barriers in succeeding on the merits of their claim were the case to proceed—one of the In re Bluetooth factors that favored final approval of the settlement. The risk and complexity of litigating the case also weighed in favor of approval. CorePower would continue to deny liability and, given the uncertain merits, the litigation would no doubt be hard-fought and costly, the court surmised. Also, CorePower said it would challenge class certification, if the action proceeded, and continue to argue the threshold issues of employment status and whether the class members were coerced into buying the yoga memberships. This key issue would present individualized questions, not readily resolved on a class basis. Material risks in proving liability on a classwide basis were underscored by the staunch opposition from objectors and those class members who asked to be excluded. On balance, the Bluetooth factors weighed in favor of settlement, the court held.
Settlement amount, attorneys’ fees. Moreover, the agreement itself was not found to be unfair, unreasonable, or inadequate. The California YFT cleaners stood to gain $7 per workweek, and members of the FLSA collective would receive $2.78 per workweek. The court had previously directed the parties to revise the distribution framework, as the FLSA collective members were allotted more than their fair share. As revised, the settlement represented a recovery of approximately 41 percent of the estimated unpaid minimum wages for California class members’ YFT workweeks, and 25 percent for the FLSA collective members’ workweeks. Still, the court was by no means convinced that the outcome was “highly favorable,” as the plaintiffs indicated in their fee motion, since the monetary recovery amounted to $0.87 per workweek for SET class members—significantly less than 8.6 percent of their estimated unpaid minimum wages. Consequently, the court declined to award fees in an amount greater than the 25 percent benchmark, and it also declined to apply a lodestar multiplier.
Reputational risk justifies service fee. The court did award the full service fee requested by the named plaintiff, who had urged that by filing this action, he had taken on “considerable reputational risk with respect to his current and future employers.” He feared other yoga studios would be loath to hire him and would perceive him to be a “troublemaker” because of the case, and attested that he has already had a hard time finding work because of it. “Given that potential employers are likely to research new hires online, I suspect that my actions in this case are likely to have dimmed my prospects for employment just based on Google results alone,” he told a sympathetic court.
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