“Top 10 Tips for Your Next Class Action Settlement Mediation”
Impact Fund, Bryan Schwartz, (February 1, 2016)
It is the day we are all waiting for. Game Day. Mediation. Your firm has spent 1,246.7 hours on the case so far, but everything will happen in these 12 hours. By the end of the day, you are so emotionally exhausted from the mediator pounding on you, and so happy to have the mediator come in with a number that you can tolerate, that you walk out with a pending mediator’s proposal that only says the gross dollar value of the global settlement. Perhaps you leave the mediation with a handshake agreement, but without nailing down the details of the Memorandum of Understanding. Oops. The devil was in those particular details.
Everyone who has negotiated a class action settlement has probably had some term he or she forgot to address at mediation, or in the MOU, that returned in drafting the “final” agreement as a big headache and put the deal at risk. I have. I have thought, at many class action mediations, “I wish I had a checklist so I would remember all the key terms.” Here it is.
1. NON-REVERSIONARY SETTLEMENT
A common defendant pitch during a class action mediation is for a “reversionary” settlement, where the defendant will recoup any amount not claimed during a claims process. Among other disadvantages, this puts the parties’ interests during the settlement administration process in conflict –instead of aligning them, with all parties hoping for maximum participation (or, as defendants would see it – the maximum number of releases).
2. EMPLOYER’S SHARE OF PAYROLL TAXES
If your settlement involves back wages, then it involves payroll taxes. Do not be surprised that the employer’s vision of a “global” settlement includes the notion that your clients will pay the employer’s taxes. Yet, an employer is required to withhold taxes from wages pursuant to 26 U.S.C. §§ 3102(a) and 3402(a), and to pay an employer’s share of FICA pursuant to § 3111. The same is true under FUTA, 26 U.S.C. §§ 3301, et seq. Do not let your defendants shift their duty to your clients.
3. SCOPE OF CLASS AND RELEASE
While it is commonplace for representative plaintiffs receiving enhancements to sign a broad release of claims – and indeed, such provides some justification for their enhanced payments – the class members’ release should be narrowly drafted to impact only the claims raised in the suit or, at a maximum, those which could have been raised in a suit premised on the same facts pled. In the same vein, make sure the class period and job titles encompassed in the settlement are mutually understood. Those encompassed in your complaint should be those benefiting from the settlement, or, defendants should pay more to compensate the additional class members.
4. TIMING OF PAYMENT
Particularly with a financially-shaky employer (or any company, especially a closely-held one, where bankruptcy is a ready option), make sure the money (including, as noted above, the employer’s share of any payroll taxes) is in the bank, and/or require the employer to provide a letter of credit from a viable financial institution, guaranteeing that all the money will be there when it is required. There is no justification for a settlement term that conditions the disbursement of payments on the expiration of time for appeals, if no one properly objected or even expressly opted-out of the agreement.
5. FAILURE OF SETTLEMENT
What number or percentage of opt-outs will “blow up” the settlement? Choosing too small a number or percentage is highly risky – 10% is appropriate. Moreover, insist on a provision that the employer will own any administration costs incurred before the settlement failed – another good reason to have the settlement fund amount deposited early.
6. NATURE OF THE PAYMENTS
Will the payments to class members be considered all wages (subject to a W2), half wages-half interest/penalties (subject to a 1099), or one-third each for wages, penalties, and interest.
7. INJUNCTIVE RELIEF
Though it goes beyond the scope of this short blog post to describe all of the possible forms of injunctive relief that could be part of your settlement, such should be outlined in the MOU or mediator’s proposal explicitly – do not assume that defendants paying a settlement regarding a wage/hour misclassification class action will reclassify the position at issue unless it is explicitly provided by your agreement. Also, seek to specify a timeline for compliance and a monitoring mechanism, if needed, from the outset.
8. ATTORNEYS’ FEES – COSTS – ENHANCEMENTS
Once a settlement becomes “all-in,” and defendants are paying the entire amount regardless of the level of participation by the class, they will have little incentive to oppose the fees, costs, and enhancements you think are appropriate.
9. CALIFORNIA PAGA ALLOCATION
If you have a Labor Code case in California, you must determine how much of the class members’ portion of the common fund to allocate to PAGA – knowing that 75% of this amount will have to be sent to the Labor Workforce Development Agency.
10. SETTLEMENT ADMINISTRATION PROCESS AND CY PRÈS
Try to agree on a settlement administrator, cy près recipient(s), the length of time to opt-into the agreement (90 days, perhaps), the means of finding and following up with the class, a process for disputing allocations by class members, opt-out/objection procedures, a website about the settlement, and the means of communication of the settlement to the public. Defendants should delegate to plaintiffs’ counsel the task of discerning an appropriate settlement allocation formula among class members.
When no other attorney would touch my case, Bryan took it on with zeal. Since then, the EEOC certified a class action and has ruled in our favor in every motion the other side has thrown at us. A five-star rating does not come close…
I was fortunate to have found Bryan Schwartz Law while searching for reputable and reliable law firms in the Oakland area that specialized in labor law, and I couldn’t be more pleased by the results they secured for my family on my father’s behalf! After…
Bryan's firm came highly recommended to deal with an employment discrimination and harassment case. Bryan and his staff were very professional, ethical, extremely organized and diligent. They are strong advocates who worked extremely hard to get me a very fair resolution to my case. I…
Bryan Schwartz is an attorney who gives good, sound advice and empowers you to believe in your convictions. I reached out to him because no other attorney wanted to assist me. Bryan has been my advocate for the last six years. He is compassionate, empathetic…
Bryan Schwartz is without a doubt a fantastic attorney. As tenacious as he is intelligent, I would absolutely recommend his services to anyone seeking justice. Not only is his legal expertise top notch, his interpersonal skills with his clients are superb as well. Working with…
Bryan and his team were highly recommended by a friend and another attorney. I reached out to Bryan when I was sick, hurting and afraid, not knowing what to expect or how to ask for help. Bryan offered to help, he and his team fought…
When I first met Bryan, and the team at Bryan Schwartz Law, I was blown away by how understanding, sympathetic, and outright dismayed they were to the unlawful situation my coworkers and I were (to say the least) uncomfortably having to endure and work through.…
Bryan Schwartz represented me successfully in mediating my age discrimination claim against a large employer....[T]here can be few lawyers with greater legal acumen or a more relentless drive to get an acceptable result for their clients. Bryan is all business and probably works too hard.…
I could never imagine having any other attorney on my side when I needed someone. This office is beyond professional and intelligent from the person answering the phone right to the attorneys. These attorneys will fight tooth and nail for you.
These guys were amazing. Just on the ball, knowledgeable and friendly as hell. I presented my case over the phone and I immediately got some preliminary feedback which was awesome. I was asked for more details which I provided via email the next day. Two…
Schedule an initial consultation to have Bryan Schwartz Law
evaluate your situation.
*Your submission of an intake request form does not guarantee that Bryan Schwartz Law will take your case or provide legal advice. You must be offered and sign a representation agreement with the firm before you will receive any legal advice.
How did we do?
Note: Your review may be shared publicly.