De Bernardi v. City and County of San Francisco

Background

The court considered unopposed motions for preliminary approval of a Fair Labor Standards Act (FLSA) collective-action settlement in two related cases. The plaintiffs were current and former employees of the City and County of San Francisco. They alleged that the City violated the FLSA by failing to pay compensatory time off at the employees’ regular rate of pay when that time was used or cashed out. The Wazwaz plaintiffs also alleged that the City excluded certain cash incentives, called POST Pay, from the regular-rate calculation for overtime. The opinion states that documents showed POST Pay had been included in the relevant calculation.

The City updated its pay practices for all City employees on December 1, 2018, and issued approximately $1.4 million in retroactive payments for possible differences between base pay and the regular rate for compensatory time used or cashed out during the preceding three years. The court related the cases, consolidated them for pretrial purposes, conditionally certified both actions as FLSA collective actions, and approved notice to potential collective members. A combined 1,833 current or former City employees opted in. A payroll review showed that nearly two-thirds did not have recoverable FLSA damages based on the stated criteria.

The parties reached a settlement in principle during a settlement conference with Magistrate Judge Corley. The San Francisco Board of Supervisors approved the proposed settlement in February 2021, and the Mayor signed an ordinance approving it.

Settlement terms

The agreement required the City to pay $503,506.33 plus additional settlement-administration expenses. According to the opinion, that amount included $192,006.33 for Recovery Plaintiffs, $1,250 service awards for each of the two De Bernardi Named Plaintiffs, and $94,000 in administrator fees and costs incurred up to the settlement conference. The amount for each Recovery Plaintiff with a valid FLSA claim was based on backpay the City had already paid, with individual amounts listed in an exhibit to the agreement.

No Recovery Plaintiffs—opt-in plaintiffs whom payroll records showed were not owed back wages under the agreement’s criteria—would receive no settlement payment. Named Plaintiffs and Recovery Plaintiffs who signed the agreement would release claims related to the overtime and compensatory-time claims asserted in the relevant action. The release included a waiver of rights under Section 1542 of the California Civil Code.

The settlement was conditioned on preliminary and final court approval and on approval by the Recovery Plaintiffs identified in the agreement. The agreement contemplated dismissal without prejudice of No Recovery Plaintiffs and Recovery Plaintiffs who did not sign. If some Recovery Plaintiffs did not sign, the City could choose to make the agreement binding only on those who did sign; nonsigning plaintiffs would then be dismissed without prejudice in connection with final approval. Counsel proposed $150,000 for De Bernardi counsel and $65,000 for Wazwaz counsel in fees and costs.

Court’s analysis

Because employees generally cannot waive FLSA rights without court approval, the court applied the standard requiring a proposed settlement to be a fair and reasonable resolution of a genuine dispute over FLSA provisions.

The court found a genuine dispute about the extent of the City’s potential liability for liquidated damages and the applicable limitations period. The City maintained that any failure to pay compensatory time at the regular rate was in good faith and not willful. A good-faith finding could eliminate liquidated damages, and a finding that the violation was not willful could limit the recovery period from three years to two years. The settlement provided the equivalent of full liquidated damages and used a three-year limitations period, resolving those disputed issues for settlement purposes.

Applying the totality of the circumstances, the court found the settlement fair and reasonable. It cited the high potential recovery for plaintiffs with valid claims, the parties’ discovery and understanding of the case, the risks of receiving less or nothing at trial, the release’s limitation to the FLSA claims at issue, counsel’s experience, and the arm’s-length negotiations conducted with assistance from Magistrate Judge Corley. The court also found that the possibility of fraud or collusion was reduced by the discovery and negotiations.

The court found the proposed attorneys’ fees and costs within a reasonable range because counsel sought less than the amounts calculated under the lodestar method, which generally multiplies reasonable hours by a reasonable hourly rate. The court stated that it would evaluate the reasonableness of the fees, costs, and incentive awards more fully at the final fairness hearing.

Disposition

The court granted the plaintiffs’ motions for preliminary approval. It also approved the proposed notices and the procedures for responding and objecting. The notices informed plaintiffs that doing nothing would result in dismissal without prejudice, while also allowing written objections and participation at the final-approval hearing. Recovery Plaintiffs were told to sign and return releases within the stated deadline to receive their settlement payments.

The court directed the parties to meet and confer and submit, within seven days, a proposed schedule for mailing notice, receiving signed releases and objections, preparing the final accounting, filing the City’s notice of intention, filing the final-approval motion, and holding the final-approval hearing.