De Bernardi v. City and County of San Francisco

Background

The plaintiffs were current and former employees of the City and County of San Francisco. They alleged that the City violated the Fair Labor Standards Act by using an incorrect regular rate of pay when paying employees for used or cashed-out compensatory time off. The Wazwaz plaintiffs also alleged that the City failed to include certain certificate-pay incentives in calculating regular rates, but discovery showed that the incentives had been included, so the settlement did not provide payment for that issue.

The City reportedly admitted that its pay practices violated the Fair Labor Standards Act and changed those practices. It also paid $1.4 million in corrective payments to affected City employees. The court conditionally certified both collective actions, the parties conducted discovery, and the court preliminarily approved the proposed settlement in June 2021.

Settlement Terms

The settlement required the City to pay $503,506.33, plus additional settlement-administration expenses. The agreement contemplated distributing $162,723.43 to Recovery Plaintiffs—employees who had joined one of the actions and had received corrective payments for unpaid back wages. The settlement amount for an eligible Recovery Plaintiff was generally equal to the back pay already received and was calculated using a three-year period measured from that person’s decision to join the collective action.

No Recovery Plaintiffs were employees who joined an action but, based on payroll records, were not owed back wages because they had not used or cashed out compensatory time or had not earned premiums that should have been included in the regular rate. They would receive no settlement payment and would not give up their rights under the settlement.

The agreement also provided for $150,000 in attorneys’ fees and costs for De Bernardi counsel, $65,000 for Wazwaz counsel, and $1,250 incentive awards for each of the two De Bernardi lead plaintiffs. Recovery Plaintiffs who signed releases and received settlement payments released claims related to the overtime and compensatory-time issues asserted in the applicable action, including related attorneys’ fees and costs.

Court’s Analysis

For an employee settlement under the Fair Labor Standards Act, the court applied the standard requiring a fair and reasonable resolution of a genuine dispute about the Act’s requirements. The court considered the possible recovery, the stage of the case and discovery, litigation risks, the scope of the release, counsel’s experience and views, and the possibility of fraud or collusion.

The court found that Recovery Plaintiffs were receiving the maximum possible recovery under the settlement because they were receiving amounts effectively equal to liquidated damages—the additional damages that may equal unpaid wages under the Fair Labor Standards Act. The court also found that the payroll-based process for identifying No Recovery Plaintiffs was objective and reliable. Because No Recovery Plaintiffs were not giving up rights, they could pursue their own claims. The court overruled objections by Bernard Chan and Phillip Brown, finding that Chan’s objection was not substantive and that Brown had not provided evidence supporting his claim.

The court found that the parties had completed enough discovery to understand the case and make informed settlement decisions. It also found meaningful litigation risks, including uncertainty about liquidated damages, the limitations period, and whether the City could show that it acted in good faith. The release was limited to the types of Fair Labor Standards Act violations alleged in the two actions. The court found no indication of fraud or collusion and noted that the settlement resulted from arm’s-length negotiations facilitated by an impartial magistrate judge.

Fees and Incentive Awards

The court found the requested attorneys’ fees and costs reasonable. The requested amounts were below counsel’s calculated lodestar amounts, meaning the estimated value of reasonable hours multiplied by reasonable hourly rates. The court also found the $1,250 incentive awards reasonable in light of the lead plaintiffs’ assistance, participation in settlement discussions, provision of documents, and preparation for possible testimony.

Disposition

Judge Haywood S. Gilliam, Jr. granted the plaintiffs’ joint motions for final approval of the collective-action settlement. The court approved the $503,506.33 settlement amount, including $94,000 in settlement-administration costs incurred through October 31, 2021, the attorneys’ fees, and the incentive awards. It also ordered the City to pay the settlement administrator additional administration and distribution costs after submission of the final invoice.

The court dismissed without prejudice all No Recovery Plaintiffs and any Recovery Plaintiffs who had not signed releases. It dismissed with prejudice all Recovery Plaintiffs who had signed releases and received settlement payments. The parties and settlement administrator were directed to implement the final order and settlement agreement, and the parties were ordered to file a short stipulated final judgment within 10 days.