Litigating California Wage & Hour and Labor Code Class Actions

nothing but still are bound by the class release. Those class members who do not request
exclusion will also have the option of filing an objection to the settlement. 472
After a fixed period following the issuance of notice (usually 45-60 days), the claims period
will end, and class counsel will seek final approval of the settlement. Above and beyond
the analysis the court conducted at preliminary approval, the court will examine the extent
of class participation in the settlement, will rule on any objections, and will make final
determinations as to class counsel’s request for attorney’s fees and an incentive payment
or “enhancement” for the class representative (additional money beyond that received by
other class members as a reward for taking the risk of filing the class action).
When Labor Code class actions were relatively novel, there was little consistency between
different judges as to the scrutiny of settlements they would undertake or the rules they
would apply. Most courts who did not have much experience with class actions typically
undertook very little scrutiny of class settlements beyond ensuring that they were not
collusive and that the notice provided clear instruction to the class. Over the intervening
years, however, a substantial body of law has developed to provide courts with better
guidance as to how to evaluate class settlements in wage and hour cases.
B. Restrictions on Reversions of Settlement Funds
Most class settlements are the product of mediation. Unlike a court, which must protect the
interests of a class, a mediator seeks solely to broker a settlement acceptable to the parties
who hired the mediator—i.e., the lawyers for the parties. Irrespective of their fealty to
ethical obligations, plaintiffs’ counsel—who often have near absolute control over
wage/hour class litigation—have a financial interest in maximizing the attorney’s fees they
will receive through the settlement. The employers’ financial incentive is to achieve as
broad of a release as possible for as little money as possible. Because the plaintiff’s lawyer
typically receives an attorney’s fee that is a percentage on the gross value of the class
settlement, employers would commonly agree to a nominally larger gross settlement value
on the condition that any unclaimed settlement funds be returned to the employer. These
sort of “reversionary” settlements have been popular because they allowed an employer
the possibility of paying substantially less in settlement than the gross settlement would
suggest, particularly in industries where the employer could predict that the claims rate
would be low.
472
See generally Wershba v. Apple Computer, Inc., 91 Cal. App. 4th 224, 251-52 (2001) (explaining different choices class
members typically have upon receiving class notice). Recent case law also implies that it may be permissible to settle a
certified class action through the acceptance of an offer of judgment by the class representative. See Nelson v.
Pearson Ford Co., 186 Cal. App. 4th 983, 1024-26 (2010) (assuming without deciding that a valid California Code of
Civil Procedure § 998 offer can be made in a certified class action). Should this process be used, after acceptance, the
parties would then provide class notice, etc., just as if a stipulation of settlement had been entered.
Seyfarth Shaw LLP | www.seyfarth.com Litigating California Wage & Hour Class Actions (12th Edition) 103