The U.S. District Court for the Eastern District of California recently rejected a class-action settlement in a wage and hour lawsuit against AT&T Mobility Services because the named plaintiff was not a member of the settlement class.
In March, AT&T Mobility Services struck a $575,000 settlement with store workers in California over the wage and hour violations. The lawsuit claimed AT&T Mobility Services didn't pay all wages due, including premium pay for untaken meal and rest breaks. It said the telecommunications firm miscalculated the regular rate of pay, underpaid overtime wages and failed to pay all wages due at the time of employment termination.
The class action was brought under California's Private Attorneys General Act, which permits employees to sue on behalf of themselves and other workers for violations of the state labor code. The settlement would have applied to more than 5,000 people who worked for AT&T Mobility Services in California from Nov. 2, 2021 through Sept. 21, 2022. The company didn't respond to a request for comments.
The former sales representative who brought the claim said he believed his termination by AT&T Mobility Services in June 2018 was unlawful, but he declined to bring a wrongful termination claim. He did not qualify as a member of the settlement class because his employment ended before the relevant time period.
"The court denied the settlement because it resolved the class claims in a manner that excluded the plaintiff's claims, making it a headless class," said Corey Cabral, an attorney with CDF Labor Law in Sacramento, Calif. "I suspect the parties will rework the settlement provisions to resolve that issue while maintaining both the settlement value and an enforceable release for the employer in the event a duplicative claim is later filed."
The sales representative said his final payments from the company—consisting of cash awards, commissions, noncash awards and a recalculation of overtime differential pay—came as late as August 2018, well after they were due. State law requires businesses to give workers their final paycheck the same day they are fired. If an employee quits, the employer must mail the final paycheck within 72 hours.
Compensation Law
In California, employers must pay overtime if a nonexempt employee works more than eight hours in one day or more than 40 hours in one week.
If an employer fails to provide a nonexempt employee a meal or rest break as mandated under California law, it must pay the employee a break premium, which is one additional hour of pay at the employee's regular rate of pay. Break premiums and overtime must be based on the person's regular rate of pay, which includes hourly wages, shift differentials, piece-rate and incentive compensation, commissions and nondiscretionary bonuses, according to Christine Baran, an attorney with Fisher Phillips in Irvine, Calif.
The regular rate of pay may be subject to recalculation and additional, retroactive compensation, according to Cabral. For example, a nondiscretionary attendance bonus earned at the end of the month may require the employer to recalculate any overtime compensation due.
Tips for Employers
Companies should "regularly audit employees' time records to ensure that they are taking complete and timely meal breaks," Baran recommended. "If the audit reveals noncompliant meal breaks, find out why this occurred. Take corrective action when an employee consistently fails to follow the company's wage and hour policies and practices. Make sure that your managers have a solid understanding of the company's wage and hour policies and practices."
The more complex your compensation structure is for nonexempt workers, the more difficult legal compliance becomes.
"Simplify compensation to the extent it is operationally feasible to do so," Cabral recommended. "If one must provide nonhourly forms of compensation for nonexempt employees, do so with the advice and counsel of an attorney with significant experience litigating wage and hour lawsuits, so they can identify and help navigate the potential pitfalls and ambiguities in the law. Do not rely solely on the representations of third-party payroll service providers."
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