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McDonald’s would pay $26M to end wage-hour class action against corporate-owned California restaurants

By Pamela Wolf, J.D.

The proposed settlement would give workers back wages, statutory penalties, and interest for alleged missed, late, or shortened meal and rest breaks; unpaid overnight overtime; waiting time penalties; wage statement penalties; and unreimbursed uniform maintenance time and expenses.

Long-running California wage and hour litigation against McDonald’s corporate (non-franchised) restaurants in that state would be resolved with the distribution of $26 million among a class of about 38,000 current and former employees, according to a proposed settlement agreement. Notably, the settlement would include the court’s previous “overnight-overtime subclass” award of $700,270 in Private Attorneys General Act (PAGA) penalties, $55,471 in unpaid overtime, and $18,701 in interest.

The tentative deal, reached after nearly seven years of litigation in the trial and appellate courts and extended settlement negotiations between the parties, would fully resolve all of the issues in the litigation, including several of first impression under California law, according to the plaintiffs.

Complaint. The operative complaint alleges a dozen causes of action, including failure to provide required meal periods and rest breaks, failure to pay minimum and overtime wages, failure to pay all wages due to discharged and quitting employees, failure to provide accurate itemized wage statements, and failure to indemnify employees for necessary expenditures. The plaintiffs also allege claims under California’s Unfair Competition Law and PAGA. The plaintiffs sought damages, statutory and civil penalties, and injunctive and declaratory relief.

Earlier overnight overtime award. In August 2016, the court certified an “overnight-overtime subclass” of all crew members employed at McDonald’s corporate-owned restaurants in California at any time between January 24, 2009, and final judgment “who worked a shift that began on one calendar day and ended on the next calendar day (an ‘overnight shift’) followed by a shift that began on the same calendar day as the overnight shift ended, who were not paid all overtime for all time worked in excess of eight hours in a 24-hour period,” according to the proposed settlement documents.

On April 20, 2017, the court held that “overtime calculations should be based on the amount of work completed by an employee during any single twenty-four-hour workday period, regardless of whether the employee works continuously through the day” and that McDonald’s “does not calculate overtime based on a workday.”

After a seven-day bench trial on the PAGA claims arising out of the plaintiffs’ certified overnight-overtime claims, the court awarded the plaintiffs and the certified overnight-overtime subclass $700,270 in PAGA penalties, $55,471 in unpaid overtime, and $18,701 in interest, based on a remedial model that used the 4:00 a.m. start-of-workday proposed by McDonald’s.

Settlement details. Under the proposed settlement agreement, the court’s previous awards of back pay and PAGA civil penalties to members of the overnight-overtime subclass and the California Labor and Workforce Development Agency (LWDA) would be deducted from the gross settlement amount of $26 million. An additional sum for overnight-overtime back wages that arose between the PAGA trial data-cutoff date and the date of the court’s decision would also be deducted. These amounts would be taken off the top to ensure that none of the certified subclass members receive less from the settlement than would be the case if the appeals court had affirmed in entirety the lower court’s award on their overtime and PAGA recoveries.

In addition, court-approved attorneys’ fees of not more than one-third of the settlement amount (which is less than class counsel’s lodestar) and costs of no more than class counsel’s actual costs of not more than $1.5 million would also be deducted from the settlement amount. The deal also contemplates court-approved service fees of not more than $10,000 to each to the four class representatives.

After these deductions, 80 percent of the net remaining settlement fund would be allocated for distribution to class members to compensate them for claims for back wages, statutory penalties, and interest for alleged missed, late, or shortened meal periods and rest breaks; unpaid overnight overtime; waiting time penalties; wage statement penalties; and unreimbursed uniform maintenance time and expenses.

The remaining 20 percent of the net settlement amount would be allocated for PAGA civil penalties (subject to the one-year PAGA statute of limitations applicable to this action), with 75 percent amount to be paid to the LWDA for Labor Code enforcement and education, as required, and 25 percent paid to aggrieved employee class members.

The case, Sanchez v. McDonalds Restaurants of California, Inc., was filed in the Superior Court of California, County of Los Angeles; it is No. BC499888.