Executive Summary: The effects of the California Supreme Court’s latest interpretation to provide seating to workers are beginning to show, as the United States District Court for the Central District of California recently approved a $700,000 settlement against a major retail clothing company for failure to provide seating in a representative action involving the Private Attorneys General Act of 2004, California Labor Code Section 2698, et seq., (PAGA).
In 2011, an employee brought a representative action under the PAGA against Abercrombie & Fitch Stores (A&F) on behalf of about 10,000 workers for failing to provide suitable seating to their employees as required by California Labor Code Section 1198 and Industrial Welfare Commission Wage Order 7-2001, Section 14. See Echavez v. Abercrombie & Fitch Co., Inc., et al., Case No. CV 11-09754-GAF (C.D. Cal. Mar. 23, 2017). The then-presiding district court judge granted summary judgment in favor of A&F. The court interpreted Wage Order 7-2001 to mean that the job in question was a “standing job” because the majority of the tasks the plaintiff and similarly situated employees performed during their shifts necessitated standing, and therefore A&F had no duty to provide seats to these employees except during their breaks. The plaintiff filed an appeal.
Meanwhile, in another representative action involving a seating claim entitled Kilby v. CVS Pharmacy, Inc., 739 F.3d 1192 (9th Cir. 2013), the Ninth Circuit certified similar questions to the California Supreme Court regarding the interpretation of Wage Order 7-2001. The plaintiff and A&F agreed to stay plaintiff’s appeal pending the California Supreme Court’s ruling in Kilby. Eventually in April 2016, the California Supreme Court tendered its ruling in Kilby, holding that the requirement to provide seats depends on the individual tasks being completed and not the general, bigger-picture work being performed during the entire work shift (the Kilby analysis can be found in a prior FordHarrison Legal Alert: California Supreme Court Tells Both Sides To Sit Down.
Following Kilby, the Ninth Circuit lifted the stay in Echavez¸ and the parties settled plaintiff’s PAGA claims in late 2016. Because a PAGA settlement statutorily requires court approval, the parties filed a joint motion for the district court to approve the PAGA settlement, providing a chance for the State of California’s Labor & Workforce Development Agency (LWDA) to respond, which it did not. Per the settlement agreement, the total amount of the settlement is $700,000, consisting of $340,000 in PAGA penalties and $360,000 in attorneys’ fees and costs to be paid to plaintiff’s counsel. As part of the settlement, A&F also changed its seating policies consistent with the Kilby decision.
The district court approved the $700,000 settlement as fair and reasonable despite finding that the plaintiff’s seating claim could have resulted in at least $881,800 in civil penalties (based on A&F’s projection of 8,818 aggrieved employees). The court also astonishingly approved the attorneys’ fees of $360,000 as well, even though that is more than the total amount of civil penalties the aggrieved employees and LWDA are receiving from the settlement.
Employers’ Bottom Line
Given the amount of the settlement and the attorneys’ fees that were viewed by the court as “reasonable” in Echavez, it is foreseeable that similar types of seating claims will continue to be filed in the future. As such, employers are strongly advised to have their seating policies and practices examined to ensure compliance with these standards and to avoid these types of lawsuits and potential civil penalties.