Why it matters

The latest development in California’s suitable seating litigation: a $700,000 deal cut by Abercrombie & Fitch with sales representatives. Amber Echavez sued the national retailer in October 2011 and sought to certify a class of 10,000 workers over a lack of seating at the retail stores. During pre-trial wrangling, a federal court rejected her class allegations and limited the suit to a Private Attorneys General Act (PAGA) claim; the court also denied Abercrombie’s motion for summary judgment. Once the California Supreme Court issued its seminal seating decision in Kilby v. CVS Pharmacy last year, the parties reached an agreement. Abercrombie will pay $340,000 in PAGA penalties ($255,000 to the state labor agency and $85,000 to Echavez) and $360,000 for attorney’s fees and costs. The employer also agreed to modify its seating policies to conform to Kilby. While the total falls “significantly” below the maximum relief available under the statute (north of $880,000, as estimated by the judge), the court granted final approval to the deal given the lack of case law post-Kilby putting a value on such cases.

Detailed discussion

Originally styled as a representative action in California state court, Amber Echavez’s suit against Abercrombie & Fitch evolved into a single-count complaint pursuant to the PAGA alleging violations of the state’s Wage Order 7-2001 by failing to provide suitable seating to employees.

The parties engaged in extensive discovery and battled over summary judgment, with Echavez appealing the district court’s ruling in favor of Abercrombie. While her appeal was pending before the U.S. Court of Appeals for the Ninth Circuit, the California Supreme Court agreed to answer certified questions on the Wage Order and the Ninth Circuit stayed Echavez’s action pending the decision in Kilby v. CVS Pharmacy.

In that case, the state’s highest court ruled that seats should be provided to employees if the “nature of the work” reasonably permits, using a totality of the circumstances test that includes consideration of the employer’s business judgment and the tasks performed by the employee.

The Ninth Circuit lifted the stay, remanded the case to district court so the parties could negotiate a settlement, and Echavez filed an unopposed motion for preliminary approval of the deal. The district court invited the Labor and Workforce Development Agency (LWDA) to weigh in on the agreement but the agency did not file a response.

Pursuant to the agreement, Abercrombie would pay a total of $700,000—$360,000 in PAGA penalties ($255,000 to the LWDA and $85,000 to Echavez) plus $260,000 in attorney’s fees and costs to her counsel. The employer also avowed that its seating policies have already been changed, consistent with the Kilby decision.

U.S. District Court Judge Virginia A. Phillips grappled with whether the settlement total was reasonable and fair, particularly given the dearth of comparative cases. The court looked to the formula set forth by statute to calculate civil PAGA penalties, with $100 assessed for each aggrieved employee per pay period for the initial violation and $200 for each subsequent violation.

During discovery, Abercrombie put the number of aggrieved employees at 8,818 while Echavez rounded up to 10,000. The court said no evidence existed to demonstrate over how many pay periods the alleged violations spanned and whether they were initial or both initial and subsequent, triggering the higher penalty.

“Even if the violation took place over one pay period and would have been classified as only an initial violation, using Defendants’ lower number of 8,818 aggrieved employees, the total statutory penalty would be $881,800,” the court said. “Accordingly, using either Defendants’ or Plaintiff’s number of ‘aggrieved employees,’ it appears the proposed $340,000 PAGA penalty is significantly less than the statutory maximum PAGA penalty that could be assessed here.”

However, the court still found that the deal passed muster, noting that the parties reached the settlement agreement as to the proposed penalty after months of negotiations, including an all-day mediation session. The parties faced a real challenge given that Kilby was only recently decided, with no body of verdicts or settlements to refer to for comparison, the court added, and the LWDA elected not to file any objection or opposition to the deal, a move the court inferred was tantamount to consent to the terms.

“Although the proposed PAGA penalty is less than the statutory maximum penalty, the Court finds it reasonable and fair,” Judge Phillips wrote. “The primary purpose of PAGA, i.e., the empowerment of aggrieved employees to act as private attorneys general to collect civil penalties from their employers for Labor Code violations, is served by the proposed PAGA penalty in the parties’ settlement agreement.”

To read the order in Echavez v. Abercrombie & Fitch Co., click here.