Wage Law

Our traffic is up, and we're pretty sure it's related to our presentation at the Bridgeport Continuing Education program on Wage and Hour Litigation today at the Bonaventure Hotel in Los Angeles.  If you missed it, you missed out. The topics were interesting, we enjoyed hearing from the other presenters, and the materials were great. Of course, our recent developments discussions and materials were actually out of date as soon as we turned in the materials, but we gave a few updates verbally. Keep this page bookmarked if you want to see the latest wage and hour developments.

And for those of you who asked during the settlement panel discussion, the code section that ended the once liberal and widely-accepted residue reversions to defendants in California state court class actions is Code of Civil Procedure § 384(b):

384. (a) It is the intent of the Legislature in enacting this section to ensure that the unpaid residuals in class action litigation are distributed, to the extent possible, in a manner designed either to further the purposes of the underlying causes of action, or to promote justice for all Californians. The Legislature finds that the use of funds collected by the State Bar pursuant to this section for these purposes is in the public interest, is a proper use of the funds, and is consistent with essential public and governmental purposes. (b) Except as provided in subdivision (c), prior to the entry of any judgment in a class action established pursuant to Section 382, the court shall determine the total amount that will be payable to all class members, if all class members are paid the amount to which they are entitled pursuant to the judgment. The court shall also set a date when the parties shall report to the court the total amount that was actually paid to the class members. After the report is received, the court shall amend the judgment to direct the defendant to pay the sum of the unpaid residue, plus interest on that sum at the legal rate of interest from the date of entry of the initial judgment, to nonprofit organizations or foundations to support projects that will benefit the class or similarly situated persons, or that promote the law consistent with the objectives and purposes of the underlying cause of action, to child advocacy programs, or to nonprofit organizations providing civil legal services to the indigent. The court shall ensure that the distribution of any unpaid residual derived from multistate or national cases brought under California law shall provide substantial or commensurate benefit to California consumers. (c) This section shall not apply to any class action brought against any public entity, as defined in Section 811.2 of the Government Code, or against any public employee, as defined in Section 811.4 of the Government Code. However, this section shall not be construed to abrogate any equitable cy pres remedy which may be available in any class action with regard to all or part of the residue.

We hope that answers your questions.

[Update: It doesn't. We clearly did a poor job of explaining this initially.

Section 384 does not preclude accomplishing the same or similar objectives with what is commonly referred to as a "claims-made" settlement. Under a typical "claims-made" settlement (somewhat of a misnomer, in that even most "common fund" settlements require class members to submit claims), there is no true residue. Unclaimed shares of the potential settlement are simply never considered or paid by the defendant, because the payout is determined by the amount of claims submitted. Moreover, courts can permit the same sort of arrangements as part of a cy pres remedy to distribute unclaimed proceeds in a manner consistent with the goals of the litigation and the interests of the class. See In re Microsoft I-V Cases (2006) 135 Cal.App.4th 706 ("reversion" to the defendant of part of a potential settlement fund can be approved as part of an equitable cy pres remedy). Still, even a Microsoft-type reversion is subject to the discretion of the trial court, and although In re Microsoft I-V Cases called the retention of some unclaimed funds by Microsoft a "reversion," we are aware of many judges who read CCP § 384(b) to prohibit any sort of reversion to defendants, including the type that was permitted in the Microsoft cases.

It is also important to note that any "residue" from uncashed checks that represent payroll to class claimants generally do not fall within the same category as other types of residue. If the settlement includes payroll distributions, uncashed checks are wages payable to the employee, and should generally escheat to the State of California like any other uncashed check. This principle might not apply to other kinds of wage and hour settlements, including those involving civil or statutory penalties.]