United States District Court, N.D. California
CRELENCIO CHAVEZ and JOSE ZALDIVAR, on behalf of all others similarly situated, Plaintiffs,
LUMBER LIQUIDATORS, INC., and DOES 1 through 20, inclusive, Defendants.
ORDER DENYING MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT
SAMUEL CONTI, District Judge.
Now before the Court is Plaintiff Jose Zaldivar's ("Zaldivar" or "Plaintiff") motion for preliminary approval of a class action settlement in this case brought under the Fair Labor Standards Act ("FLSA"), the California Private Attorney General Act ("PAGA") and various other state employment laws. ECF No. 150 ("Mot."). Defendants filed a notice of non-opposition, ECF No. 152, and the motion is ripe for disposition without oral argument under Civil Local Rule 7-1(b). For the reasons set forth below, preliminary approval is DENIED.
Lumber Liquidators is a retailer selling flooring products. During the relevant period, Lumber Liquidators had between six and twenty-four retail stores in California, each with a Store Manager and some combination of the following positions: Assistant Store Manager I, Assistant Store Manager II, Warehouse Associate, Delivery Driver, and/or Product Specialist. Store Managers are classified as "exempt" employees, meaning they are exempt from overtime pay requirements. Other employees are classified as "non-exempt, " meaning they are eligible for overtime pay.
Zaldivar worked for Lumber Liquidators in City of Industry, California as a non-exempt hourly Assistant Manager. Zaldivar stated that he earned a commission in addition to his hourly pay, but never got a breakdown of the commissions and did not understand how Lumber Liquidators calculated his commission or bonus. From July 2007 to June 2010, Lumber Liquidators paid Zaldivar $12, 282.87 as "sales bonuses." Zaldivar claims that Lumber Liquidators failed to include these bonuses into his regular rate of pay when calculating his overtime rate.
As a result, Zaldivar filed suit alleging, among other things, failure to pay overtime wages in violation of California Labor Code ("Labor Code") Section 1194 and 29 U.S.C. Section 207; failure to keep accurate payroll records in violation of Labor Code Section 226; and violation of California's Unfair Competition Law ("UCL"), California Business & Professions Code Section 17200.
The Court subsequently denied class certification for several proposed classes, but granted certification for the "Unpaid Overtime Class, " defined as:
[A]ll past and current retail store employees of [Lumber Liquidators] classified by [Lumber Liquidators] as non-exempt employees (including, but not limited to, assistant store managers, sales associates, and warehouse associates), and employed in California from September 3, 2005 through the present, who were paid overtime wages and were also paid commission wages and/or other non-discretionary pay or bonuses.
ECF No. 92 ("Class Cert. Order") at 12. In essence, Plaintiffs' theory is that Lumber Liquidators failed to account for non-discretionary pay or bonuses when calculating class members' overtime. Under California law, non-exempt employees are entitled to "no less than one and one-half times the regular rate of pay for an employee" for any work in excess of eight hours in one workday or forty hours in any one workweek. Cal. Lab. Code § 510(a). Plaintiffs contend that non-discretionary pay and bonuses were not factored into their "regular rate of pay" for the purposes of overtime calculations.
Following class certification, notice was sent to all individuals who were employed by Lumber Liquidators in California as a non-exempt store employee "who during the same pay period both earned commission/bonus wages and was paid overtime wages from September 3, 2005 to the present." Mot. at 4. Only one individual asked to be excluded from the class.
Subsequently, the parties engaged in discovery and reached a settlement with the help of a court-appointed mediator. Now they seek approval of a class defined somewhat (but not materially) differently:
All current and former retail store employees of [Lumber Liquidators] classified as non-exempt and employed in California who were paid overtime wages and commission/sales bonus wages and/or other nondiscretionary compensation between September 3, 2005 through the present. The Class includes, but is not limited to, persons employed in the following position categories and/or job titles: warehouse associate, sales associate, Assistant Store Manager 1, Assistant Store Manager 2, and other non-exempt retail store employees.
ECF No. 149 ("Settlement Agreement") § 2.6. This class is made up of approximately 240 current and former employees ...