The parties involved in a suit challenging the ability to defer more to a 401(k) have come to terms, with a settlement of roughly $1.5 million.
The suit (Baird v. Hyatt Corp., C.D. Cal., No. 2:22-cv-01620, complaint 3/10/22), filed by one Lance Baird, accused his employer, Hyatt Corporation, of failing to properly honor his repeated requests to increase the amount of his salary that would go to his 401(k) account. The suit alleged that Hyatt had a mandatory policy of requiring tipped employees (including Baird, who was employed by Hyatt as a server in Huntington Beach, CA) to be paid all charged tips in cash rather than through payroll, “interfering with Plaintiff’s and Class members’ ability to defer income under the terms of the Plan.”
The suit—he was represented by Miller Shah LLP in the action—stated that Hyatt did not provide its employees with the option to receive those tips later with their compensation paid through payroll, though when determining the taxable earnings for its employees, Hyatt includes the credit card tips that it requires Plaintiff and other tipped employees to report. The suit alleged (though Hyatt denied this claim) that their practice intentionally discriminated against those classes of employees who received tipped income—by denying them the right to defer tipped income.
The settlement (Baird v. Hyatt Corp., C.D. Cal., No. 2:22-cv-01620, settlement motion 7/7/23) notes that shortly after the filing of the Complaint, “the parties agreed to stay the case in order to narrow the issues in dispute and to proceed to mediation,” and that “through the exchange of documents and information, the Parties were able to narrow the dispute to the following issues: 1) Hyatt’s practice of having employees’ credit-card tipped earnings excluded from deferral to the Plan only occurred in California and in a few other locations that required daily cash-outs of tipped earnings under the applicable CBA or other established union practice; 2) the employees can be made whole by providing them with 50% of the missed deferrals and 100% of the missed match; and 3) the parties also do not dispute that the Plan was amended effective February 1, 2022.” For its part, the proposed settlement acknowledges that Hyatt does not admit any wrongdoing, fault, or liability.
The Settlement
Under the terms of the settlement, the Hyatt defendants have agreed to pay a gross settlement amount of $1,475,000 to resolve Plaintiff’s claims, “inclusive of all claims for attorney fees and costs, as well as payment of the Class Representative’s Case Contribution Award and the costs of administering the Settlement.”
As for how that will be distributed, the settlement says that the amount paid to each current participant and authorized former participant “will be determined by a Plan of Allocation that is based on the missed deferral opportunity of each Class Member during the relevant period.” It further states that current participants do not need to do anything affirmative to receive payment under the settlement, as their accounts will automatically be credited with the amount due them under the Settlement. As to former participants, they will receive a check.
The settlement notes that the plaintiffs’ attorneys (“Class Counsel”) will seek approval from the Court of their attorneys’ fees not to exceed $368,750 AND litigation costs and expenses advanced and carried by Class Counsel during this litigation. That turns out to be about 25% of the gross settlement amount of $1,475,000, “a percentage that falls well within established Ninth Circuit precedent and that is manifestly reasonable in light of the facts and circumstances of the case, including, among other things, the results achieved, the skill and quality of work, the contingent nature of the fee, and awards made in similar cases,” according to the settlement proposal. In addition to being part of a mediation process, the proposal has (apparently) already been reviewed by an independent fiduciary who “found that the amount requested for the attorney fees and case contribution fees were reasonable under the facts and circumstances of the case,” according to the parties.
Now we’ll see if the court approves.[i]
[i] FWIW, the settlement acknowledges the following factors to be considered: “(A) the class representatives and class counsel have adequately represented the class; (B) the proposal was negotiated at arm's length; (C) the relief provided for the class is adequate, taking into account: (i) the costs, risks, and delay of trial and appeal; (ii) the effectiveness of any proposed method of distributing relief to the class, including the method of processing class-member claims, if required; (iii) the terms of any proposed award of attorney's fees, including timing of payment; and (iv) any agreement required to be identified under Rule 23(e)(3); and (D) the proposal treats class members equitably relative to each other.”
Additionally, it notes that courts in the Ninth Circuit (where this case is being adjudicated) have traditionally considered eight factors in determining whether a settlement is “substantively fair, reasonable, and adequate. These factors are: (1) the strength of the plaintiff's case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) the risk of maintaining class action status throughout the trial; (4) the amount offered in settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the experience and views of counsel; (7) the presence of a governmental participant; and (8) the reaction of the class members of the proposed settlement.”
