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Settlement of Class Actions–Chindarah v. Pick Up Stix: California State Court Affirms Dismissal Of Labor Law Class Action Holding Settlements Accepted By Individual Employees Covered By Putative Class Action Complaint Were Enforceable

As Matter of First Impression, Class Action Complaint Alleging Labor Law Violations and Challenging Releases Signed by Employees within Putative Class Action under Direct Settlements Offered by Employer Following Failure to Settle with Named Plaintiffs in Class Action Properly Subject to Summary Judgment because Releases Executed by Members of Class Action were Enforceable California State Court Holds

Plaintiffs filed a class action against their former employer, Pick Up Stix, alleging labor law violations; the class action complaint alleged that defendant failed to pay its employees overtime and misclassified employees as exempt from overtime pay. Chindarah v. Pick Up Stix, Inc., ___ Cal.App.4th ___ (Cal.App. February 26, 2009) [Slip Opn., at 2]. According to the allegations underlying the class action, defendant misclassified general managers, assistant managers and lead cooks, id. Defense attorneys sought to settle the class action and, when that failed, offered settlements directly to members of the putative class. Id. These individual settlement offers were based on the same formula offered at the mediation, and more than 200 people covered by the class action accepted the offers, id. As a condition of these settlements, the class members executed a general release and “acknowledged that he or she had spent more than 50% of the time performing managerial duties.” Id. Plaintiffs then amended their class action complaint to include a new party-plaintiff (one who had accepted the settlement offer) and a claim that the settlements reached with members of the putative class violated California labor laws, id., at 2-3. Defense attorneys filed a cross-complaint alleging breach of contract and of the settlement agreement, and seeking declaratory relief, id., at 3. Defense attorneys then moved for summary judgment, and the trial court upheld the releases concluding that they were “valid as a matter of law.” Id. Plaintiffs appealed, and the California Court of Appeal affirmed.

Plaintiffs argued that each release obtained by defendant were “void as a matter of law to the extent it releases claims for any wages actually due and unpaid and to the extent it constitutes an agreement to work for less than the overtime compensation actually due and unpaid. “ Chindarah, at 4. The Court of Appeal found no case directly on point, id., but after summarizing the relevant provisions of California’s Labor Code and of various state and federal cases addressing releases of disputed wage claims, see id., at 3-9, the appellate court ultimately relied on the fact that “there is no statute providing that an employee cannot release his claim to past overtime wages as part of a settlement of a bona fide dispute over those wages,” id., at 9. The Court further held that “public policy is not violated by a settlement of a bona fide dispute over wages already earned.” Id., at 9. Accordingly, the trial court properly found that the releases executed by members of the putative class who had accepted defendant’s settlement offers were valid and barred the claims in the amended class action complaint challenging those releases, id., at 9-10. The Court of Appeal therefore affirmed the judgment of the trial court and awarded defendant costs on appeal. Id., at 10.

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