Employee Misclassification Settlement Gets Preliminary Court Approval

A California federal judge has preliminarily approved an employee misclassification settlement, which could resolve a proposed class action claiming misclassification allegations.

The employee misclassification settlement was entered into by defendant Postmates Inc. in the amount of $8.75 million to resolve claims of allegedly misclassifying couriers as independent contractors to avoid paying them minimum wage.

If the employee misclassification settlement is granted final approval, it would resolve a California wage and hour class action lawsuit filed in March 2015 by Postmates couriers.

Each proposed Class includes thousands of couriers from across the country including: 88,000 California couriers, 28,000 New York couriers, 3,000 Massachusetts couriers, 8,000 Washington D.C. couriers, and 107,000 couriers throughout the rest of the United States.

Overview of Employee Misclassification Settlement

According to the claim, Postmates had been allegedly misclassifying couriers in the states of California, Massachusetts, New York, and Washington D.C.

The California wage and hour class action lawsuit also claims that Postmates had violated California’s labor laws, the Private Attorneys General Act, as well as the Fair Labor Standards Act (FLSA), with attorneys wanting to represent a nationwide class under FLSA.

U.S. District Judge Jeffery S. White said his order will help claims filed by employees in different “gig” companies, and that the nature of these employee misclassification lawsuits. At this time, no California court has concretely determined whether or not gig workers are nonexempt employees or independent contractors.

Therefore, it was not a certain victory for the Postmates couriers. This was further emphasized by the company’s arbitration agreement, which covers 70% of the couriers.

“A class recovery through settlement may be the best hope for most of these couriers recovering anything at all on these claims, given the very low number of couriers who would file individual claims, if required to do so,” Judge White said.

Under the employee misclassification settlement, $100,000 will be allocated to resolve PAGA (Private Attorneys General Act) claims. Of that amount, 75% of the funds will be paid to the state of California and 25% will go to the couriers. An additional $300,000 will go to the settlement administrator, Garden City Group, and class attorneys will also receive 25% of the gross payment in the amount of $2.187 million.

In addition to paying the employee misclassifcation settlement, Postmates had agreed to revise its business practices by adopting different policies when hiring and firing couriers. This includes the couriers’ ability to challenge termination decisions, and for couriers to give feedback to Postmates regarding their platform and interactions with the company.

The employee misclassification settlement is one of the many deals being throughout the state of California, with each of the claims being filed by gig economy employees. In June 2016, a California judge had approved a separate settlement from Postmates, to resolve allegations of unfair background checks on its couriers.

The company allegedly failed to notify 190,000 potential couriers, that they would be subject to this process. Lawyers involved in the employee misclassification lawsuit stated they were pleased with the preliminary approval, and look forward to concluding the settlement.

California is one of the most progressive states in the country for protecting employee rights and is one of the first states to examine how workers are treated in gig economy workplaces.

This California Wage and Hour Class Action Lawsuit is Sherry Singer et al. v. Postmates Inc., Case No. 4:15-cv-01284, in the U.S. District Court for the Northern District of California.

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