Thursday, July 8, 2010
C.A. Upholds $8.9 Million Settlement in Nordstrom’s Suit
By a MetNews Staff Writer
The Fourth District Court of Appeal has upheld a settlement of nearly $9 million in a class action brought by Nordstrom’s commissioned salespersons against the company.
Justice Richard Fybel, writing for Div. Three, said the settlement amount was fair, and rejected an employee’s objection to the fact that $2.5 million of the $8.905 million total would be paid in merchandise coupons rather than cash. The opinion was filed June 10 and certified yesterday for publication.
Two employees filed separate class actions in 2004, alleging that a plan for paying sales commissions based on net sales on a pay period basis, so that deductions for returned merchandise would be deducted from commissions for the same pay period, violated the California Labor Code.
While the system was approved as part of a 1997 settlement of an earlier class action, in which the plaintiff claimed that calculating commissions based on net sales violated the Labor Code, the plaintiffs in the new actions said it was illegal because it constitute a taking back of wages that were earned when the merchandise was sold.
The two actions were coordinated and assigned to Orange Superior Court Judge Thierry P. Colaw, and the settlement, which included a new system of calculation, payment, and reporting of commissions along with the cash and coupons, was approved last year.
Two employees initially objected to the settlement, but Kellie Taylor was left as the lone objector after Cynthia Alvarez opted out to pursue her own action.
Colaw overruled Taylor’s objections. He ruled that all relevant issues, including the potential that former employees could recover waiting time penalties under the Labor Code, were considered in the settlement negotiations, and that it was unlikely the class could have recovered such penalties by taking the case to trial.
Fybel, writing for the Court of Appeal, agreed. Claims for waiting time penalties had little chance for success, he said, given that the pay structure challenged by the plaintiffs had been agreed to by the employees in written agreements, and approved by the court in the prior action.
He also noted that similar claims had been filed with the Labor Commissioner and rejected, and that the employer could argue that the former employees’ commissions were incapable of being calculated at the time of termination and could thus be delayed until the date they were able to be calculated.
Nor, the justice wrote, did the lack of penalties under the Private Attorneys General Act render the settlement unfair. The trial judge reasonably concluded that no PAGA were recoverable because the company followed the previously court-approved plan in good faith.
As for the use of coupons, Fybel explained that Labor Code Sec. 212, which prohibits paying employees in coupons or other things not redeemable for cash, does not preclude the use of such items to fund a settlement of a good faith dispute as to whether the compensation claimed by an employee is actually owed.
In this particular case, the justice added, the use of coupons was justified because some of the class members will receive less than $20 from the settlement and paying them in coupons will enable them to avoid tax withholding that would reduce the small amount even further.
The case is Nordstrom Commission Cases, G042772.
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