Unreported / Non-Citable
Background
Plaintiff Mark Hendrickson, a Wal-Mart employee since 1997, filed a putative class action in San Diego County Superior Court on December 14, 2022, alleging that Wal-Mart’s El Centro, California superstore maintained unlawful employment practices related to employee exposure to extreme heat. The case was removed to federal court.
The operative Fourth Amended Complaint asserted three causes of action: (1) failure to provide recovery periods under California Labor Code § 226.7; (2) failure to provide accurate itemized wage statements under Labor Code §§ 226, 226.3, and 1198; and (3) representative claims under the Private Attorneys General Act (PAGA). A fourth claim under the Unfair Competition Law was remanded to state court. After early neutral evaluation with Magistrate Judge Berg, discovery, and a full-day mediation on February 12, 2026, the parties reached a settlement resolving both the federal and remanded state actions.
The Court’s Holding
The Court granted the Joint Motion for Preliminary Approval. It conditionally certified a Settlement Class of approximately 1,082 hourly non-exempt employees who worked at the El Centro store from June 19, 2018 to April 24, 2026 on days when outdoor temperatures reached or exceeded 80°F. The Court also recognized a PAGA Employee group of 787 current and former non-exempt employees from August 19, 2021 to April 24, 2026.
The $400,000 Gross Settlement Fund allocates up to $133,333.33 in attorney fees, up to $40,000 in costs, up to $12,500 for administration, $30,000 for PAGA penalties (75% to LWDA, 25% to employees), up to $10,000 service award for Hendrickson, and at least $174,166.67 distributed pro rata based on qualifying workweeks. The Court appointed Hendrickson as Class Representative, Vilmarie Cordero as Class Counsel, and Apex Class Action LLC as Settlement Administrator. A Final Approval Hearing is set for April 15, 2027. The Court flagged concerns about the $10,000 incentive award and the 43.3% fee request (including a clear-sailing provision), requiring detailed briefing on these issues at final approval.
Key Takeaways
- The Court conditionally certified a settlement class of ~1,082 Wal-Mart El Centro employees exposed to temperatures ≥80°F between June 2018 and April 2026.
- The $400,000 settlement represents ~13% of estimated maximum exposure ($3.07M), which the Court found within the range of adequacy for preliminary approval.
- PAGA settlement allocates $30,000 (7.5% of gross fund), with 75% to LWDA and 25% to 787 aggrieved employees (~$9.53 average), which the Court found preliminarily fair.
- The Court expressed significant concerns about the $10,000 incentive award and the 43.3% attorney fee/cost request with a clear-sailing provision, requiring detailed justification at final approval.
- Notice will be mailed to all class members with 45 days to opt out or object; PAGA employees cannot opt out of the PAGA release. Final approval briefing is due January 21, 2027, with hearing April 15, 2027.
Why It Matters
This order illustrates the heightened scrutiny courts apply to pre-certification settlements under Rule 23(e), particularly regarding incentive awards and attorney fee provisions that trigger ‘Bluetooth’ red flags (disproportionate fees, clear-sailing provisions). The Court’s willingness to grant preliminary approval while flagging specific concerns for final approval reflects the Ninth Circuit’s framework: preliminary approval requires only that the settlement appear to be the product of serious, non-collusive negotiations, have no obvious deficiencies, not grant improper preferential treatment, and fall within the range of possible approval. The case also demonstrates the interplay between Rule 23 class actions and PAGA claims, where aggrieved employees cannot opt out of PAGA releases, and the court applies a ‘Rule 23-like’ fairness standard to PAGA settlements.
The heat-exposure theory under California Labor Code § 226.7 and Cal/OSHA regulations presents novel liability questions that influenced the parties’ risk assessment. The order resolves only the motion and issues described above. Any claims, defenses, or later approval questions not decided by the order remain for further proceedings in the trial court.