United States District Court, W.D. Wisconsin
OPINION & ORDER
JAMES D. PETERSON District Judge
Plaintiffs Brannon Holmes and Anthony McMahan allege that defendant Roadview, Inc. underpaid them, and other similarly situated employees, for their overtime work, in violation of the Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201-19, and in violation of Wisconsin state law, Wis.Stat. § 103.03. The court approved a stipulated conditional certification for a collective action under the FLSA, consisting of 69 current and former employees. After plaintiffs provided notice to the putative class, 15 people opted in. The parties now seek court approval of their class action settlement. Plaintiffs also ask the court to certify a class under Federal Rule of Civil Procedure 23 for their state law claims.
The court will certify the proposed class, accept the proposed settlement, approve the proposed notice to the class and settlement administration plan, and set a final fairness hearing.
Plaintiffs have alleged that Roadview failed to adequately pay them by implementing a fluctuating work week payment method. Pursuant to this method, field service operators like plaintiffs who worked at least 40 hours per week were paid a fixed amount each week. If they worked more than 40 hours per week, they were paid only 50 percent of their regular rate for those hours. If they worked fewer than 40 hours per week, they were paid at a lower rate.
Plaintiffs filed a complaint alleging that Roadview’s payment methods violated the FLSA requirements regarding overtime compensation. Generally, the FLSA requires that overtime-hours worked in excess of 40 hours per week-be paid at 150 percent of the hourly rate. 29 U.S.C. § 207(a)(1). Under certain conditions, overtime compensation may be calculated using the fluctuating work week payment method. Under that method, Roadview could pay a weekly fixed-base salary, regardless of how many hours the employee actually worked, plus an additional overtime rate of 50 percent of the regular hourly rate for every hour more than 40 per week. 29 C.F.R. § 778.114(a). The regular hourly rate for that week equals the fixed-base salary divided by the total hours worked that week, including the overtime hours. Id.
But Roadview may use the fluctuating work week payment method only if: (1) its employees’ hours fluctuate week-to-week; (2) its employees receive a fixed weekly salary (excluding overtime premiums) regardless of the number of hours worked; (3) its employees’ fixed-base salaries compensate them at a rate no less than the legal minimum wage for all hours worked; (4) its employees receive at least 50 percent of their regular hourly pay for all overtime hours worked; and (5) Roadview and its employees have a “clear mutual understanding” that the fixed salary “is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period.” See Id. § 778.114(a)-(c). Plaintiffs alleged that Roadview paid them a lower salary for weeks when they worked fewer than 40 hours, violating the second and fifth requirements.
Wisconsin law also regulates overtime wages and provides that employers “shall pay to each employee time and one-half the regular rate of pay for all hours worked in excess of 40 hours per week.” Wis. Admin. Code DWD § 274.03. Violations are enforced under Wis.Stat. § 103.03. Whether the FLSA fluctuating work week payment method is allowed under state law is an open question.
After plaintiffs filed their complaint and the parties exchanged discovery, the court approved a stipulated conditional certification for the FLSA collective action and approved of the notice. Dkt. 26. Fifteen people opted in. The parties then completed mediation and submitted their joint motion for class certification (relating to their state law claims) and for preliminary approval of their settlement. The proposed settlement provides a fund of $155, 000 total for plaintiffs, all members of the collective action who opted in, and all members of the proposed class unless they opt out. Dkt. 52. The total amount includes attorney fees and costs, which are capped at 33 percent of the fund. The settlement also provides that the class representatives will receive $5, 000 in addition to their share of the fund. The rest of the class is to receive payments from the fund unless they opt out.
The court has jurisdiction over the federal claims under 28 U.S.C. § 1331 and over the state law claims under 28 U.S.C. § 1367.
The parties have moved for certification of their proposed class and for approval of their settlement, as required under Rule 23(e). The court will first address the certification and then settlement.
A. Class certification
The parties already have a conditionally certified FLSA collective action. For their state law claims, they request certification of a proposed class of:
all persons who have been or are currently employed by Roadview, Inc. as Field Service Operators who worked hours over forty (40) per workweek and were paid on the fluctuating workweek pay method and who were paid reduced wages during weeks they worked less than forty (40) hours a workweek at any time from January 5, 2013 to August 12, 2015.
Dkt. 48, at 2. To be certified, Rule 23(a) requires that a class satisfy the prerequisites of numerosity, commonality, typicality, and adequacy of representation. The class must also satisfy one subsection of Rule 23(b). In this case, Rule 23(b)(3) applies; it requires a showing that the common issues predominate other issues, and that the class action method provides the best way to resolve those issues. See Jefferson v. Ingersoll Int’l Inc., 195 F.3d 894, 898 (7th Cir. 1999) (“When substantial damages have been sought, the most appropriate approach is that of Rule 23(b)(3), because it allows notice and an opportunity to opt out.”). In a settlement context, the court rigorously examines whether the class meets the requirements, in an effort to mitigate the lack of an adversarial relationship between the parties, and to identify potential conflicts of ...