Alleged labor violations at The GAP, Inc. distribution center in Fresno led to a tentative $1.7 million settlement amount against the clothing retailer. But a Fresno County Superior Court judge called the desired $553,000 in plaintiff’s attorney fees too high.

Judge Kristi Kapetan on Tuesday denied the first proposed settlement from attorneys for workers at the GAP Pacific Distribution Center near the Fresno Yosemite International Airport. Workers claim they worked past their lunch hours, were not paid for overtime, and were not given breaks.

It is not uncommon for attorneys to receive as much as one-third of the total compensation amount for lawsuits filed under California’s Private Attorneys General Act.

In a court document, however, Kapetan called the 33% and $1,826 an hour in attorney fees “extraordinary.”

“Applying the amount sought of $553,278 to the 303 attorney hours, the hourly rate would equate to $1,826,” court documents stated. “The court finds the rate sought as extraordinary, and therefore will not rely on a percentage approach.”

Kapetan’s objection echoes grievances from business advocates who say PAGA lawsuits benefit attorneys rather than workers.

A voter initiative to repeal and replace PAGA received enough signatures to qualify for the 2024 ballot.

Lawsuit: Employee Shortage Leads to Unpaid Wages

In the six months from July 2020 to January 2021, employers “regularly did not have enough employees to provide sufficient coverage,” the lawsuit alleges.

That was the six months the main plaintiff, Courtney Haynes, worked at the business.

Because of staffing shortages, Haynes and other employees regularly missed lunch periods, did not get breaks, and worked past the eight-hour daily limit without getting overtime pay, plaintiffs said.

The Private Attorneys General Act of 2004 made it easier for employees to sue employers in a class-action-style lawsuit. PAGA lawsuits bypass arbitration requirements and allow workers to sue on behalf of other employees.

Attorneys first estimated as many as 6,189 class members covered by the lawsuit. However, the number increased to 7,910 members. The increase was part of the reason Kapetan disputed the initial settlement.

The 21% increase in people involved in the lawsuit would “inappropriately devalue the value of compensation,” Kapetan wrote.

Workers who signed onto the lawsuit could receive $11.42 for each week they worked in the period the lawsuit covers if the class members remained at 6,189.  If the class increases, the amount would be lowered to $9.31.

Judge Wants Huge Cut in Attorney Fees

For the 303 hours that attorney Justin Lo said his firm worked, the proposed settlement called for $553,278 in fees, or one-third of the settlement amount.

Kapetan proposed paying $162,645 instead based on a reduced number of hours at a rate of $700 an hour.

Of the settlement amount, lead plaintiff Haynes would receive $10,000, which Kapetan approved.

The settlement administrator, Phoenix Settlement Administrations, would receive $45,000. The California Labor & Workforce Development Agency would receive $37,500.

Business Advocates Want PAGA Reform

The California Chamber of Commerce says 2021 was a record year for PAGA claims, with 6,502 claims filed against California businesses — mostly small and mid-sized.

“The popularity of these lawsuits is likely due to the significant monetary awards that can be levied against an employer,” Cal Chamber said in a news release. “The threatened penalties can be staggering.”

While litigation against employers has increased, Cal Chamber says compensation for employees has not increased. The default penalty for employees is $100 per pay period for the first violation and $200 for each violation after that. Employees receive on average $1,300 in PAGA cases.

Attorneys request on average 33% of compensation. The average attorney fee is $372,000, according to Cal Chamber.

Cal Chamber representatives say PAGA lawsuits can be predatory with no actual damages suffered by employees, such as when there’s a misprint on a timecard.

After not getting enough signatures to qualify for the 2022 ballot, the California Fair Pay and Employer Accountability Act qualified for the 2024 ballot. The ballot initiative would replace PAGA with the Fair Pay Act. Proponents of the bill say it would double penalties against willful violators and require all monetary penalties to be paid to employees.