Family Dollar’s $45M Pay Bias Settlement Approved (1)

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By Patrick Dorrian

A federal judge approved a $45 million agreement settling claims by a group of women nationwide that Family Dollar Stores Inc. paid them less than their male co-workers for doing the same work.

The March 14 ruling by the U.S. District Court for the Western District of North Carolina brings an end to a “pattern-practice pay discrimination” class action that began in 2008, when 49 female store managers sued the variety chain store operator. It’s a stark reminder for employers of the steep price they could pay if it is shown or credibly alleged that they’ve systemically underpaid female employees relative to their male counterparts.

The case was “vigorously litigated over the last ten years,” Judge Max O. Cogburn Jr. said in granting final approval of the settlement. The pact also provides for “significant prospective programmatic remedies aimed at providing adjustments to Family Dollar’s pay practices” to change the way salaries for store managers are set, according to a memorandum of law filed by the class in support of final approval. Those remedies are to be “formally validated” by industrial organizational psychologists and labor economists, the memo says.

Cogburn also approved the parties’ proposal that $16 million of the $45 million class fund be used to pay class counsel’s attorneys’ fees and litigation costs, $15 million and $1 million, respectively. Family Dollar didn’t oppose the “one-third common fund fee” provision in the proposed settlement and class counsel showed that a fees award of one-third of the total settlement met the seven factors federal courts in the Fourth Circuit use to analyze common-fund fees arrangements, Cogburn said.

Those factors include the results obtained in the litigation, the quality of the legal services provided, the complexity and duration of the case, and the risk that no fees might be recovered should the case be lost, he said.

The class entitled to share in the settlement consists of all female store managers who are or were employed by Family Dollar anywhere in the U.S. at any time between July 2, 2002, and the present. Only nine potential class members chose to opt out of the deal, Cogburn said.

In addition, nine of the workers named in the lawsuit will receive service awards for acting as class representatives in the case. The other named plaintiffs will receive service awards of $5,000, the court said.

Family Dollar must make any modifications to its process for setting store manager starting pay available to class counsel for review on a confidential basis prior to implementation and provide class counsel with a qualified expert’s certification that the revised process has been validated according to professional standards. In addition, all exceptions to the revised process must be reviewed on an individual basis by a designated representative or team, which may include human resources managers.

‘Double-Blind’ Mediation Follows High Court Rebuff

Cogburn said the settlement was the product of “double-blind” mediation during which the parties separately communicated with Mediator Mark Rudy. They first agreed to the broad outlines of a pact proposed by Rudy and then continued to work separately with him to hammer out the details, the judge said.

Rudy’s proposal followed a failed second round of traditional mediation in which the mediator acts as a neutral third party who facilitates discussions between the parties. That second round of mediation came after the Fourth Circuit ruled in October 2013 that Cogburn erred when he struck the class allegations and dismissed the lawsuit for failing to meet the class certification requirements set by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes and then denied the proposed class leave to amend its complaint.

The Fourth Circuit held that Dukes didn’t prohibit class certification in all cases in which an employer’s decision-making processes leave room for subjective discretion by managers. The Supreme Court subsequently denied Family Dollar’s request that the justices review the case.

The parties didn’t respond March 15 to Bloomberg Law’s requests for comment.

Wiggins, Childs, Quinn & Pantazis LLC and Greg Jones P.A. represented the class. Gibson Dunn & Crutcher LLP and Robinson Bradshaw & Hinson P.A. represented Family Dollar.

The case is Scott v. Family Dollar Stores, Inc., W.D.N.C., No. 3:08-cv-00540, final approval of class settlement 3/14/18.

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