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Matco Tools Misclassification Suit Reaches $15.8 Million Settlement

On January 19, 2022, John Fleming (“Plaintiff”) requested preliminary approval of a $15,846,423 settlement (the “Settlement”) on behalf of himself and a class of other current and former distributors of Matco Tools Corporation (“Matco Tools” or “Defendant”). The Settlement resolves allegations that Plaintiff and other class members were misclassified as independent contractors instead of employees of Matco Tools, resulting in unreimbursed business expenses, unlawful deductions, unpaid overtime compensation, missed meal and rest breaks, improper wage settlements, and writing time penalties in violation of California labor law.

Plaintiff moved for class certification of claims that Matco Tools misclassified franchisers as independent contractors in October 2020. In February 2021, U.S. District Judge William H. Orrick certified a class for claims that Matco misclassified the workers as independent contractors to avoid California labor law requirements and failed to reimburse expenses and give accurate wage statements.

A formal Settlement Agreement was presented on November 18, 2021, following mediation between the two parties.

The Settlement includes two components: monetary relief and debt forgiveness. The monetary relief portion offers $13.5 million to the Class, defined as “all persons who signed Matco Tools franchise Distributorship Agreements in the State of California and personally operated a mobile store at any time between January 25, 2015 through and including the date the Court grants preliminary approval of the Settlement.” The debt forgiveness portion alleviates approximately $2.3 million of debt held by class members who terminated their distributorships on or before September 8, 2021. Each class member is expected to receive an average total net value (cash and debt relief) of $42,000 after the deduction of attorneys’ fees, litigation costs, service awards, and administration costs.

The Settlement also allocates $250,000 to Plaintiff’s California Private Attorneys General Act claims. $187,500 of that amount will be paid to the California Labor and Workforce Development Agency and $62,500 will be paid to aggrieved employees in California. Finally, Plaintiff requested a service award of $25,000 in the Settlement to compensate him for the active role he played in the prosecution of the case.

The Class approves of the settlement, noting that “even if [P]laintiff prevailed at the summary judgment stage, the class faced risks proving their claims in a class-wide trial with competent class-wide evidence. This settlement avoids that uncertainty, while ensuring that class members receive substantial consideration now for a release of their claims.”

Updates will be posted to this blog as the matter progresses. Preliminary approval for the settlement has not yet been granted. The case is Fleming v. Matco Tools Corporation et al., case number 3:19-cv-00463, filed in the United States District Court for the Northern District of California.

The legal team at Miller Shah LLP has significant experience representing employment matters. If you have any questions regarding this subject or this post, please contact John Roberts (jcroberts@millershah.com) or Casey Yamasaki (ctyamasaki@millershah.com). The firm can also be reached toll-free at (866) 540-5505.

Miller Shah, LLP is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, and Pennsylvania. The firm is an active member of International Advisory Group (www.iaginternational.org), which provides clients access to excellent legal and accounting resources around the globe. For more information about the firm, please visit https://www.millershah.com/.

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