A mediator’s perspective on common breakdowns and how to preempt them in employment class actions.
Introduction
Settling a class action is a major milestone—but for many litigators, final approval becomes an unexpected second battlefield. California courts routinely scrutinize employment class action settlements, and despite a handshake at mediation, approval delays, judicial pushback, and even rejection remain common.
As a full-time mediator working on wage and hour, discrimination, and PAGA-related class and representative actions, I’ve observed several recurring reasons settlements unravel—both in court and in the weeks after mediation. Below are the most common causes of failure and how attorneys can prevent them before stepping into the mediation room.
1. Inadequate or Late Data Exchange
One of the most frequent issues in employment class mediations is insufficient data. Either the data hasn’t been exchanged early enough or lacks critical details such as the number of workweeks, job titles, facility locations, or classification breakdowns. This undermines the negotiation process and the documentation needed to obtain approval.
Parties often arrive at mediation with only estimated exposure values based on outdated or unvetted assumptions. This leads to extended sessions, recalculations during mediation, and often a breakdown in trust if discrepancies arise.
Practice Tip: Set a schedule for exchanging data ahead of the mediation date. Even limited, targeted data (e.g., sample workweek counts or payroll snapshots) can significantly improve modeling, anchor expectations, and avoid surprises. Verify that the data source is complete and consistent with the class definition and claims.
2. Financial Uncertainty on the Defense Side
Defendant solvency is often left unaddressed until the day of mediation—if at all. This creates two risks: (1) plaintiff’s counsel may anchor to a settlement figure that isn’t achievable; or (2) the defense may push for a steep discount late in the session due to alleged financial hardship, without supporting documentation.
This lack of transparency can derail progress, especially when the defense brings up solvency issues for the first time after substantive negotiations have begun. When settlement numbers start shifting due to financial constraints, trust and efficiency suffer.
Practice Tip: If financial limitations or insurance issues may impact the settlement range, the parties should consider raising the issue early and consider providing documentation. If documents can’t be exchanged, counsel should at least be prepared to address those issues with specificity during the mediation.
3. Unrealistic Expectations from One or Both Sides
Another persistent problem is the absence of realistic settlement expectations—particularly when parties are unfamiliar with current settlement trends or are emotionally anchored to extreme figures. In class actions, the settlement amount is public and often compared to similar matters. Coming in with final figures far outside the judicial or market norm can limit meaningful discussion.
Practice Tip: Counsel should conduct a realistic assessment of value based on comparable cases, risk exposure, and approval standards. Mediators can help, but parties should have already discussed ranges internally and within their client groups. Plaintiff attorneys may consider confidential conversations with peers or review publicly available settlements in similar industries or job classifications. Defense counsel should evaluate historical exposure and not assume a blanket low-end “per capita” number will survive court scrutiny or be acceptable to the plaintiff.
4. Vague Class Definitions or Unclear Release Language
Settlements that fail to clearly define the class or the release terms often stall in court. Ambiguous definitions raise red flags about scope, fairness, and adequacy. A release that doesn’t mirror the pleadings or includes undefined future claims will almost certainly be flagged by the reviewing judge.
If the case includes a PAGA claim, the class and release language should also align with the facts alleged in the original LWDA letter to avoid conflicts and strengthen the basis for judicial approval.
Practice Tip: Use the operative complaint and the PAGA letter (if applicable) as your templates. Confirm that class definitions and release language are consistent, tailored, and specific. Don’t copy from old agreements.
5. Insufficient PAGA Allocation and Rationale
In California, courts expect separate and transparent treatment of PAGA claims. Blending PAGA into the overall settlement amount or assigning it a nominal value without explanation invites rejection. Courts expect not just an amount, but also a rationale that connects to litigation risk, claim scope, and case-specific facts.
Practice Tip: Allocate a reasonable portion of the total to PAGA and document the justification, especially where the exposure is significant but disputed. Be prepared to explain the allocation in both the settlement documents and the motion for court approval.
6. Stalemates from Entrenched Negotiation Positions
One of the less discussed, but equally common reasons class action settlements fail is the psychological deadlock that occurs when one or both parties anchor early and refuse to move meaningfully. When each side demands that the other make a substantial shift without adjusting their own position, parties can quickly become entrenched. This often results in frustration, reduced flexibility, and a premature walk-away.
Practice Tip: Encourage movement, even if symbolic, to demonstrate good faith and preserve momentum. Mediators can help reframe offers and manage expectations, but the parties must be willing to engage in reciprocal movement. Emphasize that walking away from the table can often cement unproductive positions and increase costs with no guaranteed better outcome.
7. Failure to Explain the Rationale Behind the Settlement
Finally, many settlements stall because the motion for preliminary approval fails to clearly explain why the settlement is fair and reasonable. Courts need to understand the risks of litigation, the reasons for discounting claims, and the practical considerations at play.
Practice Tip: Use the mediation process to build your future motion. Outline the key risks, factual disputes, and litigation hurdles discussed during the session. Document these internally during mediation or even draft a settlement rationale memo that can be adapted later for court.
Final Word
Settlement approval is not guaranteed by agreement alone. In California class and representative actions, courts scrutinize not just the amount but the structure, fairness, and rationale behind the deal. Many failures are avoidable—but only if counsel prepares for approval from the start.
By addressing data early, discussing financial constraints candidly, setting realistic expectations, maintaining negotiation flexibility, and drafting carefully, counsel can avoid the most common pitfalls and deliver settlements that not only conclude litigation but stand the test of judicial review.
About the Author
Steve Mehta is a full-time mediator in California with extensive experience mediating complex employment matters, including wage and hour class actions, representative actions, and PAGA claims. He works closely with plaintiff and defense counsel to help design durable and approvable settlements.