お知らせ • Dec 11
Psychemedics Corporation Enters into Binding Memorandum of Understanding to Settle Purported Class Action Lawsuit Against It Related to Certain California Wage and Hour Laws
Psychemedics Corporation entered into a binding Memorandum of Understanding to settle a purported class action lawsuit against it related to certain California wage and hour laws. The lawsuit, Enma Sagastume v. Psychemedics Corporation, Case No. 2:20-CV-06624-DSF, is pending in the United States District Court for the Central District of California and is similar to numerous lawsuits filed against employers with operations in California. In the binding MOU, the parties agreed to settle this matter for a payment by the Company of approximately $1,150,000 in exchange for the dismissal of the Lawsuit and a customary release of liability, subject only to final court approval and the process described below. Factoring in that process, the Company estimates that the settlement funds will be dispersed in the second half of 2022, subject to the actual timing of final court approval. Although the Company believes that the allegations in the Lawsuit lack merit, it agreed at a mediation to enter into the binding MOU to settle the claims in the Lawsuit in order to avoid potentially significant legal fees, other expenses, and management time that would have to be devoted to protracted litigation in California regarding its wage and hour laws. The foregoing was also impacted in part by new California case law in February 2021 regarding meal period compliance. The allegations in the Lawsuit relate to alleged discrepancies in compliance with meal and rest periods required by California law and other alleged compliance discrepancies relating to the California wage and hour laws with respect to non-exempt hourly employees of the Company in California for a period since June 9, 2017. The Lawsuit sought recovery of wages, penalties, interest, attorneys’ fees and other alleged damages. As part of the settlement, the Company continues to deny any liability or wrongdoing with respect to the claims made in the Lawsuit. The MOU assumes class certification for purposes of the settlement only. The settlement amount of $1,150,000, which includes plaintiff attorneys' fees and costs, is subject to potential increase based on any adjustments in the final class size and the exact period to be covered, as determined by the court’s final approval. However, the Company believes that such adjustments, if any, would likely be immaterial. Once court approved, in exchange for the settlement payment, the plaintiff and all class members who do not opt out of the settlement will provide a broad release of any liability relating to the subject matter of the Lawsuit, including any claims of such persons under California’s Private Attorneys' General Act of 2004. Such release is for the benefit of the Company, its affiliates and any successor to the Company. The Company has the right to revoke the settlement prior to court approval in the event opt-outs, if any, from the class membership exceed a specified level. While the settlement is subject to final court approval as is customary, the MOU expressly provides that it is binding on and enforceable by each of the parties thereto, including by any successor to the Company. Because of the prior uncertainty surrounding this matter, no litigation reserve had previously been established by the Company. Even though actual payment of cash is not expected to occur until the second half of 2022 subject to the process described above, it is expected that the Company will recognize, as an accounting matter, a one-time, non-cash charge of $1,150,000 constituting a settlement reserve in the fourth quarter of 2021.