Santa Clara to pay $2.7 million settlement in employee overtime lawsuit

SANTA CLARA — The city of Santa Clara will pay its government employees a total of $2.7 million to settle a lawsuit brought by five firefighters that alleges it failed to pay them and other workers proper overtime rates for more than four years.

Most of the $2.7 million settlement money will go toward back pay for virtually all city employees who were eligible to receive overtime between May 2014 and August 2018. It also includes about $150,000 in attorneys’ fees.

The litigation is based on a 2016 U.S. Ninth Circuit Court of Appeals decision in Flores v. City of San Gabriel that changed how overtime pay is calculated under the federal Fair Labor Standards Act. The ruling requires employers to take into account cash payments for unused health benefits when calculating overtime pay.

A year after that ruling, in July 2017, Santa Clara began working with the firefighters’ union to resolve allegations that the city failed to include unused medical benefits and specialty pay, such as paramedic or hazard, when calculating overtime rates, thus violating the Fair Labor Standards Act. In August 2018, the city updated its practices for calculating overtime, and paid $1.73 million in back pay to more than 150 fire union members, according to a court filing.

But the firefighters ultimately filed a lawsuit against the city in October of that year, arguing it still owed them money for damages, and to demand that it also compensate any other city employees whose overtime pay was miscalculated, said the firefighters’ attorney, Dieter Dammeier.

“We wanted to make sure we captured everyone who should have been paid,” Dammeier said.

By agreeing to the settlement, the lawsuit against the city will be dismissed.

A federal court still has to approve the settlement, which was filed on Oct. 17, before the city can begin to issue any payments.

“This was a result of a federal court decision that caused many California cities to go back and apply the decision of the court,” City Manager Deanna Santana said in a statement Monday. “We continue to comply by manually verifying calculations, assuming that the court decision is being upheld.”

Santana said the city had set aside $1.2 million from its general fund for the lawsuit, and will pay for the remainder of the settlement through the general fund and reserve funds.