A U.S. District Judge in California (William Alsup – San Francisco) has rejected a proposed FLSA settlement between Oracle and the plaintiffs. The proposed $9 million settlement was intended to resolve claims that the company had improperly denied overtime pay to workers. The federal judge classified the proposal as an unfair “bonanza” for both Oracle and the workers’ lawyers and said that “Oracle is trying to use a California court to erase the workers’ rights in 35 states and under 150 different local laws.”

In his order, the judge took issue with the fact that the proposed accord included a rich $2.25 million in attorney’s fees, did not provide adequate notification to hundreds of Oracle’s U.S. hourly workers, blocked future claims by those who weren’t contacted, and provided non-California workers lower compensation.

Alsup ordered the case to proceed toward certification of a group (class-action) lawsuit.

Commentary: We have never seen a FLSA case so roundly rejected by a federal judge. This case does raise some interesting questions around potential conflicts of interest for the plaintiffs and their attorneys. For example, we’re left wondering if, with the right fees, they were happy to push through a lower settlement for Oracle and limit the rights of future plaintiffs in the case. Overall, the dollar settlement did seem quite low compared to similar cases in the software industry – so perhaps the judge had the right to be suspicious. And, as the judge noted himself (citing estimates from lawyers involved in the case), Oracle may be forced to pay $52.7 million in this specific case if it loses at trial.