8. LEGAL SETTLEMENT CHARGES
On September 26, 2011, the Division of Labor Standard Enforcement, Department of Industrial Relations, State of California (the “DLSE”) filed a lawsuit against the Company in the Superior Court of California, Alameda County, State Labor Commissioner, etc., v. ZipRealty, Inc. The complaint concerned the Company’s compensation practices regarding real estate agents in California, who at the time at issue were classified as employees. Specifically, the complaint alleged that the Company failed to pay these persons minimum wage and overtime, and failed to provide itemized wage statements, as required by California laws. In addition to wages and overtime, the complaint seeks liquidated damages, for a total claim in excess of $17 million. On September 28, 2012, the Company entered into a settlement Agreement and General Release (the “Agreement”) with the DLSE concerning the complaint. Pursuant to the Agreement the Company paid $0.2 million to the DLSE for attorneys’ fees and costs, and $4.8 million into a trust for disbursement to former employees as back wages. The Company will pay the employer’s share of F.I.C.A. taxes and other employer tax responsibilities on back wages as they are distributed to former employees, as well as the administrative costs of the claims administrator for the trust, which totaled less than $0.1 million in the three and six months ended June 30, 2014 and were reflected in litigation settlement charges in the Company’s Statement of Operations, and which could total less than an additional $0.1 million if all remaining former employee claimants participate. A liability and corresponding expense for the additional employer taxes and administrative fees have not been reflected within the balance sheet because an estimate of the ultimate liability for payment of these payroll taxes cannot be reasonably determined. Disbursements to former employees are subject to their execution of a release claim against the Company. The Agreement also includes a full release by the DLSE from further liability on this issue. On October 12, 2012, the Court dismissed the entire action, with prejudice, against the defendants.
On February 17, 2012, two real estate sales agents formerly employed by us, on behalf of themselves and all other similarly situated individuals, filed a lawsuit against us in the United States District Court, District of Arizona, Patricia Anderson and James Kwasiborski v. ZipRealty, Inc. The complaint concerned our compensation practices nationwide regarding our real estate agents, who at the time at issue were classified as employees. Specifically, the complaint alleges that we failed to pay these persons minimum wage and overtime as required by federal law. The complaint sought liquidated and treble damages in addition to wages and overtime for an unspecified amount. On December 23, 2013, we reached a settlement for $1.7 million to resolve both the federal and state law claims. This settlement was subsequently approved by the court. We were also responsible for payment of the employer’s share of F.I.C.A. taxes and other employer tax for the back wages which total less than $0.1 million. A liability and corresponding expense for the $1.7 million settlement and associated employer’s share of F.I.C.A. taxes and other employer taxes was included in litigation settlement charges in the Company’s Statement of Operations for the year ended December 31, 2013 because a loss is both probable and reasonably estimable.
On February 29, 2012, one real estate agent formerly employed by the Company, on behalf of herself and all other similarly situated individuals, filed a lawsuit against the Company in the Superior Court of California, Los Angeles County, Tracy Adewunmi v. ZipRealty, Inc., concerning the Company’s compensation practices regarding real estate agents in California. Specifically, the complaint alleged that the Company failed to pay these persons minimum wage and overtime, failed to provide meal and rest periods, failed to reimburse employee expenses and failed to provide itemized wage statements as required by California laws. The complaint sought unspecified damages including penalties and attorneys’ fees in addition to wages and overtime. On May 20, 2013, Ms. Adewunmi dropped the class claims in her complaint and proceeded as an individual plaintiff. On January 28, 2014, the Company reached a settlement with Ms. Adewunmi for $30,000 to resolve all claims. The payment of this $30,000 settlement was reflected in litigation settlement charges in the Company’s Statement of Operations for the six months ended June 30, 2014.
