Chavez v. RBA Builders, Inc.

The court has reviewed and considered the papers, including the supplemental papers, filed in support of plaintiff’s motion for preliminary approval of a $400,000 class action settlement. The court has the following questions and comments:

1. In the August 14, 2025 order (ROA 103), the court noted that paragraph 3.2.2(a) of the settlement agreement stated that “all payroll taxes, including employer payroll taxes, will be paid out from the Gross Settlement Amount.” Settlement Agreement ¶ 3.2.2.(a). The court stated that this provision was inconsistent with other paragraphs of the settlement agreement (e.g., ¶¶ 1.21, 1.25) and inconsistent with the notice (e.g., §§ 3(1), 3(2)). The court stated that if the parties nevertheless propose to have “all payroll taxes, including employer payroll taxes” paid from the gross settlement amount, the parties must: (i) state specifically which taxes are proposed to be included in “all payroll taxes”; (ii) state the estimated amount of the deduction from the gross settlement amount for “all payroll taxes, including employer payroll taxes”; and (iii) explain why that deduction from the gross settlement amount is appropriate as the employment tax obligation is generally the employer’s independent responsibility.

In the supplemental filing, plaintiff states that the parties have agreed that defendant’s employer payroll taxes shall be paid from the gross settlement amount. Supp. Moon Decl. (ROA 126) at 1:24-2:16. Plaintiff cites Cifuentes v. Costco 3 Wholesale Corp. (2015) 238 Cal.App.4th 65, 77-78, as support for paying the employer’s payroll taxes from the gross settlement amount. Cifuentes addresses withholding an employee’s taxes from settlement funds, not an employer’s taxes. See id. at 77 (“Costco's potential exposure for failing to withhold the payroll taxes outweighed the inconvenience to Cifuentes of seeking a refund for the excess withholding”); id. at 80 (“The law . . . required Costco to withhold payroll taxes from the award of lost wages.

Costco complied with this requirement and satisfied the judgment by paying Cifuentes the remaining balance due. His remedy was to seek refunds for any excess withholding, not further damages from Costco”). Plaintiff should provide on point legal authority supporting payment of the employer’s taxes from the gross settlement amount or the parties should revise the settlement agreement to state that defendant will pay the employer’s taxes outside of the gross settlement amount.

2. The word “amended” should be removed from the title of the notice.

3. The last three sentences of the second paragraph of section 4(2) of the notice should be removed.

4. The last sentence of the first paragraph of the exclusion form should be removed, as this settlement does not settle a PAGA claim(s).