Kyla Asbury Aug. 7, 2014, 10:42am

CHICAGO (Legal Newsline) - Sears has agreed to a $5 million settlement in a class action alleging it misclassified workers in order to not pay them overtime pay.

"The $5 million settlement resolves all current and potential litigation concerning the classification of the [loss prevention managers] position," the settlement document filed July 16 states. "This settlement was reached after the parties participated in two mediations with Mark Rudy, a well-known and experienced wage and hour mediator, followed by five months of exhaustive post-mediation negotiations conducted by the parties."

The settlement is the product of years of hard fought and extensive litigation by both parties, according to the settlement.

Class counsel will file an application for an award of attorneys’ fees and reimbursement of costs and expenses incurred in the prosecution of this lawsuit and the finalization of this global settlement, according to the suit. The fees will not exceed $1.66 million.

As part of the settlement, the parties have agreed that $15,000 should be paid to the California Labor and Workforce Development Agency and $75,000 will be withheld from the net settlement amount for the defendants to use to resolve the claims of other current or former loss prevention managers who are covered by this settlement and who have pending or threatened federal or state overtime claims at the time this stipulation is filed and/or or the remedy any errors or disputes.

Each of the named plaintiffs will receive a $5,000 incentive award.

Following deductions, the settlement will pay the employees an average of approximately $21 per each week they worked during the time period covered by the unpaid overtime settlement, which is an average of $1,800 per worker.

"Participating claimants will be compensated from the sum arrived at from the net settlement amount, minus reserve fund based on his/her an LPM during his/her applicable statutory time period," the complaint states.

Sears Holdings Management Corp. agreed to the settlement to end the lawsuit accusing the company of misclassifying hundreds of employees.

Various Sears and Kmart retail stores were affected by this unpaid overtime lawsuit, which allege violations of the Fair Labor Standards Act.

The lawsuit was filed in July 2011 by Robert O’Toole, who took action on behalf of himself and other current and former loss prevention managers at Sears and Kmart stores who allegedly were denied overtime compensation.

O’Toole and at least 13 other employees alleged that it was company policy for Sears and Kmart to refuse to pay employees overtime, despite working more than 40 hours a week.

U.S. District Court for the Northern District of Illinois case number: 1:11-cv-04611

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