A federal judge in San Diego is considering whether to approve a proposed class action settlement that would resolve claims against U.S. Healthworks Medical Group and related companies over allegedly inappropriate medical questions asked during pre-employment examinations.
The settlement, filed in June, covers approximately 172,070 job applicants who underwent “basic” post-offer medical examinations at U.S. Healthworks facilities in California between October 2017 and December 2018. Under the proposed agreement, defendants would pay $1 in nominal damages for each class member, totaling $172,070, which would go to Legal Aid at Work as a cy pres award rather than being distributed to individual class members.
Background of the case
The lawsuit began when K.R. applied for a food service position at a retirement facility in February 2018. As part of the hiring process, she was required to complete a pre-placement medical examination at U.S. Healthworks, which included filling out a standardized Health History Questionnaire containing approximately 150 medical inquiries.
When K.R. refused to answer a question about the date of her last menstrual period, U.S. Healthworks terminated the examination, resulting in her prospective employer withdrawing the job offer.
K.R. and co-plaintiff D.F. alleged that many questions in the questionnaire violated California’s Fair Employment and Housing Act, which requires that pre-placement medical examinations and inquiries be job-related and consistent with business necessity.
Legal challenges and developments
The case faced significant legal hurdles early on. In January 2021, the federal court dismissed the FEHA claims, ruling that agents could not be held directly liable under the statute. However, plaintiffs appealed, and the Ninth Circuit certified a question to the California Supreme Court about whether business entity agents can be held directly liable under FEHA.
In August 2023, the California Supreme Court unanimously ruled in the plaintiffs’ favor, determining that “an employer’s business entity agents can be held directly liable under the FEHA.” The Ninth Circuit subsequently reversed the dismissal and sent the case back to the trial court.
In August 2024, the court granted class certification for nominal and punitive damages, initially covering approximately 245,000 job applicants. However, the settlement class was reduced to 172,070 members based on defendants’ production of examination files showing that only applicants who received “basic” examinations were given the questionnaire.
Settlement terms
Beyond the nominal damages payment, defendants agreed to several other terms. They represent and warrant they no longer use the specific Health History Questionnaire at issue and will not use it in the future, though the agreement notes that using similar forms or forms containing some of the same questions would not constitute a breach.
The settlement also provides for incentive awards of $7,500 each to the named plaintiffs, subject to court approval. Additionally, plaintiffs are deemed the prevailing party on their FEHA claim, entitling their attorneys to seek reasonable fees and costs under the statute.
Verita Global will serve as settlement administrator, with defendants paying administrative costs estimated at approximately $53,688.
Litigation risks cited
In supporting documents, plaintiffs’ counsel outlined several risks that influenced their decision to settle. They noted significant uncertainty about whether nominal damages would be limited to $1 per examination, citing conflicting case law on whether such damages can be aggregated or exceed minimal amounts.
The attorneys also expressed concern about potential class decertification. While defendants initially confirmed in discovery that all applicants received the questionnaire, they later produced examination files suggesting only a fraction actually received it, creating “significant risk that the class would fail on ascertainability grounds.”
Other risks included defendants’ argument that some class members were subject to arbitration agreements, the possibility that volunteers rather than employees were included in the class, and uncertainty about whether defendants could successfully defend the questionnaire as appropriate for business purposes.
Notice and approval process
Class members will receive notice of the settlement via text message, email, or mail. They have 30 days from notice to opt out or object to the settlement. Those who don’t opt out will be bound by a release covering all claims that were or could have been alleged in the lawsuit based on the facts during the class period.
A final approval hearing is scheduled for the court to determine whether the settlement is fair, reasonable and adequate. The court will also consider the attorneys’ fee application and incentive awards at that time.
Expert testimony disputes
The case involved competing expert opinions about whether the medical questionnaire met FEHA standards. Plaintiffs’ expert opined that no jobs exist for which all 150 medical inquiries would be relevant and consistent with business necessity, and that certain questions aren’t relevant to any position.
Defendants countered with five experts who concluded the questionnaire meets FEHA requirements. They also noted that many questions appear in government-mandated health questionnaires for certain certified positions, such as Department of Transportation roles.
The proposed settlement would resolve these disputed factual and legal issues without a trial on the merits, with defendants continuing to deny any wrongdoing while agreeing to the compromise to avoid further litigation costs and uncertainties.
See the original ruling here: https://s3.documentcloud.org/documents/25982113/us-dis-casd-3-19cv1539-d62602404e7785-motion-for-settlement-preliminary-approval-of-clas.pdf
