Employers “Picking Off” Workers in Wage and Hour Cases with Misleading Attempts to Settle: A Shakespearean Saga

California has a clear public policy that encourages the use of class actions to address wage violations. See Sav-On Drug Stores v. Superior Court, 34 Cal. 4th 319, 340 (2004). However, employers facing class actions sometimes respond by directly contacting individual workers and offering small payments to get employees to give up their claims. This “pick off” technique can dramatically limit the scope of a class case.

However, if the employer’s communications are misleading or coercive, courts may intervene and reject them. A recent decision involving a company with a very clever name addresses some of the issues that arise when an employer engages in such behavior in an attempt to convince class members to accept individual settlements: The Merchant of Tennis, Inc. v. Superior Court (2026) 117 Cal.App.5th 1141 (“Merchant”).

In Merchant, the plaintiff alleged multiple wage and hour violations on a class basis. While the class certification motion was pending, the employer pulled its employees into mandatory meetings and asked them to sign agreements. As a result of these efforts, the employer entered into approximately 954 individual settlement agreements.

The plaintiff moved to invalidate the individual settlement agreements, arguing they were obtained through fraud and coercion and contained misleading statements. The trial court agreed with the plaintiff. It found that the employer had used false and misleading representations, including misleadingly describing the case status, the release of claims, and the prevalence of arbitration agreements.

While the trial court did not invalidate the agreements across the board, it did find the agreements voidable. It also ordered curative notice for the workers who had signed.

The parties disagreed about what the curative notice should say about money already paid. The employer wanted the notice to warn that anyone who revoked their agreement could later have to repay the settlement amount. The trial court rejected that repayment warning, and adopted language that any future recovery might be offset by what was already paid. The employer sought an immediate appeal.

The Court of Appeal for the Second District (“DCA”) rejected the employer’s argument that employees should have to immediately repay the amounts they received through the pick off settlements. Instead, the DCA addressed the narrow issue of what the curative notice should inform employees about whether they might need to repay those amounts in the future. That issue involved California’s statutory framework for canceling, or rescinding, a contract found in Civil Code sections 1689 and 1691.

The DCA emphasized that under Civil Code sections 1689 and 1691, a party seeking rescission must restore (or offer to restore) what they received. It reached this conclusion even though the Civil Code provides some relevant exceptions. First, the repayment can be delayed until the final judgment under section 1693 (absent a showing of substantial prejudice). Second, the trial court may “adjust the equities” in its judgment under section 1692, which could mean forgiving repayment.

Despite those protections, the DCA found that the “restore what you received” rule meant that employees should be notified that if they voided their settlement agreements, they might need to repay the amount they had received.

One judge dissented from this holding, raising the important concern that warning workers they may owe money to join a class action would discourage participation in the case. The dissent cited multiple federal court decisions that approved curative notice with offset language, not repayment language. The dissent also would have held that the Civil Code is more flexible than the majority held, and that the trial court’s discretion to authorize offset language in the curative notice was permitted by the code.

If you have questions about a settlement offer that you have received from your employer, please feel free to contact the experienced attorneys at Hunter Pyle Law, PC. We can be reached at inquire@hunterpylelaw.com or at (510) 444-4400