Health club class-action settlement demonstrates value of mediation

By Staff

The class-action settlement between a large fitness chain and a number of its employees shows the potential value of mediation for all parties involved in a dispute, Toronto mediator and arbitrator Bernard Morrow tells

CBC News reports that the company agreed to pay $7.5 million to the proposed class of around 22,000 current and former employees who alleged they were underpaid as a result of poor record-keeping and barriers to claiming overtime pay.

Little has been publicly reported about the substance of the two-day mediation session that produced the settlement, but Morrow, principal of full-service dispute resolution firm Morrow Mediation, says that’s no surprise since the mediation process and the specific settlement terms reached would be confidential.

“In mediation, the focus is on the parties and their interests and the process encourages the negotiation of mutually beneficial outcomes by bringing the parties together in a private collaborative setting,” he says. “Litigation, by contrast, is a public and highly adversarial process pitting lawyers and their clients against one another, with the ultimate outcome resting in the hands of a third party."

“The settlement in this case allowed both sides to avoid the long and extremely costly undertaking that class-action litigation entails,” says Morrow, who was not involved in the case and comments generally.

Although the statement of claim in this case originally sought a much higher amount, a spokesperson for the plaintiffs told the CBC they were satisfied with the result, partly for the speed and convenience of the payment, but also for the company’s commitment to "behaviour modification" following the launch of the class action.

Changes to its employment practices included:

  • scheduling paid hours for personal trainers to recruit new clients
  • eliminating a clawback on trainers' commissions
  • paying trainers an extra amount every pay period for administrative work

“By changing some of its employment practices and coming to the table to deal with past compensation issues through mediation, the company was able to send a message to stakeholders — including gym members and employees — that it was doing the right thing, which is a winning proposition from a public relations point of view,” Morrow says. “If the parties had proceeded further with the litigation, the company risked upsetting and alienating its stakeholders. It could have become a public relations disaster.”

He says mediation's privacy and flexibility also allows the parties to develop customized solutions that would not be available in the courtroom.

“In court, the outcomes are pretty black and white. The judge decides in favour of one side or the other’s legal position. The participants don’t get the opportunity to shape and refine the outcomes,” Morrow says, adding that the ongoing relationship between the company and many members of the class also demands a more amicable process.

“You don’t want bad blood festering between the company and its employees — those relationships would only become more strained and perhaps even toxic had the litigation continued,” he says. “Instead, this settlement sends a positive message that the company’s concerns have been heard and taken seriously, which augers well for future relations between the company and its employees.”

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