DATE: September 15, 2026
TO: Mayor and City Council
FROM: City Attorney’s Office
SUBJECT: Adopt a Resolution Approving and Ratifying the Settlement Agreement and General Release of All Claims, as Amended, Resolving Ghali et al. v. City Of Hayward, and a Side Letter of Agreement Amending the Memorandum of Understanding Between the City of Hayward and the International Association of Firefighters, Local 1909, Regarding the Calculation of Overtime Compensation and Authorize Transfer of Funds from the Risk Management Fund to the General Fund
RECOMMENDATION
That the City Council adopts a resolution (Attachment II) approving and ratifying: (1) the Settlement Agreement and General Release of All Claims in Ghali et al. v. City of Hayward (Attachment III), as amended (Attachment IV); and (2) the Side Letter of Agreement between the City of Hayward and the International Association of Firefighters, Local 1909 (Local 1909), amending Section 4.02 of the parties' Memorandum of Understanding regarding the calculation of overtime compensation (Attachment V).
SUMMARY
The City, Local 1909, and the plaintiffs in Ghali et al. v. City of Hayward reached a global resolution of disputes concerning the City's calculation of overtime compensation. The resolution includes a $600,000 monetary settlement of specified historical claims, prospective changes to the calculation of overtime for Local 1909 members.
Those terms were subsequently implemented through a long-form Settlement Agreement and amendment and an Overtime Side Letter. On July 30, 2026, the United States District Court for the Northern District of California approved the FLSA settlement and entered final judgment. The City thereafter implemented the prospective overtime -calculation methodology beginning with the first full pay period following court approval.
Although the agreements were executed as part of the negotiated resolution, the Settlement Agreement, amendment, and Overtime Side Letter were not separately presented to the City Council for formal approval. To establish a clear public record of approval, staff recommends that the Council approve and ratify the agreements and their prior execution and implementation.
FISCAL IMPACT
The amended Settlement Agreement provides for a total City payment of $600,000. Of that amount, $435,437.68 is allocated as damages to plaintiffs and other affected employees, $5,000 is allocated as a service award to Andrew Ghali, and $159,562.32 is allocated to plaintiffs' counsel for attorneys' fees and costs.
The Overtime Side Letter establishes a prospective overtime -calculation methodology for covered 56-hour fire-suppression employees. The ongoing cost will vary based on the number of overtime hours worked and the remuneration included in each employee's regular rate of pay.
The settlement costs of $600,000 are budgeted in the FY 2026/27 budget in the Risk Management Fund and the increased overtime costs associated with the new methodology was budgeted in the Fire Department Budget for FY 2026/27. A transfer of funds from the Risk Management Fund to the General Fund and an associated increase in revenue and appropriations is required.
BACKGROUND
In Ghali et al. v. City of Hayward, current and former non-exempt City employees asserted claims under the Fair Labor Standards Act (FLSA) concerning the calculation of overtime compensation. The claims included the treatment of cash payments made in lieu of health benefits and a separate dispute over the methodology used to calculate the regular rate and overtime compensation for fire-suppression employees. The City disputed the claims and denied that it had violated the FLSA.
Following negotiations and mediation, the parties executed the Settlement Agreement and General Release of All Claims in April 2026. An amendment executed in June 2026 corrected an individual damages allocation by reallocating $437.68 from attorneys’ fees to damages without changing the total $600,000 settlement amount. The parties also executed the Overtime Side Letter amending Section 4.02 of the MOU.
On July 30, 2026, the United States District Court found the FLSA settlement fair and reasonable, approved it in full, and entered final judgment. The court's order requires the parties to perform the Settlement Agreement according to its terms. Under the Overtime Side Letter, the revised overtime calculation became effective with the first full pay period following court approval, and the City has implemented the revised calculation.
At the August 18, 2026 City Council meeting, it was reported that settlement negotiations had concluded and that the court had entered a final order approving the City's payment of $600,000. Staff now recommends open-session approval and ratification of Settlement Agreement, amendment, and Overtime Side Letter and their prior implementation.
DISCUSSION
The agreements are interrelated components of the global resolution. Their principal terms are summarized below.
Settlement Agreement and Amendment
The long-form Settlement Agreement identifies the individual settlement allocations and provides for dismissal and release of the claims asserted in the Ghali action. As amended, the agreement maintains a total settlement amount of $600,000, consisting of $435,437.68 in damages, a $5,000 service award, and $159,562.32 in attorneys' fees and costs. One-half of each individual's damages payment is treated as back wages and one - half as liquidated damages. The amendment corrects one individual's allocation without increasing the total settlement amount.
Overtime Side Letter
The Side Letter memorializes the parties' agreement regarding the interaction between contractual overtime provided by the MOU and the City's separate calculation of overtime required by the FLSA. Its principal terms are summarized below.
Contractual Overtime
Section 4.02(a) continues the existing MOU provisions governing overtime compensation and compensatory time off. An employee is compensated by pay or time off with pay at the applicable overtime hourly rate for work required to be performed beyond the employee’s regular work shift. An employee who completes a regular work shift, is released for the day, and is subsequently called back to work is compensated at one and one-half times the regular straight-time hourly rate for the employee’s classification. The Side Letter refers to hours worked beyond an employee’s regular work shift under this provision as “Contractual Overtime.”
Regular Rate of Pay
The Side Letter provides that effective the first full pay period after the Court’s approval of the Ghali settlement, the City shall calculate the Regular Rate of Pay for 56 - hour/suppression FLSA Overtime Hours worked, by dividing total remuneration (as defined by 29 U.S.C. section 207(e)), paid in the work period by two hundred twenty-four (224).
FLSA Overtime Hours
The Side Letter provides that a t the end of each employee’s 28 -day FLSA work period, the City calculates the number of hours the employee actually worked in excess of 212 hours. The Side Letter identifies 212 hours as the FLSA overtime threshold for a 28 -day work period established under 29 U.S.C. section 207(k) and defines the hours actually worked above that threshold as “FLSA Overtime Hours.”
Scheduled FLSA Overtime
The Side Letter provides that an employee’s fixed salary compensates the employee at the straight-time rate for all regularly scheduled shift hours worked during the 28 -day work period, including regularly scheduled hours exceeding 212. For regularly scheduled shift hours exceeding 212 hours, the employee receives additional premium compensation equal to one-half of the employee’s regular rate of pay.
Unscheduled FLSA Overtime
The Side Letter defines “Unscheduled FLSA Overtime” as hours actually worked in excess of both 212 hours and the employee’s regularly scheduled shift hours during the work period. For 56 -hour / suppression employees, the City shall calculate the additional Unscheduled FLSA Overtime pay owed by multiplying one and one -half (1.5) of the Regular Rate of Pay by each Unscheduled FLSA Overtime Hour in the work period.
Offsets and FLSA Overtime Adjustment
After calculating the total FLSA Overtime owed, the City applies the offsets permitted by 29 U.S.C. section 207(h)(2). As provided in the Side Letter, the City offsets the applicable one-half premium previously paid for Scheduled FLSA Overtime and Contractual Overtime. Any remaining amount is paid to the employee as an FLSA Overtime adjustment.
Barnett Reopener Provision
If the Ninth Circuit Court of Appeals or the United States Supreme Court issues a decision in Barnett et al. v. City of San Jose supporting the City’s position that 29 C.F.R. section 778.113 does not apply to Local 1909 members, the City may reopen the FLSA overtime- calculation methodology established by the Side Letter. Any reopener remains subject to the City’s applicable meet -and-confer obligations, and employees retain their rights to challenge any resulting adjustment.
Council Approval and Ratification
The proposed resolution approves and ratifies the Settlement Agreement, amendment, and Overtime Side Letter. It also confirms the prior execution and implementation of those agreements and authorizes the City Manager or designee to take administrative actions necessary to complete and continue their implementation according to their terms.
STRATEGIC ROADMAP
This agenda item is a routine operational item and does not relate to one of the Council’s Strategic Roadmap.
NEXT STEPS
If the Council adopts the resolution, staff will complete the settlement administration and continue implementing the Side Letters. Human Resources, Finance, and the Fire Department will administer the revised compensation provisions, and the City Attorney's Office will monitor the Barnett litigation for any development that may implicate the reopener provision.
Prepared and Recommended by: Deputy City Attorney R. Mick Rubio
Approved by:
Jennifer Ott, City Manager