Settlement OKd in Lawsuit Over State IOUs

A federal judge has approved a settlement in a $558-million lawsuit against Gov. Pete Wilson’s administration in which state workers said they were hurt by the use of IOUs during the 1992 budget stalemate.

Under the terms of the agreement approved Tuesday by U.S. District Judge Garland Burrell, workers will get additional vacation time. In the case of retirees or those who no longer work for the state, they will receive up to $980 each in damages.

The workers had contended that the issuance of IOUs violated the federal Fair Labor Standards Act. They contended that they were owed the original amount covered by the face value of the IOUs, plus 100% in damages.

The workers included several who filed lawsuits individually as well as representatives of 17,000 employees; all were included in Burrell’s settlement order. It is not clear how much the settlement will cost the state because some of the affected workers are part-timers, and all workers seeking the additional vacation time must submit claim forms documenting failed attempts to cash an IOU.

About 100,000 state workers were paid with IOUs for two months in the summer of 1992. Not all of them are eligible for the benefits. Workers paid more than $5,000 a month are excluded, as are attorneys, physicians and teachers.

Under the terms of the settlement, state workers who were unable to cash or deposit their IOUs, or were otherwise hampered in negotiating them, or had to spend at least $25 to cash them, or who had to take leave time will get up to 3 1/2 additional vacation days for each IOU they received, with a maximum of seven days.

People who no longer work for the state will receive an average of $140 per vacation day, with a seven day maximum of $980.

The IOUs were officially called “registered warrants”--checks that could be cashed only on certain dates. The IOUs went to some state workers and were used for tax refunds and payments to state vendors, among other things. Some financial institutions declined to accept them.

State workers contended that the IOUs were illegal. The Wilson administration said it had the authority to use them.