WAWA, Pa. -- Wawa Inc. has agreed to pay $25 million to settle a class-action lawsuit filed in February 2016 in the U.S. District Court for the Eastern District of Pennsylvania that claimed the convenience-store retailer violated the Employee Retirement Income Security Act (ERISA) by allegedly barring workers who left the company from maintaining company stock and liquidating their stock at an unfair, low price, according to court documents.
Wawa has been sharing ownership with employees since 1977 through profit sharing and since 1992 through the formation of an employee stock ownership plan (ESOP).
The settlement will benefit about 2,300 current and former Wawa employees who invested their retirement savings in the privately held company’s stock, said a Bloomberg BNA report. The workers said Wawa wrongly forced them to sell the shares held in their employee stock ownership plan at $6,940 per share in 2015. This share price was below market value at the time and $712 below the share price three months after the forced sale, the workers said.
Greg Pfeifer, a former employee who spent 17 years with the company, contended that the retailer reneged on an agreement to allow workers no longer with Wawa to maintain their company stock as its value continued to grow. Pfeifer worked for the company from 1992 to 2009. During that time, he accrued the company’s private stock through the ESOP and watched that stock grow as the company grew from a regional chain to a super-regional chain.
Based in Wawa, Pa., Wawa has more than 750 c-stores in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Florida and Washington, D.C.
Pfeifer claims that Wawa backed out of an agreement to allow former employees to keep their growing Wawa stock until they retire or turn 68, the point at which beneficiaries are required to cash out. The suit alleges that Wawa altered its policy in August 2015, forcing former employees to sell and prohibiting those who leave the company in the future from keeping the stock.
The class consists of terminated employee-participants of the Wawa ESOP as of Jan. 1, 2015, with account balances greater than $5,000 and the beneficiaries of those participants and any alternate payees whose stock was liquidated because of the 2015 policy change, the court documents said.
The parties conducted negotiations at two mediation sessions and reached an oral agreement in principle in May 2017 contingent on funding and agreement by Wawa’s insurers, and, after further negotiation, executed a settlement agreement in principle on Nov. 1, 2017.
Wawa has admitted no wrongdoing or liability in the matter. The company said in court that it is “entering into the settlement solely to avoid the cost, disruption and uncertainty of litigation.”
The company did not respond to requests for comments. In 2016, Wawa spokesperson Lori Bruce told CSP Daily News, "We cannot comment on active litigation." But she said, "Our [ESOP] is a strong, employee benefit that invests a significant amount of annual profits in Wawa stock for all active, eligible Wawa associates. This plan has been in place for over two decades and has grown to represent approximately 41% ownership of our company. We remain committed to the concept of shared ownership for the thousands of Wawa associates that our customers count on every day."
Plaintiffs in the case were seeking compensation from Wawa for any losses resulting from the alleged policy change and a reversal of the alleged rule barring former employees from keeping company stock. They were also calling for the replacement of Wawa's retirement plans committee with an independent fiduciary.
The settlement comes a year after a federal judge refused to dismiss several of the Wawa workers’ claims against the company. The deal, which must be approved by the judge before becoming final, allows up to $5 million of the settlement to go to the workers’ lawyers as attorneys’ fees, said Bloomberg BNA.