Top 40 distributor Cintas (asi/162167) has agreed to a settlement that calls for the Cincinnati, OH-headquartered corporation to pay $4 million, plus fees, to end a class action lawsuit brought by former employees regarding the 401(k) plan it provided workers from December 2013 to at least December 2019.

Cintas and the former employees agreed in principle to a settlement in November 2023, but terms still needed to be discussed.

On Feb. 9, attorneys for the plaintiffs filed a motion in the U.S. District Court for the Southern District of Ohio that calls for preliminary approval of the settlement by a judge. The motion notes that Cintas and its former workers have agreed to the terms and that the motion is unopposed.

“Plaintiffs believe the settlement is an excellent result, providing a substantial, immediate payment to settlement class members and eliminating the risks and cost of trial,” attorneys representing the workers wrote in the court filing.

The settlement agreement entitles each of the plaintiffs, which represent class members in the court action, to receive an additional payment of up to $3,500 (beyond what all class members are getting individually) for bringing the case.

Attorneys are eligible to receive up to about a third of the total gross settlement in fees – $1,333,200 – as well as a maximum of $100,000 in expense reimbursement, under the terms of the deal. These amounts are to be paid from the gross settlement amount.

Case History & Claims

The former employees first filed the case in 2019.

They alleged that Cintas’ 401(k) plan violated the Employee Retirement Income Security Act of 1974 (ERISA), a federal law that sets in place minimum standards for most voluntarily established retirement and health plans in private industry, with the aim of protecting individuals in such plans.

The employees’ suit asserted that Cintas’ plan instituted excessive record-keeping fees and offered just actively managed mutual funds, rather than also making less expensive index funds an option. The company failed to “objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost,” a complaint stated.

Cintas countered by filing to have the suit dismissed, asserting the issues at question should be worked out through arbitration. Both a circuit court and an appeals court rejected that argument. The U.S. Supreme Court later refused to hear the case, leaving the lower appeals court ruling in place that effectively said the lawsuit wasn’t subject to arbitration. That meant a trial, a settlement or a withdrawal of the suit by plaintiffs were the ways the legal action could end.

Based on estimated 2022 North American promotional product revenue of $199.1 million, Cintas ranked 16^th on Counselor’s most recent list of the largest distributors in the industry. Promo is only a small part of Cintas’ overall business. The multibillion-dollar, publicly traded firm is best known for its uniform rental and facility services.

Cintas has earned accolades for its efforts on corporate social responsibility, sustainability, and being one of the United States’ most trustworthy companies. Meanwhile, Cintas was this month named to FORTUNE’s 2024 World’s Most Admired Companies list, ranking second amongst all companies in the Diversified Outsourcing Services category.