Attorneys for two former employees of Rhythm & Hues and the debtors for the bankrupt company have reached an agreement to settle potential class action claims over the 238 employees who were laid off from the company in February.

In a filing with U.S. Bankruptcy Court in Los Angeles on Friday, the proposed settlement calls for Thomas Capizzi and Anthony Barcelo to each receive $10,000 for their roles as class representatives, with the balance of $980,000 divided among the laid-off employees based on their final pay rates and termination dates. Attorneys for the plaintiffs also will deduct one-third for attorney fees, plus court costs. The settlement is in response to claims that Rhythm & Hues violated the Worker Adjustment and Retraining Act, which requires large companies to give employees at least two months’ advance notice of plant closings or mass layoffs.

Another aspect of the settlement provides compensation to employees who were not paid their earned compensation when they were laid off, and remained unpaid after they were terminated for one or more days.

The settlement still has to be approved by the bankruptcy judge, and former employees will be given the option of opting out.

A holding company connected to Prana Studios won bankruptcy court bidding for the effects house’s assets in March.

The employees were represented by Lankenau & Miller, the Gardner Firm, Outten & Golden and Reeder Law Corp. Greenberg Glusker represented the debtors.