The EmpLAWyerologist

Lesson from Wal-Mart: Wage and Hour Violations Don’t Pay!

I would like to think employers know they have to pay their employees for the time they work. The problem is that not all employers understand what constitutes “time worked”.  (Click here, here, here and here for review). Litigation trends show that this point may not have been readily apparent to Wal-Mart either. Wal-Mart has steadfastly clung to its party-line that it is “our policy to pay associates for every hour worked and to make rest and meal breaks available”, even as it has paid out multi-million-dollar wage-and-hour settlements or judgments.  Whether or not litigation has had an educative effect on Wal-Mart, perhaps the rest of us can learn from some of those same cases –after the jump!

In July, 2009 Wal-Mart agreed to pay $35 million to a class of employees from Washington State to settle allegations that it denied the employees meal and rest breaks and forced them to work off the clock. In addition, the court ordered Wal-Mart to pay $10 million in legal fees to the plaintiffs’ attorneys. (That number, of course, does not include the legal fees Wal-Mart had to pay its own attorneys.) The case was Barnett v. Wal-Mart (Case No. 01-2-24553-8, King County Superior Court for the State of Washington). It involved approximately 80,000 current and former Wal-Mart “associates” who had worked there since September 1997, and was one of just 63 such wage and hour class action lawsuits that Wal-Mart ultimately agreed to settle around Christmastime, 2008.  The settlement also included Wal-Mart’s statement that it denied any wrongdoing or liability.  This particular lawsuit began in 2001. That’s right. It took 8 years to achieve this settlement! That also means that Wal-Mart paid its attorneys 8 years worth of legal fees. Yikes!  Did Wal-Mart really gain anything here? Wal-Mart’s attorney at the time claimed that the allegations were “not representative of the company we are today”, because it had changed its policies. Is that true? Maybe yes, maybe no. Wal-Mart settled a similar class action lawsuit in Massachusetts in October 2009 for $40 million.  That case, Salvas v. Wal-Mart Stores, Inc., having begun in September 2006 settled a mere three years later. In May, 2010 Wal-Mart settled another class action lawsuit in California involving 232,000 employees’ claims that they were denied $12 million in vacation pay and $74 million in unpaid wages. (See In re: Wal-Mart Stores Inc Wage and Hour Litigation, U.S. District Court, Northern District of California, No. 06-02069.)

In Braun/Hummel v. Wal-Mart Stores, Inc. in October 2006, a jury awarded approximately $78 million in back pay to employees claiming they were forced to work off-the-clock and were owed money they should have been paid for missed meal and rest breaks. The employees filed their claims for off-the-clock work under the Pennsylvania Wage Payment and Collection Act, and based their meal and rest break claims on provisions in the Employee Handbook. The jury found for Wal-Mart on the employees’ claims for missed meal breaks, however. In addition to the jury award, the trial judge assessed additional statutory penalties, prejudgment interest and attorneys’ fees against Wal-Mart.( Just to be clear, the off-the-clock work was a statutory violation, whereas the missed rest breaks were contractual violations.)

On May 1, 2012 after a U.S. Department of Labor investigation, Wal-Mart agreed to pay $4.8 million in back wages to employees nationwide in order to correct violations of the Fair Labor Standards Act’s overtime provisions. Wal-Mart also paid liquidated damages and a penalty to the Department of Labor, assessed because of the fact that they were repeat violations.  Wal-Mart again  issued a statement that it made sure its overtime pay practices were addressed in 2007, implying that it was no longer in violation of FLSA overtime provisions.

In October 2012 a class of temporary employees sued Wal-Mart and two staffing agencies in federal court in Chicago, alleging that they were required to report early for work, stay late and work through lunch, in violation of state wage and hour laws. Since this case also is one of several where Wal-Mart was sued as a joint employer, I reserve the right to come back to it  and in an upcoming post on Wal-Mart and co-employment issues!

To be fair, at least a few of these cases do involve allegations arising prior to 2007. There have, however, been other cases in the last few years that have alleged wage and hour violations by Wal-Mart as a joint employer (and I will talk about those too in the near future in the upcoming Wal-Mart-and-co-employment post).  So, now let’s cut to the chase: What wage and hour law lessons has Wal-Mart been gracious enough to teach the rest of us? Here are some:

1. In addition to  federal wage and hour laws, many states have their own wage and hour laws. You therefore need to comply with all wage and hour laws of all states in which you employ people.
2. If you promise certain compensation, overtime pay, vacation pay or meal and rest breaks in your Employee Handbook, you need to comply with those provisions, or your employees may have a breach of contract claim against you.
3. Failure to pay minimum wage and overtime and to comply with meal and rest break laws can result in private lawsuits, and also lead to state and federal department of labor investigations, which  in turn could lead to assessment of statutory penalties and back pay awards to employees.
4. Never, never, never require an employee to work off-the-clock!
5. Either you can keep accurate records of all time worked by your hourly employees, or you will be stuck with your employees’ records of time worked if they allege you owe them wages.
6. Don’t  pull a Wal-Mart and wait to be sued! Be proactive and get either your in-house counsel or a good outside employment counsel to evaluate your wage and hour practices and make sure you’re up to snuff in this area!

Well folks, that’s all for now! Next week we’ll take a look at how Wal-Mart and its settlement/defense of sex discrimination cases.

Disclaimer: This post’s contents are for informational purposes only, are not legal advice and do not create an attorney-client relationship. Always consult with competent local employment counsel on any issues discussed here.

Click here to learn more about Janette Levey Frisch, author of The Emplawyerologist.

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