Retailer Slammed $102 Million for Wage and Hour Violations—What Can We Learn from Its Pain?

Following a bench trial, which ended with the court’s issuance of findings in late May 2019, a large retailer found itself walloped with a judgment against it for…wait for it…$102 million! Appeal to follow for sure. Yet, there are still lessons to be learned.

Lesson one might be: don’t place a business location in California, the site of the litigation. California certainly holds a special cache for being tough on employers. Likewise, the primary allegation involved a California-specific state law concerning the required format for pay stubs. Specifically, the judge ruled final wage statements to employees lacked start and end dates and hourly rate information for a subset of overtime wages. 

According to the trial judge, the company compounded the problem by ignoring a preliminary ruling finding the pay statement deficient as early as May 2018. Instead of taking prompt and effective remedial action, the company stuck to its guns and was rewarded with a finding that after that date, the violation became “knowing and intentional,” according to the trial judge. Of course, on appeal all of this may be viewed completely differently.

Even employers in the other 49 states, free of any California operations, may still want to heed what just happened. Among the serious allegations leveled were federal wage and hour violations applicable to all employers nationwide covered by the Fair Labor Standards Act (“FLSA”).

Employees often accuse employers of shorting their meal breaks. A common trap for employers remains the arbitrary, but long standing, rule that breaks shorter than 21 minutes must be paid, even if no work gets done, because the U.S. Department of Labor takes the position such breaks benefit the employer, not the employee. It makes workers more productive, but doesn’t really give them enough time to do anything for their personal benefit. Breaks 21 minutes and longer (safe harbor: 30 minutes) go the other way and may be uniformly unpaid, so long as no work occurs.

Although not at issue in this case, another common stumbling block involves employers not fully excusing employees from performing duties while on a meal or other break. Attending to phones, email, work-related texts, or live customer walk-ins while on break will destroy the right of the employer to declare time non-working/unpaid time off.

Tricks and traps abound for employers when it comes to wage and hour law. It remains astounding how large, successful companies, presumably possessing teams of lawyers, still get hit with enormous, multi-million dollar verdicts. 

The Indiana Chamber of Commerce views the situation as so dire that each year it invites Ice Miller to present a Wage and Hour Update for Indiana employers. This year will be no exception.   

As the Chair of the seminar, it will be my pleasure to do my annual "Walk of Shame," where I stroll through the wreckage of the prior year's biggest wage and hour judgments and settlements to see what we can all learn. I am told some attendees come every year just to enjoy the Walk of Shame! (I believe the word for that in German is "schadenfreude".) Of course, if such actions also help protect your company from being on next year's Walk of Shame, it will still be of great benefit. Saving your company millions of dollars in legal liability seems like pretty good use of a day.

If you'd like to join us, this year it will be on Thursday, July 25, at the Indiana Chamber of Commerce Conference Center in Indianapolis, Indiana. Information on registering can be found by contacting Jennifer George, Director of Business Education and Events, Indiana Chamber of Commerce, at 317-264-7537 or by visiting the website at www.indianachamber.com. Hope to see you there!

For more information, contact David Carr or another member of the Labor, Employment and Immigration Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.