Daily Labor Report: Wal-Mart Hit With $172 Million Verdict Over Missed Meal Breaks in California

Daily Labor Report: Wal-Mart Hit With $172 Million Verdict Over Missed Meal Breaks in California

January 1, 2006

A California jury Dec. 22 awarded a class of some 116,000 Wal-Mart Inc. workers $172 million for missed breaks in violation of a state law that mandates a 30-minute, unpaid meal break (Savaglio v. Wal-Mart Inc., Cal. Super. Ct., No. C-835687, verdict 12/22/05).

The jury in Oakland, Calif., deliberated three days to conclude that the world's largest retailer owed class members $57,268,673 for missed meal periods and $115 million in punitive damages. The jury originally awarded the workers $63,631,858 for missed meal breaks, but subtracted $6,363,185 because some class members failed to substantially comply with Wal-Mart directions about meal periods.

The class covered 115,919 current and former Wal-Mart employees in California.

''Basically I think the message to Wal-Mart is it's not acceptable to deprive your employees of meal breaks," Jessica Grant, a principal for plaintiffs' counsel the Furth Firm in San Francisco, told BNA Dec. 22. ''Another thing in play was we presented the jury here with Wal-Mart's own documents" that showed executives knew the company was ''breaking the law as far back as 1998." Grant told BNA.

Grant said Wal-Mart has ''known about this for years, not only in California but across the United States. They took steps to conceal the problem while simultaneously spending millions of dollars on TV" advertisements promoting how well workers are treated.

Wal-Mart Questions Punitive Damages

In a written statement issued after the verdict, Wal-Mart announced it planned to appeal the decision and said that while there were pre-2001 problems with meal breaks, the concerns were corrected after the state legislature implemented new rules.

"Wal-Mart has acknowledged it had compliance issues when the statute became effective in 2001. The problems were also experienced by other employers in the state of California," the statement said. "Wal-Mart has since taken steps to ensure all associates receive their meal periods, including adopting new technology that sends alerts to cashiers when it is time for their meal breaks. The system will automatically shut down registers if the cashier does not respond."

The company also stated that it questioned the appropriateness of punitive damages, given an early December ruling in Murphy v. Kenneth Cole Prods. by a California appeals court in San Francisco that ruled that violations of the break rules result in a penalty, and not wages (235 DLR A-1, 12/8/05). Wal-Mart theorized in its statement that because such violations resulted in "penalties," punitive damages could be in doubt.

The court in Murphy said that because there are no lost wages for not providing an unpaid meal break, the "penalty" for such a violation was the equivalent of one hour of "wages" per violation. The court emphasized, however, that the damages were not "lost wages," but instead a "penalty," thus a shorter statute of limitations applied.

In July, however, Judge Ronald M. Sabraw in the Wal-Mart case found that punitive damages would not represent a "double penalty" under California law, since general damages payments to potential class members are considered "wages" and not a "penalty." If the payments were deemed a penalty, Sabraw said, punitive damages would be unavailable because they would represent a double penalty (144 DLR A-2, 7/28/05).

The jury in Oakland, Calif., deliberated three days to conclude that the world's largest retailer owed class members $57,268,673 for missed meal periods and $115 million in punitive damages.

Long History of Litigation

The heavily litigated case included numerous trips over the last four years to the appeals and state supreme courts, including three emergency petitions filed by Wal-Mart with the California Court of Appeal during the course of the trial, which began Sept. 6, Grant said. All of the petitions were denied, she said.

In the July ruling, Sabraw ruled that class members do not have a property interest in meal breaks taken prior to a 2001 change in the state laws, and therefore monetary damages were unavailable for those claims.

The ruling limited the claims of one of four subclasses in the far-reaching lawsuit alleging that the company required employees to finish their work before going home even if their shift had ended and that Wal-Mart understaffed stores to make working off the clock mandatory for all practical purposes.

The judge said that the meal break provisions in the state's Unfair Competition Law did not exist until in 2001 thus there was no claim for lost meal breaks before that time, since such a denial was not a violation of statute. He rejected the class's argument that there was a property interest in the breaks before 2001, saying the employees did not experience any actual loss since they were being compensated.

In 2003, Sabraw granted certification to four overlapping classes of workers. The first class is workers who claim that Wal-Mart's policies forced them to work off the clock in violation of the state Labor Code and the California Business & Professions Code Section 17200, the state unfair competition law. Sabraw allowed that class to seek injunctive and declaratory relief (219 DLR A-3, 11/13/03).

Sabraw also certified two separate classes of workers who alleged they were denied rest and meal breaks. They may seek injunctive and declaratory relief. While the class members for the off-the-clock and rest break claims may not seek monetary relief, a fourth class--the one at issue in the current decision--covers workers who can seek monetary relief under the Labor Code and the unfair competition law for claims they were denied meal breaks.

In 2004, the California Supreme Court refused to interfere in class certification issues by denying Wal-Mart's motion for a stay (73 DLR A-8, 4/16/04).

Class actions against Wal-Mart for alleged meal break violations have been filed in more than 30 states, counsel for the class said. The next case scheduled for trial is in Minnesota state court in June 2006. A Massachusetts class action in which the Furth Firm is counsel is scheduled for trial in October 2006.

Neal S. Manne and Vaneet Bhatia of Susman Godfrey in Houston and Teresa Beaudet of Mayer, Brown, Rowe & Maw in Los Angeles represented Wal-Mart.

The article originally appeared in theDaily Labor Report on December 28, 2005, and was written by Michael R. Triplett and Joyce E. Cutler.

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