$172 Million: Jury Holds Wal-Mart Liable For Break Violations

We've been so busy this month, we haven't had time to keep up the blog, but this news got our attention today.

Congratulations to Fred Wurth, left, and his legal team representing Wal-Mart workers in the eagerly anticipated meal and rest period class action trial in Alameda County for their $172 million jury verdict today. The case, brought on behalf of thousands of Wal-Mart Stores Inc. workers who were illegally denied lunch breaks yielded a verdict of $57 million in compensatory damages and $115 million in punitive damages. Well over 100,000 current and former California employees who worked from 2001 to 2005 will share in the award.

Like every employer in every case we've filed since 2001, Wal-Mart argued that California law allows no private right of action for workers, and that punitive damages cannot be awarded in a break case. Like every employer in every case we've filed since 2001, Wal-Wart lost. And no company puts up a fight like Wal-Mart's. This decision bodes very well for California employees.

Comments

[Dave]

Is it true that an appeals court just ruled in a San Francisco case that meal and rest periods are penalties not wages?

[michael walsh]

Almost. The case did not say that meal and rest periods are penalties. It did say that the "hour of pay" under Labor Code s 226.7 is a penalty. We'll be discussing that case shortly after Christmas. However, that case should have little, if any, bearing on the Wal-Mart matter, since published reports list the case as being filed less than a year after section 226.7 went into effect. Whether a wage or a penalty, the Wal-Mart workers' pay shouldn't be time-barred.

[MPrimo]

What is the basis for the punitive damages award?

[dogfacegeorge]

Ditto. What is the basis for the punitive damages award?

I think the appellate decision stating that the LC 226.7 remedy is a "penalty" will have a profound effect on the Wal-Mart case because I don't think you can get both a penalty and punitive damages for the same wrong.

[michael walsh]

I haven't seen the judgment, but the punitive damages could have been based upon the rest period claims. I have read that the rest period claims were not certified for purposes of recovering the hour of pay. There is a line of cases that authorize punitive damages for "blatant violations of law or public policy," for which this would suffice. In one of the Red Lobster cases, the 9th Circuit authorized punitive damages for rest period violations even where actual damages were not proven. More likely, however, the punitive damages were awarded on top of the "penalties," because the judge ruled that the hour of pay is a wage. You can get a wage and punitive damages in a single action. However, if Murphy v. Kenneth Cole stands, that determination would have to be reconsidered or reversed. Of course, even if the hour of pay is a penalty, the class has the right to elect the remedy after trial. Between $57M in penalties and $115M in punitive damages, I'd take the punitive damages.

[dogfacegeorge]

I looked at the special verdict form. The jury found "actual injury" in ADDITION to the "one additional hour of pay," but did not quantify the amount of that actual injury.

Thus, I think the plaintiffs will have to elect between the $57M and the $115M. They will elect the $115M and the defense will appeal the $115M judgment on the grounds (a) that there is insufficient injury to justify such a high punitive award and (b) that the Legislature intended the statutory penalty to be the exclusive remedy.

Meanwhile, I think the plaintiffs will appeal on the ground that the OAHOP is a "wage" and that they should not have been forced to elect their remedy.

[dogfacegeorge]

To add an additional thought: I'm not clear on what statutory cause of action the Wal-Mart employees can rely on in bringing a punitive damages claim. The obvious candidates are LC 512, the "11" sections of the Wage Orders, and LC 226.7(a). While these sections create the substantive obligation that the employer must provide meal periods, I do not see that they create a damages cause of action, as opposed to an action for penalties, to enforce that obligation. And while LC 218 authorizes a cause of action for "wages" or "penalties," I do not see how that helps - unless Murphy is overruled. And I fear that a damages cause of action will be necessary to support the $115M punitive award.