Two major retailers — Saks Fifth Avenue and Nordstrom, Inc. — have recently experienced firsthand the pricey consequences of defending allegations of wage and hour violations at the state and federal level.
Saks is currently facing a multimillion dollar lawsuit for allegedly failing to comply with California law. Nick Perez v. Saks & Co., Case No. 3:14-cv-02512 (N.D. Cal.). In Perez, the Complaint alleges that Saks failed to compensate its employees for all hours worked and that the company maintains a corporate policy that deprives workers of required meal and rest breaks in violation of California law. The Complaint also asserts related wage statement and waiting time penalties. Perez seeks to represent a class of all California-based Saks hourly employees who worked for the company in the last four years. In a recent motion to remove the case from state to federal court, Saks suggests that the size of a potential class could be substantial, as Saks employed an estimated 2,353 individuals in California during the relevant time period.
In California, the law requires that employers must authorize and permit nonexempt employees to take a paid rest period that must, insofar as practicable, be taken in the middle of each work period. The rest period is based on the total hours worked daily and must be at the minimum rate of a net 10 consecutive minutes for each four-hour work period, or major fraction thereof. Also, an employer may not employ an employee for a work period of more than five hours per day without providing the employee with an unpaid meal period of not less than 30 minutes — except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee. In the motion to remove the case to federal court, Saks estimated that its alleged exposure for just one missed meal or rest break during the proposed four-year period would result in potential liabilities of approximately $10.9 million. This estimate does not include interest or attorneys’ fees.
Saks is not the only major retailer dealing with wage and hour issues. Nordstrom recently settled two cases, Balasanyan, et al. v. Nordstrom, Inc., Case No. 3:11-cv-02609, andMaraventano, et al. v. Nordstrom, Inc., Case No. 3:10-cv-02671, both in the US District Court for the Southern District of California. In the Maraventano case, former employee Gino Maraventano filed suit in October 2010, alleging that Nordstrom violated the California Labor Code when it failed to pay commissioned sales workers minimum wage for time spent before and after the stores’ official opening and closing times, unless those workers failed to meet their minimum commission draw. In Balasanyan, former employee Gina Balasanyan made the same allegations but added Fair Labor Standards Act, breach of contract, and Private Attorneys General Act claims.
Nordstrom reportedly agreed to pay a total of $7.65 million to resolve the claims of the commissioned employees. The $7.65 million total includes a $2.7 million monetary fund for the class, $2.6 million in vouchers that can be used at Nordstrom stores in California, and up to $2.3 million in attorneys’ fees.
The payment of commissioned employees, particularly in California, is a complex issue. Since January 1, 2013, California law requires that employees who are paid on commission be provided a written contract that sets forth the method by which the commission shall be computed and paid. The law further requires that the employer provide a signed copy of the commission agreement to the employee and obtain a signed receipt for it.
The Saks and Nordstrom cases demonstrate the continuing importance of understanding federal, state, and local wage and hour laws for all employees. One seemingly innocent mistake could end up costing a retailer millions of dollars on the back end.