A Minnesota district court judge ordered Wal-Mart Stores Inc. to pay $6.5 million to compensate workers for missed rest breaks and off-the-clock work as part of a class-action lawsuit, which could also weigh down the discounter with civil penalties of up to $2 billion.
This story first appeared in the July 2, 2008 issue of WWD. Subscribe Today.
Nancy Braun, a former hourly employee at Wal-Mart’s Apple Valley, Minn., store, brought the suit in September 2001, and was later joined by a number of other named plaintiffs who alleged the retailer failed to provide its employees with sufficient rest breaks and meal periods. They were later joined by a class of 56,000 people who worked at Wal-Mart and Sam’s Club stores in Minnesota from September 1998 though January 2004.
Wal-Mart’s internal audits should have alerted the company that there was a chance of widespread problems related to meal and rest breaks, said Dakota County District Court Judge Robert R. King Jr. in the 151-page finding Monday.
“Instead of blaming its own auditors at trial for not following up with associates regarding the audits, Wal-Mart management ought to have followed up with its associates contemporaneously,” King wrote. “Wal-Mart management responded to the audits with no action. In essence, they put their heads in the sand.”
King also found that “Wal-Mart chose to stop requiring associates to clock in and out for rest breaks, at least in part, to avoid creating what might be construed or used, whether fairly or not, as evidence of missed breaks in litigation.”
Responding to the ruling, a Wal-Mart spokeswoman stated in an e-mail, “Our policies are to pay every associate for every hour worked and to make rest and meal breaks available for associates. Any manager who violates these policies is subject to discipline, up to and including termination.
“We are pleased that the court in Minnesota ruled in Wal-Mart’s favor on many points before, during, and after trial,” she continued. “We respectfully disagree with portions of the decision. As part of the order, the court invited both parties to file an appeal, and we are considering that option.”
The trial, held in Hastings, Minn., shed some light on the emphasis Wal-Mart management placed on keeping payroll costs down — disciplining managers who failed to meet company expectations and addressing the topic in performance evaluations.
“Wal-Mart should have been aware that constant payroll pressure might possibly lead to inadequate staffing, which might in turn have made meal and rest break compliance more difficult,” wrote King.
“I was treated like so many of my co-workers,” said Braun Tuesday. “There was just too much work to do and never enough time to do it. There just wasn’t enough time in the day to take the breaks we were entitled to.”
The judge found that Wal-Mart’s workers missed 1.6 million rest breaks, took 428,641 short rest breaks and endured other violations of Minnesota law over the almost four-and-a-half-year period.
As painful as the ruling might be for Wal-Mart, the attendant civil penalties could be much more costly and will be determined at a jury trial beginning Oct. 20.
Wal-Mart is subject to a civil penalty of up to $1,000 for every time it violated a state statute, including 73,864 meal periods missed by workers, 1.6 million instances when the retailer improperly deducted rest break time and nearly 400,000 instances in which the company failed to keep records.
The bench trial, which began in September, included 41 witnesses for the plaintiffs, 52 witnesses for Wal-Mart, including top executives, and 1,184 exhibits. Testimony was completed in December.