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, and
Maraventano, 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
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Effective January 1, 2015, certain employers became subject to the employer mandate of the Patient Protection and Affordable Care Act, and thus subject to liability under the ACA Employer Shared Responsibility provisions.