Wage Law

Employees at California stores operated by Guitar Center, Inc. (Nasdaq: GTRC) will share in a significant settlement [the terms of which we are prohibited from disclosing, but have been discussed openly by Guitar Center executives] involving meal and rest period violations and off the clock pay claims, pursuant to a tentative settlement our office reached last week on behalf of several thousand current and former Guitar Center workers. The terms are subject to court approval.

The settlement resolves two cases pending in the Los Angeles County Superior Court. Our law firm is among five firms involved in the action; we represent plaintiffs James McClain, Vincent Musolino and Joshua Castaneda. The cases were filed in 2004 and settled after two mediation sessions with highly regarded employment litigation mediator Mark Rudy. The primary claims alleged in both cases stemmed from a failure on the part of Guitar Center to permit its workers to take required meal periods.

Leland P. Smith, Executive Vice President and General Counsel for Guitar Center, commented, "While the Company denies all liability or wrongdoing in these cases, we chose to settle these lawsuits in order to put them behind us and avoid the distraction and additional, unnecessary legal expenses that we would otherwise incur."

On behalf of the class, however, we would add that the employees emphatically insist that the case, particularly with respect to the meal period violations, was supported by substantial evidence and was quite meritorious, which justifies the significant amount of the settlement. Guitar Center is known for working its sales force ("the sales force that rocks") hard, and this environment has resulted in strong profits and shareholder value. However, it has also resulted in a practice, if not a policy, that runs afoul of California law concerning mandatory employee breaks. Consider these excerpts from a recent article about the company in the magazine Business 2.0:

Some mornings Marks psyches up his staff by showing them Glengarry Glen Ross, the 1992 David Mamet film about a group of worn-out salesmen hustling to move empty lots. Marks always plays the same scene: Alec Baldwin, looking like a high-paid Wall Street exec, dressing down his lowly crew. Baldwin mocks their clothes, their watches, their cars. At one point, he turns to sad sack Jack Lemmon and gets in a vicious dig: "Put that coffee down! Coffee is for closers only." The scene always gets laughs, but it's meant to inspire. The not-so-subtle message: Close the deal, or else.

The hustle doesn't stop at closing time. After salespeople lock the doors, they grab vacuums and toilet brushes and go to work. Cleaning helps build store pride, Marks explains. But it wears on some, and if they haven't faded recently, toilet patrol only compounds the misery. "That's the only time of the day when I'm questioning what the hell I'm doing," says another salesman.

Despite this corporate culture, workers have the right to rest during their long shifts. Under California Labor Code § 226.7 and Industrial Welfare Commission Wage Order 7, retail store employees are entitled to a paid ten-minute break for every four hours of work, or major fraction thereof. Employees working at least 3½ hours are entitled to one paid break, and earn a second paid break after six hours. Furthermore, employees who work more than five hour shifts are entitled to a 30 minute break which need not be paid.

The settlement will require the company to mail claim forms to all eligible employees. Workers must submit these forms in order to be eligible to receive their payments under the settlement.

Source/Contact: Walsh & Walsh, P.C. Michael J. Walsh, Esq. 420 Exchange, Suite 270 Irvine, CA 92602 Tel: (714) 544-6609 Fax: (714) 544-6621 E-mail: [email protected]. The employees were represented by Walsh & Walsh, P.C. (Michael J. Walsh and Mark A. Walsh) of Irvine, California, Langford & Langford, APLC (Michael S. Langford and Karin A. Langford) of Santa Ana, California, Kingsley & Kingsley (Eric B. Kingsley) of Encino, California, the Law Offices of Stevel Miller (Steve Miller) and the Law Office of Scott A. Miller, of Encino, California.