Wage Law

Orange County Superior Court Judge Stephen Sundvold recently approved a $500,000 class action settlement in a case brought by a group of current and former employees of consumer lender Speedy Cash (Rivas v. Speedy Cash). The case involved alleged for denials of meal and rest periods. Though we aren't intimately familiar with the case, it appears, from some of the court records, that the settlement was previously given preliminary approval, including approval of a class representative enhancement of $10,000 and approval of an attorney's fee to the class counsel of $166,666.

Unfortunately for the class counsel, only $67,600 of the class fund was claimed by the interested employees. The judge wasn't about to trash the entire deal over that, but the apathy of the claimants certainly influenced his final approval decision, as he slashed the fees (from $166,666 to $45,000) and class representative enhancement (from $10,000 to $1,500). The ruling published last week was as follows:

The Settlement is fair, adequate and reasonable. It is approved.

This Action and its settlement cause the Court to ponder the efficiency and efficacy of the use of the time and efforts of Plaintiff’s Counsel. Barely 30% of the potential class members have made claims. This is a sad reflection on the Action, especially since each will receive in excess of $500 for a total of $67,600.

The requested attorney fees in the amount of $116,666 amount to nearly 200% of the benefits paid to the class members.

There is no legal justification for an enhancement of $10.000. An enhancement of $1,500 is awarded. Attorney costs in the amount of $2,433.35 are awarded. Administrative costs of $16,500 are approved. Attorney fees in the amount of $45,000 are granted. This amounts to over 66% of the payout to the class.

Who is the lucky beneficiary of these reductions? If the settlement was a typical "claims made" settlement, then the money is kept by the defendant rather than spread among the class members who made claims.

At a recent class action defense seminar I attended, one of the key pieces of advice offered to class action defendants was this:

"Do not ever tie the class counsel's fees to the number or amount of submitted claims."

The implication of that advice is that, unless the class counsel's recovery depends upon it, they will not actively seek to rally the class members to submit claims. But, as the Speedy Cash case demonstrates, even if the defendant does not correlate those two figures, the court might. And while some class lawyers will recite the old cliche about leading a horse to water, the prudent class counsel will always make sure he is not only leading the horses to water, but that he is also strongly encouraging them to drink.

An Orange County Register article in today's newspaper says this about the threat that California's supposed "anti-business" laws were going to drive business out of the state in droves:

"A commonly heard theme in recent public debates about California's economic problems is that the state's economy is hostile to the needs of business. As evidence, it is frequently asserted that businesses are fleeing California in droves, relocating to more welcoming, 'business-friendly' states with lower taxes and a less onerous regulatory environment. Californians therefore suffer because their jobs are being siphoned off to benefit residents of other states."

However, a study found that the number of jobs lost from companies moving out of state was "negligible." All that talk about job losses was nothing but talk.

The net number of jobs that California lost from companies moving into or leaving the state didn't exceed 0.1 percent of the total number of California jobs in any year from 1993 to 2002, and since 1998, the number has never exceeded 0.03%.

The largest exodus? A total net of 5,330 jobs in 2001.

Last year, a lawyer from a law firm who defended one of our wage and hour class actions testified that one of his clients (clearly referring to a company we had sued) was contemplating moving its entire California operation out of state unless the laws were changed immediately. The laws haven't changed yet, but that company is still here. And, according to what we've been hearing from current employees, they are still breaking the law. If they get sued again, they will have nobody to blame but their own management.

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.

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.