Bloomberg: Wal-Mart Workers Say Company Tried to Hide Violations

From Bloomberg:

Wal-Mart Stores Inc. tried to hide evidence that it denied mandatory breaks to employees after an internal audit turned up 60,000 cases of skipped rest periods, California workers claimed in a lawsuit.

A Wal-Mart study of 127 stores during a week in 2000 found workers weren’t getting breaks they were entitled to under labor laws, prompting the company to discontinue further audits, the employees said in papers filed with an Oakland, California, court. Wal-Mart spokesman John Simley declined to comment, saying the allegations are part of ongoing litigation.

The workers will ask the court today to order Wal-Mart to comply with California labor laws in one of more than 40 wage- and-hour class-action suits brought against the Bentonville, Arkansas-based company. The California employees won a $172 million verdict in December over unpaid meal breaks. They also claim Wal-Mart failed to pay for 13.2 million rest breaks.

“Those are huge numbers,” said Patricia Edwards of Seattle-based Wentworth, Hauser & Violich, which has $8 billion in assets, including Wal-Mart shares. ``I think that starts to be pretty material pretty soon.’’

California labor laws require companies to give workers a 30-minute meal break for every five hours worked and 10-minute rest breaks per four hours. Companies compensate for missed breaks with an hour of pay.

Workers in the meal-break class action can’t seek damages for rest breaks because Judge Ronald Sabraw wouldn’t let them sue as a group. The judge allowed the workers to ask the court to order changes in rest-break policy, said their attorney Jessica Grant. The suit was filed in February 2001.

Shares of the world’s largest retailer are down 1.1 percent since the December verdict. They rose 13 cents to

$48.07 at 4 p.m. in New York Stock Exchange composite trading.

Wal-Mart Responds

Wal-Mart is asking the court to deny the workers’ request for an injunction because it says it changed how it monitors time worked and isn’t likely to deprive workers of breaks.

Meal-break compliance in California has been above 99 percent since mid-2003, after it added new technology, procedures and training, Wal-Mart said in court papers.

Wal-Mart’s attorneys called the workers’ estimate of unpaid rest breaks ``junk science’’ and said in papers that the new procedures ``are deeply-embedded in the everyday operations of Wal-Mart California stores.’’

Wal-Mart also stopped making employees clock in and out for breaks, making it harder to track violations, the employees said. The suit seeks the appointment of an outside auditor to monitor Wal-Mart’s compliance in California once a quarter.

Workers also want the judge to force the company to reinstate punching in for rest breaks.

‘Bad Policy’

“Wal-Mart’s current audit and monitoring processes are adequate,” the company said in its papers. The workers’ “vague injunctive audit department orders are bad policy, punitive and unnecessary.”

The workers’ lawyers said Wal-Mart did nothing on meal breaks until it was sued, and has yet to provide all required rest breaks.

A court order mandating compliance and requiring the company to pay for monitoring would force Wal-Mart to hire workers to allow people to take rest and meal breaks, said attorney Frank Azar.

That “could cost Wal-Mart billions” over time, said Azar, who represented Colorado workers in a similar suit the company settled. He isn’t involved in the California suit.

Wal-Mart has 196 stores in California, including Sam’s Clubs, according to its Web site. It has 3,889 U.S. locations.

More Suits

Wal-Mart, which had 2005 net income of $11.2 billion, has come under fire for its labor practices. Some labor groups, lawmakers and community groups accuse the company of shortchanging workers on pay. The average full-time hourly wage at Wal-Mart is $10.11.

Wal-Mart also has pending the largest-ever sex discrimination class action suit, involving 1.6 million women who claim they were denied equal pay and promotions. This month the company agreed to pay $315,000 to settle two U.S. Equal Employment Opportunity Commission sexual-harassment lawsuits.

An Oakland jury awarded the California workers $57.3 million in actual damages for unpaid meal breaks and $115 million in punitive damages in December. Wal-Mart intends to appeal.

The employees in the California suit claim Wal-Mart knew since 1998 it had a ``chronic problem’’ of violating rules for breaks, citing company documents.

No More Audits

The 2000 audit report said the underpayment might affect morale at its stores. After the report, Wal-Mart prohibited further audits, the workers said, citing documents produced by the company.

Previously, the company had told regional managers it would end punch-ins because of a $550 million lawsuit, according to the documents cited in the California lawsuit.

“How can we enforce the policy if we cannot track it in the system?” one manager asked, according to court papers.

The next case to go to trial is set for Sept. 5, on behalf of Pennsylvania Wal-Mart hourly workers who are seeking from $150 million to $300 million, said their attorney Michael Donovan.

The California lawsuit is Savaglio v. Wal-Mart Stores Inc., No. C-835687-7, Superior Court, Alameda County, California (Oakland).

Posted by Russ Fagaly on Tuesday, June 27, 2006

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