Class Action Suits Against Wal-Mart Face New Hurdles

Wal-Mart is the largest private employer in the world, with just over 2 millions employees on its payroll. So when the company does something wrong, there are usually a lot of people involved and for that reason, Wal-Mart often finds itself the subject of class action lawsuits.

An article today from Bloomberg News notes that there are currently over 70 lawsuits currently pending against Wal-Mart which deal with wage-and-hour violations alone. A 2005 federal law, which ruled that any lawsuit involving parties from multiple states and damages exceeding $5 million must go to federal court, means some of the cases filed since 2005 and currently pending against Wal-Mart will be combined. This had included class action suits from Delaware, South Dakota, Nevada and Alaska, until U.S. District Judge Phillip Pro denied their class status in June. Today’s article asserts that Wal-Mart stands to benefit from the 2005 law, which could make it harder for employees to collectively litigate against the company.

Whether Wal-Mart “shaved” time off employees’ schedules is not up for debate here: Judge Pro explained each wage-and-hour violation will simply be treated individually. Wal-Mart continues to look for ways to spend as little as possible on payroll, even if this means unfairly compensating employees for their hours worked. Rulings such as this one make it more difficult for employees to change Wal-Mart as a whole, but the company should stop breaking labor laws in the first place and pay its workers fairly.

Wal-Mart Shareholders Benefit From Judge’s Pay Ruling [Bloomberg News]

Wal-Mart Stores Inc., facing as much as $2 billion in damages in a Minnesota employee-pay trial, may be shielded from similar cases in the future thanks to a 2005 federal law.

The statute requires federal courts to handle class-action lawsuits of $5 million or more when plaintiffs and defendants are from different states. Because judges have been less willing to certify these cases as class actions, the law may save Wal-Mart as much as $5 billion, said Robert Bonsignore, lead workers’ attorney in Nevada suits against the world’s largest retailer. That’s equivalent to 77 percent of Wal-Mart’s $6.5 billion first- half profit.

Hourly employees in more than 30 states have sued since the law’s passage, claiming Wal-Mart manipulated time cards to reduce pay. The cases were combined in federal court in Las Vegas, where a judge in a test ruling refused to allow class-action suits in four of the states.

``It put a decision on state laws before a judge in a distant federal court,’’ Bonsignore said of the Class Action Fairness Law. ``It unleveled the playing field.’’

Judge Philip Pro may apply the same reasoning in 31 other cases, effectively killing them and chilling future claims, Bonsignore said.

State and federal courts have ruled on 36 wage-and-hour class actions against Wal-Mart, according to company spokeswoman Daphne Moore. Judges denied class-action status in 24.

The Bentonville, Arkansas-based retailer faces more than 70 such suits in the U.S., including cases older than the 2005 law and not governed by it.

`Pay Every Associate’

Company policy is ``to pay every associate for every hour worked,’’ Moore said. Managers who break that rule are ``subject to discipline, up to and including termination,’’ she said.

Avoiding multiple wage-and-hour trials will bolster the shares, said Patricia Edwards, a portfolio manager at Wentworth, Hauser & Violich Inc. in Seattle. The firm oversees $14.8 billion, including Wal-Mart stock.

``Any time you don’t have to spend your time and effort fighting in the press and in the courts for your reputation, it’s certainly better,’’ she said in an interview.

Wal-Mart shares, which fell 1.4 percent to $59.07 on Aug. 29 in New York Stock Exchange composite trading, rose 58 cents to $59.65 after going up as much as 3.25 percent in the morning.

The company lost a $78 million Pennsylvania verdict in 2006 over unpaid work and inadequate rest breaks and a $172 million California verdict in 2005 over meal breaks. It has appealed both.

Minnesota Case

In what may become the biggest case, a Minnesota state judge in July found Wal-Mart broke labor laws more than 2 million times. State law sets possible damages at $1,000 per occurrence, meaning jurors at a trial to start Oct. 20 might bring in a $2 billion award.

The company’s future risk from wage-and-hour claims is limited, said Arthur Bryant, executive director of the Public Justice Foundation, a trial lawyers’ group in Washington. The Nevada judge ``granted a huge cap on Wal-Mart’s potential liability,’’ Bryant said.

``The primary goal of the legislation was to get class actions out of state courts and into federal court,’’ where judges ``are much more friendly to business and much more antagonistic to class actions,’’ he said.

Backers of the law sought to make such litigation fair for defendants, not to deny workers’ rights, said Darren McKinney of the American Tort Reform Association. The Washington-based group seeks to limit lawsuits.

Nevada Ruling

Pro ruled June 20 that workers in Delaware, South Dakota, Nevada and Alaska didn’t prove common issues predominated in their cases.

Wal-Mart argued workers sometimes took breaks without clocking out. The company has taken action to ensure its workers are paid for all hours worked, Pro wrote, including locking registers of cashiers who aren’t clocked in.

Denying class-action status means employees seeking relief in court would have to sue singly. Wage-and-hour claims are rarely pursued individually because the money at stake doesn’t make the litigation worthwhile, law professor Carl Tobias of the University of Richmond in Virginia said.

``The whole point of the class-action device is to make it feasible for people whose claims are too small to band together,’’ Tobias said.

Business groups including the U.S. Chamber of Commerce pushed for the 2005 law, saying plaintiffs’ lawyers got large fees while clients saw negligible recoveries.

Backed by Bush

President George W. Bush backed the bill, calling it ``an important step forward in our efforts to reform the litigation system’’ by curbing frivolous suits.

Senator Edward M. Kennedy of Massachusetts called the measure an example of the administration’s ``putting the interests of big companies ahead of America’s working families.’’

The bill passed 279 to 149 in the House and 72 to 26 in the Senate, with Barack Obama and 17 other Democratic senators voting for it. John McCain was among Republicans voting for it.

The bipartisan support means the law is unlikely to be repealed, said McKinney, of the tort-reform group.

The wage-shaving lawsuits are consolidated as In re: Wal- Mart Wage and Hour Employment Practices Litigation, MDL 1735, U.S. District Court, District of Nevada (Las Vegas).

Posted by Alex Goldschmidt on Wednesday, September 03, 2008

Click Here for a Printer-Friendly Version