$86 Million Settlement Approved for Unpaid Earnings

On November 9, 2010, the settlement In re Wal-Mart Stores Inc. Wage & Hour Litigation, pending in the U.S. District Court for the Northern District of California, received final approval from the court. The settlement resolved the claims of a class of 293,971 employees who worked in California Wal-Mart or Sam’s Clubs ranging from 2002 until June of this year.

This case stemmed from allegations that Wal-Mart did not pay workers for various types of earned wages upon termination of employment, including vacation and personal time. The class members sought damages under specific provisions of the California state law requiring prompt payment upon separation. The state law also provides penalties for non-compliance.

Based upon reports, the settlement is approximately worth 2 days of profits for the retailer.

Although the scope of this case encompassed a very large amount, the lesson is relatively simple: Under the Federal Fair Labor Standards Act, employers are not required to provide paid vacation and there is not specific requirement for immediate payment upon separation from employment.

But, state laws typically dictate when paychecks are due upon termination and if and when accrued benefits, such as vacation and PTO, are due. These state laws, like the California Labor Code, could cause problems for employers who do business in multiple states. There is not necessarily a “one-size fits all” program. Some states require payment immediately upon separation; others with 72 hours and some have no requirement other than the next regular pay day. Further, vacation and PTO can be mandatory in some states and completely discretionary in others.

Employers in multiple states should consider consulting with legal counsel and ensuring that pay practices are proper in each state where they operate. Most won’t be as big as Wal-Mart, but two days of profits to settle a claim can still be more costly than an initial effort at compliance.

By Paul L. Bittner, WHDI Member
Schottenstein, Zox & Dunn Co., L.P.A.
Columbus and Cleveland, Ohio

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