More Wage Statement Class Actions Likely Following $102 Million Award Against Wal-Mart
By: McKague Rosasco LLP on July 1, 2019
On May 31, 2019, a federal court ordered Wal-Mart to pay $102 million to a class of employees for wage statement violations. $96 million of the total damages was awarded to employees who earned additional overtime under an incentive program but whose wage statements listed these additional wages as a simple lump sum. Following a bench trial, Judge Lucy Koh of the Northern District of California found Wal-Mart’s wage statements violated the California Labor Code by failing to list the hourly rate or hours worked used to calculate an employee’s additional overtime wages.
The employees in the class all benefited from Wal-Mart’s “MyShare” incentive awards – a non-discretionary quarterly bonus program. When employees received a MyShare bonus and worked overtime during the relevant bonus period, Wal-Mart also paid an incremental overtime adjustment. The wage statements at issue in the case simply reported these additional earnings as a lump sum described as “OVERTIME/INCT.” Wal-Mart’s wage statements did not list the hours worked or hourly rate used to calculate this lump sum.
Labor Code section 226(a)(9) requires wage statements to contain "all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee." The court rejected Wal-Mart’s argument that section 226(a)(9) does not apply to “additional wages that were earned as overtime pay based on non-discretionary bonuses being spread over the hours worked during the bonus period.” The court noted Wal-Mart’s interpretation of section 226(a)(9) was at odds with a “statute whose avowed goal is to ‘insure that employees are adequately informed of compensation received and are not shortchanged by their employers.” (Magadia v. Wal-Mart Assocs. (N.D.Cal. May 31, 2019) 2019 U.S. Dist. LEXIS 91792, at 67 [quoting Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385 at 393].)
Although the employees suffered no actual harm, Judge Koh awarded the employees who received non-compliant OVERTIME/INCT wage statements $48,046,000 in statutory damages under Labor Code section 226(e) for Wal-Mart’s violation of section 226(a)(9). Judge Koh also awarded the same employees another $48,046,000 in penalties under the Private Attorneys General Act (PAGA) for failure to provide accurate wage statements in violation of section 226(a)(9).
Plaintiff’s complaint sought $131,427,750 in PAGA penalties for Wal-Mart’s violation of section 226(a)(9). Judge Koh found that awarding the full amount of PAGA penalties sought would be unjust and that reducing the amount of statutory penalties to match the underlying statutory damages was consistent with the Central District’s opinion in Aguirre v. Genesis Logistics (C.D.Cal. 2013) 2013 U.S. Dist. LEXIS 189820. “The amount of PAGA penalties awarded and the amount of statutory penalties awarded for the underlying Labor Code violation should not be too disparate.” (Magadia v. Wal-Mart Assocs., supra, at p. 90.) In all the class action settlements Judge Koh could find, the statutory damages awarded outweighed the PAGA penalties awarded. (Id. at p. 92.) Judge Koh also recognized that imposing a disproportionate PAGA penalty on Wal-Mart for “conduct that ultimately results in a net positive for employees —the award of discretionary bonuses—would not make sense” given the policy of California’s Labor Code and the chance of deterring employers from paying such bonuses. (Id. at p. 92-93.)
Non-discretionary bonus programs like Wal-Mart's are not unusual. Employers who offer incentives leading to increased overtime rates should take care to ensure their wage statements comply with all provisions of Labor Code section 226(a). Likewise, employers offering any bonus or incentive that alters an employee’s base rate of pay need to be aware that seemingly minor omissions in wage statements could expose them to legal liability. Contact McKague Rosasco LLP to have your company’s paycheck reviewed for legal compliance. A few minutes of time can save millions in liability. You may not enjoy the prospect of looking over your wage statements with a microscope, but you can be sure there are many plaintiff’s lawyers who keep a favorite microscope on their desk just for this purpose.
