$172 MILLION VERDICT AGAINST WAL-MART MERITS ATTENTION AND IMMEDIATE ACTION

On Thursday, a California jury awarded $172 million to 116,000 current and former employees of Wal-Mart based on violations of California’s meal period rules. The verdict included $57 million in general damages and $115 million in punitive damages. Although the award may be vulnerable and is likely to be appealed, it will undoubtedly lead to even more wage-hour litigation and challenges. All California employers should understand the message the verdict is intended to send.

The significance of the case is highlighted by articles in most of the nation’s major newspapers, including the Wall Street Journal, the New York Times, the Washington Post/Associated Press and the Los Angeles Times. The Los Angeles Times article quoted a juror who confirmed that the large award was intended to send a “very clear message” to California businesses that they must pay attention to California laws.

The Los Angeles Times article also quoted Sheppard Mullin Partner Richard J. Simmons, whom it interviewed as an expert on California law, even though Sheppard Mullin did not defend Wal-Mart. Simmons was quoted as stating that the punitive damage verdict was “not typical” for cases involving meal and rest periods and looked to be “extremely vulnerable” on appeal. A strong argument can be made that the jury should never have considered the issue of punitive damages based on the theories in the case.

California law requires that employees receive meal periods of at least 30 minutes if they work over five hours. The California Division of Labor Standards Enforcement (“DLSE”) has attempted to formulate regulations that interpret the meal period rules and afford greater flexibility to employees. The regulations were initially proposed in December of 2004. Proposed revisions were published in July of 2005. While action regarding the regulations may occur soon, employers can only remain hopeful that clarifications and helpful guidelines will be finalized.

There are many proactive strategies that employers can assess to make certain that they are complying with the state’s wage and hour rules, including the meal and rest period requirements. Some of the practices are obvious, such as conducting internal audits, maintaining clear written policies that comply fully with the letter and the spirit of the law, and training managers to understand that nothing less than strict compliance will be tolerated.

Using “attestation forms” to ask employees to acknowledge periodically that they have received their meal and rest periods is also helpful. Other measures may be more subtle and innovative, and vary from workplace to workplace.

Employers are strongly encouraged to contact their employment lawyers for assistance and immediately reexamine their written policies and practices. Sheppard Mullin’s employment law group has assisted many clients to address their obligations in this area and is available to help.