9th Circuit overturns Walmart workers’ $102 mln win

An employee sets up a holiday display at a Walmart store in Secaucus, New Jersey, November 11, 2015. REUTERS/Lucas Jackson
  • Walmart complied with paystub rules, said court
  • First time 9th Circuit held that an uninjured employee cannot sue under the California PAGA

(Reuters) - A federal appeals court on Friday wiped out a $102 million verdict for Walmart employees who claimed the company violated California labor laws governing pay-stub information and meal breaks.

The 9th U.S. Circuit Court of Appeals agreed with Walmart’s lawyers at Gibson, Dunn & Crutcher, who argued that Walmart fully complied with the pay-stub rules – which accounted for more than $101 million of the award – and that lead plaintiff Roderick Magadia could not sue over the “meal-break premium” because he had suffered no injury.

Larry Lee of Diversity Law Group, which represented Magadia along with the Gupta Wessler law firm, said they were “quite disappointed.”

The California Labor Code “places a burden on the employer to advise its employees in writing how their pay was calculated,” Lee wrote. “The ruling completely eviscerates that very purpose, making it much easier for employers to steal wages.”

Walmart spokesman Randy Hargrove emphasized Friday that Magadia and other plaintiffs “were fully compensated.”

“There was no allegation that an associate was not paid appropriately, but rather only hyper-technical allegations that our pay stub was insufficient,” Hargrove said in an email. “We appreciate the Ninth Circuit’s thorough review and ruling that our pay stub complies with California law.”

Magadia, who worked for Walmart from 2008 until 2016, filed suit in federal court in San Jose, California, on behalf of tens of thousands of Walmart employees in California.

U.S. District Judge Lucy Koh divided the case into three parts: a “meal break” action under California’s Private Attorney General Act (PAGA); an “overtime increment” class; and the “final statement” class.

The court vacated the $70,000 meal-break verdict for lack of standing. This was the first time the 9th Circuit has held that an uninjured employee cannot sue under the California PAGA, according to a footnote in the opinion.

Next, the court tackled Koh’s $96 million verdict for the “overtime increment” class, made up of employees who had received a quarterly performance bonus and had worked overtime during that same quarter.

Under California law, a bonus increases the base rate on which overtime is calculated. Walmart duly calculated and paid the “overtime increment” with the quarterly bonus, but Koh said it also should have shown the higher amount as the “wage in effect” on the workers’ semimonthly pay stubs.

“But at no time during the preceding two-week pay period did the employee work under that overtime rate because it’s calculated after the close of the pay period based on the preceding six pay periods,” Circuit Judge Patrick Bumatay wrote. He was joined by Circuit Judge Consuelo Callahan and U.S. District Judge Gregory Presnell of Florida, sitting by designation.

Members of the final-statement class had received a paycheck and wage statement on their last day of work, but did not receive a statement listing the dates of the pay period until the end of the semimonthly pay period.

Koh found that dividing the information violated California’s pay-stub rules, and awarded $5.8 million.

But the law clearly “affords employers the option of furnishing the pay statement either semimonthly or at the time of each wage payment” – whichever they choose, Bumatay wrote. “Walmart complied with this provision.”

The case is Roderick Magadia, individually and on behalf of all those similarly situated v. Wal-Mart Associates Inc, Walmart Inc., 9th U.S. Circuit Court of Appeals, No. 19-16184.

For Magadia: Jonathan Taylor and Deepak Gupta of Gupta Wessler; Larry Lee of Diversity Law Group

For Walmart: Theane Evangelis and Julian Poon of Gibson Dunn & Crutcher, Aaron Winn of Duane Morris

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