Wal-Mart Faces $2 Billion Labor Law Trial, Judge Says

By Margaret Cronin Fisk

July 1 (Bloomberg) -- Wal-Mart Stores Inc. broke Minnesota labor laws, a state judge ruled, handing the world's largest retailer its third-straight defeat in a wage-class action trial and the possibility a jury may order it to pay $2 billion.

The company required hourly employees to work off-the-clock during training and denied full rest or meal breaks in violation of state wage and hour laws, Hastings, Minnesota, District Judge Robert King Jr. held today following a non-jury trial. King ruled Wal-Mart broke labor laws more than 2 million times and ordered the company to give employees $6.5 million in back-pay.

``Wal-Mart's failure to compensate plaintiffs was willful,'' the judge wrote in his 151-page decision. ``Wal-Mart was on notice from numerous sources of the wage and hour violations at issue and failed to correct the problem.''

The lawsuit is one of more than 70 cases, including class actions, or group suits, in which Wal-Mart has been accused of wage-law violations. The retailer lost a $78 million jury verdict in Pennsylvania in 2006 over rest breaks and unpaid work and a $172 million verdict in California in 2005 over meal breaks. Both verdicts have been appealed.

``They are involved in more litigation over alleged violations of wage and hour laws than any other company,'' said Professor Carl Tobias, of the University of Richmond School of Law in Virginia, who has been following the lawsuits. ``They might want to re-evaluate their policies.''

Second Trial

King's decision means Wal-Mart will face a second trial in Minnesota state court, this time before a jury. Minnesota labor law allows a fine of up to $1,000 per violation of wage and hour rules. With 2 million violations, that may total as much as $2 billion. At the Oct. 20 trial, jurors will determine how much each violation is worth, and also consider punitive damages.

Wal-Mart, based in Bentonville, Arkansas, is considering an appeal, said company spokeswoman Daphne Moore.

``Our policies are to pay every associate for every hour worked and to make rest and meal breaks available,'' Moore said in an e-mailed statement. ``Any manager who violates these policies is subject to discipline.''

King ``found that Wal-Mart is lacking in many respects,'' workers' attorney Justin Perl said in an interview. ``Not only does this help our individual clients, but it sends a message to Wal-Mart that there are consequences for willfully depriving its hourly workers of their contractual and statutory rights.''

Composite Trading

Wal-Mart rose 83 cents to $57.03 at 4 p.m. in New York Stock Exchange composite trading.

The lawsuit was filed by four women on behalf of about 56,000 Wal-Mart and Sam's Club employees. The workers claimed company managers denied breaks to keep down labor costs. The Minnesota suit was granted class-action status in 2003, allowing the workers to sue together.

The company also faces class-action suits in state courts in New Jersey, Washington and Missouri. It fought off class certification in multiple states including New York, Illinois and Maryland. Denial of class-action status means individuals must spend more to sue the company on their own.

Wal-Mart won a federal court ruling June 20 denying class status to workers in four states who claimed the company denied rest breaks and manipulated time cards to ``shave'' their pay. The ruling was likely to kill about 35 such actions filed in federal court, according to plaintiffs' lawyers.

Minnesota Plaintiffs

The Minnesota plaintiffs are Nancy Braun, who worked at a Wal-Mart store in Apple Valley; Debbie Simonson and Cindy Severson, who worked in Brooklyn Park; and Pamela Reinert, who worked at stores in the Minneapolis-St. Paul area. Each said she worked off the clock and was denied meal and rest breaks.

Wal-Mart's own audits found that its hourly workers were missing rest and meal breaks, King said. Wal-Mart argued at trial the audits were unreliable, he said.

``Wal-Mart management responded to the audits with no action,'' he wrote. ``They put their heads in the sand.''

King said the evidence didn't support workers' allegations that Wal-Mart managers falsified records by inserting meal breaks into employee records.

The case is Braun v. Wal-Mart Inc., 19-CO-01-9790, District Court, Dakota County, First Judicial District, Minnesota (Hastings).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net.