Wal-Mart Faces Massive Liability in Unpaid Break Case

Author: David B. Weisenfeld, XpertHR Legal Editor

December 22, 2014

The Pennsylvania Supreme Court has upheld a $151-million award to workers at Wal-Mart and Sam's Club stores for unpaid break time and other off-the-clock work. Wal-Mart also must pay nearly $34 million in attorney fees for its employees. The decision affects 188,000 Wal-Mart employees who worked in Pennsylvania between 1998 and 2005.

In its opinion, Pennsylvania's highest court rejected the company's claims that this was a "class action run amok." The court found it significant that during orientation for new employees, employee handbooks were distributed informing workers that they are entitled to paid rest and meal breaks and that they will be paid for all hours worked.

A Philadelphia jury had found in 2007 that Wal-Mart properly handled meal breaks, but failed to pay employees when they worked during rest breaks or off the clock after their scheduled shifts had concluded. In affirming the award, the Pennsylvania Supreme Court said there was a single, common issue of liability: whether Wal-Mart failed to compensate its employees in accordance with its own written policies. The Court held that Wal-Mart's liability was proven on a class-wide basis.

A Wal-Mart spokeswoman said the company did not believe the claims should have been grouped together as a class action. An appeal to the US Supreme Court is possible. In 2011, Wal-Mart successfully argued before the Supreme Court that the sex discrimination claims of nearly 1.5-million of its employees could not proceed as a class action because the claims did not have sufficient "commonality."

Some federal appellate courts have ruled that employers can avoid liability under the Fair Labor Standards Act by having a reasonable process in place for employees to report uncompensated work time.