The Walgreens Wage And Hour Settlement: A Cautionary Tale For California Employers
In 2018, Walgreens Company -- the #1 American pharmacy chain -- was taken to court and settled a wage and labor class action lawsuit for its California employees in the sum of $4.5 million.
The Walgreens case is one of many in which US employers fail to adhere to federal and state labor laws, causing wage theft and incalculable distress to their employees -- and losing millions in the subsequent payouts.
What Is Labor Law?
Labor laws exist to set and enact standards to protect employees' rights (such as financial remuneration, health and safety regulations, etc.), governing everything from fair hiring practices to child labor protections.
A cardinal aspect of labor legislation is "wage and hour" laws which provide standards and limits on minimum wage and overtime hours for non-exempt workers (i.e. hourly workers).
Federal Law Vs. State Labor Law
Labor laws are set at the Federal level and enforced by the US Department of Labor, under the Fair Labor Standards Act (FLSA).
Several US states have their own state labor laws, though most do not (yet). If a US state has passed its own labor laws and they are different from federal ones, the US Department of Labor expects employers in the private sector of that state to adhere to whichever law offers the strictest standard for employers and the highest protection to employees.
Federal Wage And Hour Laws
The federal minimum wage (which hasn't changed since 2009) is currently set at $7.25 per hour.
In terms of overtime laws, the FLSA states that laborers may not be employed for more than 40 hours worked in a week without being compensated at least one-and-a-half times the regular rates for "overtime". "Hours worked" applies to all the time during which an employee is required to be on the employer's premises, on duty, or at a specified work site (as you will see in the Walgreens case, this is an important distinction).
State Labor Laws
Only a handful of US states have their own labor laws that supply additional provisions for hour and wage rules, as well as rights to organize.
Let's use California law as example, since that is the location of the Walgreens class action lawsuit in question.
California minimum Wage Law
In California, wage and hour laws are decreed through the California Labor Code and the California Industrial Welfare Commission (IWC) Wage Orders, enforced by the California Division of Labor Standards Enforcement (DLSE).
As of January 1, 2022 minimum wage is set at:
• $14 per hour for small employers with 25 or fewer employees • $15 per hour for larger companies with 26+ employees
These minimum wage rates are higher than that of the federal ones, therefore, they prevail.
California Overtime Law
California overtime laws are also stronger than the federal standards. The employer must pay non-exempt workers 1.5 times the employee's hourly rate for each hour worked over 8 hours within a day for each hour worked over 40 within a workweek, as well as for the first 8 hours worked on the 7th consecutive day of the week (the federal technical definitions of what constitutes a "40-hour work week" are looser).
Furthermore, California employers must pay double the regular hourly rate for 12+ hours worked in a day and for all hours worked over 8 hours on the 7th consecutive day of work.
California also makes overtime provisions for agricultural employees not covered under the federal FLSA regulations.
How Do Employers Violate Hour & Wage Laws?
Scrutiny by the government and watchdog organizations makes it difficult for large corporations to blatantly break the law by paying less than minimum wage, so they find subtler, harder-to-prove ways to engage in wage theft, such as not providing lawfully mandated breaks, making workers take extra, unpaid work home, not reimbursing work-related expenses, or pressuring employees to "volunteer" their time off the clock.
How Are Labor Law Violations Prosecuted?
FLSA-covered employees who believe they've been shortchanged/exploited by having their fair wage or hour rights violated have 2 years to file a claim form with the US Department of Labor Wage and Hour Division under FLSA.
Employees working in states with their own labor laws may be able to file their claims directly with the state entity responsible for enforcing labor laws (in California, it's the Department of Industrial Relations' Division of Labor Standards Enforcement).
If the labor law violation is systemic, affecting multiple workers, a class action lawsuit may be lodged with the state court, as demonstrated by the following Walgreens case.
The Walgreens Class Action Lawsuit By Hourly Workers
In late 2018, a worker from a Walgreens distribution center in California filed a class action lawsuit (Lucas Mejia, et al. v. Walgreen Co, et al) on behalf of over 2600 other workers from the same facility, alleging wage theft through failing to receive pay for all of their hours worked.
The alleged violations included:
• Hours on employees' timecards were being rounded down. • Employees were required to wait in line to complete pre and post shift security checks without being compensated for time spent on this daily work-related task • Employer failed to pay premium wages to laborers who were denied rest breaks required for meals.
Walgreens' side tried to argue that the time spent by the employees waiting for mandatory bag checks was too negligible to count for pay purposes.
The California judge disagreed and ruled in favor of the plaintiffs. The settlement came to $4.5 million to be paid by Walgreens in total. One third of this settlement went to attorneys' and other legal fees. The lead plaintiff and each individual participant in the class action lawsuit split the rest (a net settlement of $2.8 million), making out with $1200 each.
As you can see, the main "winners" in this costly 2-year-long transaction were the law firms.
Similar Cases Of Class Action Lawsuits Over Security Checks
California has set the precedent for prosecuting problematic bag check policies with rulings for the plaintiffs in several class action lawsuits.
For example, in 2019, Dick's Sporting Goods retailer was taken to court and eventually agreed to pay $2.9 million to a class of 10700 former and current employees to compensate for time spent in security checks.
In 2020, a three-judge panel at the 9th US Circuit Court of Appeals ruled for Apple retail store employees, once again, for uncompensated time spent on bag checks. This class action settlement that was tied up in courts for nearly a decade, ultimately costing Apple Inc. $30.5 million.
Complying With Labor Laws Is The Only Way
Being noncompliant with wage and hour laws can be ruinous to a business: financially and reputation-wise.
Truly, the best policy is to never come even close to breaking these laws in the first place!
EasyLlama Has The Labor Law Training For Your Company!
EasyLlama recognizes the demand for corporate labor law education -- and is rolling out new, state-specific e-training courses that cover the entire spectrum of labor law compliance topics, including (but not limited to):
• minimum wage and overtime requirements • what are exempt and non-exempt employees • how/when employees are to be paid • rest and meal breaks • sick leave time and pay • tipped wages • severance pay • consequences for non-compliance
Let EasyLlama set your leadership on-course for ethical, transparent, and legally compliant labor practices! Your company will avoid costly litigation -- and people will want to work for you!
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