Wet Seal Settles Store Managers’ Suit Concerning Overtime
Troubled retailer Wet Seal Inc., which this week resolved a wage dispute involving contract factory workers, said Thursday that it had agreed to pay as much as $1.3 million to settle a lawsuit by California store managers who claimed they were wrongly denied overtime pay.
Wet Seal admitted no wrongdoing in either case. Nonetheless, Chief Executive Peter D. Whitford, who was hired last year to turn around the struggling apparel merchant, said that clearing up lingering legal battles would help the company move forward.
B. Riley & Co. analyst Jeffrey Van Sinderen said he doubted that investors would react negatively to the announcement of a second settlement, partly because Wet Seal, the Foothill Ranch-based parent of 620 Wet Seal, Arden B., Zutopia and Contempo Casual stores, has about $70 million in cash on hand.
“It makes sense for them to just clean this stuff up and move on,” he said.
The managers’ suit, filed in Orange County Superior Court, alleged that salaried employees were wrongly classified as being exempt from overtime pay under California law. If approved by the court, the settlement could include as many as 500 store managers who worked for the retailer in California from Jan. 27, 1999, through the time the judgment is finalized, said William E. Harris, the plaintiffs’ attorney.
The suit was launched in January 2002 by Ricky Chacon, a manager in Wet Seal’s Torrance store at Del Amo Fashion Center. A month later, a similar claim was filed by two more company employees, Rashilda Hymes and Tyese Knighten. The cases eventually were consolidated and are expected to be certified as a class action as part of the settlement.
The Wet Seal case was one of a number of similar lawsuits that have swept through the service industry in recent years after California toughened its wage standards beyond what’s allowed under federal rules, labor law experts said.
“Many employers who deal with federal standards in most of the states and erroneously apply those same standards in California find themselves getting into trouble,” said Joe Beachboard, a partner with Ogletree, Deakins, Nash, Smoak & Stewart, a Los Angeles law firm that represents management in labor and employment disputes.
In their attempts to cut costs, worker advocates say, retailers typically have too few nonsalaried clerks on hand to handle basic store duties, such as stocking shelves, helping customers and ringing up sales.
“What happens is they hire managers and the managers just end up chipping in,” said Rene Barge, an attorney who has represented managers in similar cases.
The maximum Wet Seal would have to pay is considerably less than what many other firms have agreed to pay in similar cases. Last year, Anaheim-based retailer Pacific Sunwear paid nearly $4 million to settle similar claims by managers.
Wet Seal’s stock closed Thursday at $9.16, down 33 cents on Nasdaq. The announcement was made after the market closed. The firm said it would take a charge in the fourth quarter related to the settlement.
On Tuesday, Wet Seal said it had agreed to pay $90,000 to four garment workers who claimed they were underpaid by one of the company’s contractors.
