Capping a bitter labor dispute that bloodied both the upscale Nordstrom retail chain and its union adversaries, the two sides on Monday announced a tentative multimillion-dollar settlement of a lawsuit that accused the company of shortchanging employees.
Thousands of current and former employees who performed such duties as stocking shelves, delivering merchandise or writing thank-you notes to customers without being paid are entitled to compensation under the agreement.
Officials at Nordstrom headquarters in Seattle said they believe a $15-million company fund established in 1990 will cover most or all of the payouts to workers, but union leaders estimated the compensation could exceed $30 million. Nordstrom also agreed to pay the union an estimated $7.5 million to cover its lawyers’ fees and related costs.
About 170,000 employees who worked for the company between 1984 and 1992 will be notified of the program by Nordstrom. But a far smaller number are expected to be declared eligible for back pay.
The dispute between the department store chain and two locals of the United Food and Commercial Workers in Seattle and Tacoma, Wash., erupted in 1989 after a union contract expired and the two sides failed to negotiate a new pact.
Union leaders soon began publicizing charges that Nordstrom managers pressured employees, particularly salespeople, not to seek their hourly pay for some customer service-related tasks and other duties. Washington state labor officials later sided with the union, and many employees confirmed the allegations in interviews with newspaper reporters.
Nordstrom, which has long cultivated a reputation for sterling customer service, initially rejected the union’s claims. But it eventually agreed to change its record-keeping practices and to set up its $15-million fund to compensate employees who were shortchanged. Still, the union filed its class-action lawsuit in 1990, claiming that workers might be entitled to as much as $300 million in back pay.
Both sides suffered heavy losses in a labor battle that continued to rage on several fronts. Union-sponsored demonstrations, intended to deter holiday season shoppers, were staged at Nordstrom stores in Los Angeles and other cities on the East and West coasts. Further damaging the company’s reputation, employee complaints led to an investigation by Oregon officials, who found that the company was selling, as new, clothing and cosmetics already used by employees.
But the two UFCW locals leading the attack on Nordstrom were voted out by employees, many of whom were turned off by the union’s tactics and backed the company instead. The union no longer represents any of the company’s workers, a fact company officials pointedly noted in responding to union claims Monday of an “employee victory” in the legal dispute.
Nordstrom spokeswoman Kellie Tormey called the pay dispute a “pressure point” raised by the union amid contract negotiations, “and two years later the employees voted overwhelmingly to decertify the union.”
Ray Johnson, a Nordstrom co-president, said in a prepared statement that the chain is “in business to take care of the customer. When we considered the costs of continued litigation and the time spent by our people working on the case, it became clear this was the best course of action.”
Joe Peterson, president of UFCW 1001 in Seattle, responded by saying that “Nordstrom has not been vindicated. . . . The reason they settled was that they knew they were going to lose.”
He said the company would not pay the union millions in legal fees “if they didn’t know they had a problem.”
To be eligible for compensation, employees must have worked at least 200 hours for the company between Feb. 16, 1987, and March 15, 1990, among other things. The union said employees could receive up to $2,000 each, but the company maintained there is no set maximum. Employees throughout the Nordstrom chain, including California, will be eligible. Union officials called the settlement the largest of its kind in a private suit. But the company called the unionists’ cost estimates “ridiculous,” and said there was no way to determine how much would be paid out.
The settlement is scheduled to go into effect following a final state court hearing in Seattle on April 12.
Despite the expense of the settlement, retail industry analysts lauded the announcement. “This issue has been an albatross for Nordstrom,” said Carol Palmer, an analyst at the Chicago-based Duff & Phelps investment firm. “It’s good that the company is getting this matter out of the way.”
Palmer said the controversy has not prevented Nordstrom from getting quality salespeople. She said the company is a successful recruiter because its employees--on balance--earn more than the average retail salesperson.
However, Palmer said the settlement would have an impact on the industry.
“Unions will now be looking for more of these kinds of complaints at other stores,” she said. “There will be fewer off-the-clock requests by other retailers because they will realize that they could be vulnerable. However, more and more retailers will still try to provide Nordstrom-level customer service.”