Neiman Marcus Salespeople to Be Reimbursed for Illegal Deductions

Several thousand past and present employees at Neiman Marcus’ five department stores in California could be in line for reimbursements in connection with a sales commission policy that violated state law.

The reimbursements, which could total as much as $1.5 million, stem from a since-abandoned policy that required salespeople to absorb commission costs associated with merchandise returned without sales slips.

Neiman Marcus dropped the policy, known by employees as the “777” payroll adjustment, in 1992. But a settlement approved May 3 by a state Superior Court judge in San Francisco requires the Dallas-based chain to reimburse California employees for deductions made between 1986 and 1992, when the policy was in effect.

Neiman Marcus officials on Friday declined to say how many current and former employees qualify for reimbursements or how costly the court-approved settlement would be.

Retail industry experts were unable to say if the May 3 settlement of a 1989 lawsuit brought by a former Neiman Marcus employee might prompt similar reimbursements by other retail chains, or if Neiman Marcus stores in other states might face similar court orders.

Attorneys representing Kirby Hudgins, the former Bay Area department store employee, maintain that the settlement could cost Neiman Marcus as much as $1.5 million if every eligible employee seeks a reimbursement.

Hudgins, who worked at Neiman Marcus’ San Francisco store for two years in the mid-1980s, said he filed his suit in 1989 “because the company was stealing from us.”

“They owed me exactly $494,” Hudgins said. “That might seem like a small amount of money, but I thought it was an abusive policy.”

Hudgins said that he also won a $25,000 judgment against the store chain and is hoping other employees will contact the department store chain for details about reimbursements.

The contested policy didn’t involve merchandise that customers returned along with sales slips. In those cases, Neiman Marcus used data on the receipts to deduct the appropriate commission amount from whoever made the sale.

Hudgins’ lawsuit successfully challenged the chain’s former policy of requiring employees to bear the costs of commissions associated with merchandise that was returned without a sales slip.

Janet Mangini, a Bay Area attorney who represented Hudgins, said that the policy unfairly saddled employees with costs of commissions generated by sales made by other employees.

“Say you bought a $500 purse at the Dallas store and sent it to your mother in L.A. for a birthday present,” Mangini said. “And she returned it in L.A. without the sales slip for cash or credit. Neiman Marcus would deduct the commission paid on that purse from the salaries of the people in the L.A. purse department--even though they didn’t sell it in the first place.”

“I’m so glad they stopped that policy,” said Mike Sage, who expects to receive several hundred dollars in commissions lost between 1989 and 1992 when he worked at the chain’s Beverly Hills location. “It always seemed like such an unfair thing.”