An Oakland jury Thursday awarded $172 million to 116,000 current and former employees of Wal-Mart Stores Inc. in the first of dozens of wage and hour class-action lawsuits targeting the giant retailer to go to trial.
The world's largest retailer was ordered to pay $57 million in general damages and $115 million in punitive damages to employees for violating a 2001 state law that requires employers to provide 30-minute unpaid lunch breaks to employees who work at least six hours in a shift.
California law requires companies to pay workers a full hour's wages for every missed lunch. Lawyers for Wal-Mart had argued that workers did not demand their penalty wages on a timely basis.
But jurors in Alameda County Superior Court decided otherwise, handing a big win to the group of employees who had worked in Wal-Mart's California stores from Jan. 1, 2001, through May 6 this year.
A jubilant Michael Christian, one of the San Francisco lawyers who represented the plaintiffs, said the verdict made for "a good day."
"There was an abundance of evidence that Wal-Mart knew that workers did not get meal periods for many years and they did nothing," he said. "The jury concluded that conduct was unacceptable" and that Wal-Mart "deserved to be punished for its willful indifference to its workers."
Wal-Mart said it disagreed with the verdict and would appeal. The company also said that because the case involved a meal-period statute that was unique to California, the verdict had no bearing in any other state.
But many legal experts said that with similar litigation pending in about 40 other states, the verdict was certain to have a ripple effect far beyond California.
Toby Marshall, a Seattle lawyer who represents workers in a similar class-action against Wal-Mart in Washington, said Thursday's verdict would strengthen other claims.
"This is a very clear public statement that its policies are against the law," Marshall said of Wal-Mart. "While each state's law is different, the fact that one jury found that Wal-Mart's corporate policies are resulting in wage and hour violations means that it's more likely that a jury here in Washington or elsewhere is going to find violations."
Wal-Mart has acknowledged that it had "compliance issues" when the statute took effect in 2001, spokeswoman Mona Williams said in a statement.
"Wal-Mart has since taken steps to ensure all associates receive their meal periods, including adopting new technology that sends alerts to cashiers when it is time for their meal breaks," she said. "The system will automatically shut down registers if the cashier does not respond."
Williams added that based on a ruling in another California trial, Wal-Mart believed that punitive damages could not be recovered in this case.
Juror Jeff Pector, a 52-year-old software developer, said he and several other jurors believed that the punitive damage award should have been higher.
"Wal-Mart, in my opinion, had clear knowledge of what the law was requiring, full, timely, uninterrupted meal breaks, and from the top down to the store manager, it seemed that there was disregard for the laws that were passed in California," Pector said in an interview after the verdict was announced. "We wanted to send a very clear message that in California, even really big companies need to follow the law."
Last year Wal-Mart settled a similar lawsuit by workers in its Colorado stores for $50 million, and an Oregon jury awarded 83 Wal-Mart workers in that state about $2,000 each for lunch period violations.
The California verdict, if upheld, would amount to an average of nearly $1,500 for the employees; individual awards would probably vary by length of service. In addition, Wal-Mart would probably have to pay the plaintiffs' legal fees, to be determined by the court.
To Deborah Hensler, a Stanford Law School professor who has studied class actions, the size of the award did not seem out of bounds.
"These days, when multibillion-dollar damages against corporations are not unheard of, it doesn't strike me immediately as being a remarkably high award," she said.
The verdict couldn't come at a worse time for Bentonville, Ark.-based Wal-Mart. The retailer, under pressure from organized labor and community activists, has been working diligently to present a more positive image of itself.
In an October speech in which he outlined support for an increase in the federal minimum wage, Wal-Mart Chief Executive H. Lee Scott Jr. said the company was committed to "taking care of those whom we serve: our associates and working families."
The company's critics, however, were quick to say that the Oakland case points to broader problems with how Wal-Mart treats its employees.
"Today's verdict affirms that time-theft labor abuses are a chronic and systemic problem for Wal-Mart and its dangerous business model," Andrew Grossman, executive director of the union-supported group Wal-Mart Watch, said in a statement. "At Wal-Mart, not only is there no such thing as a free lunch for employees but, in this sad case, there is no lunch at all."
In addition to the similar wage and hour class-action suits in other states, Wal-Mart faces lawsuits accusing the retailer of discriminating against female employees and tolerating sweatshop conditions in the factories of its foreign suppliers.
Thursday's verdict, which came after a closely watched three-month trial, may bode poorly for Wal-Mart in its pending cases, several observers say.
Nelson Lichtenstein, a professor of history at UC Santa Barbara and editor of the new book "Wal-Mart: The Face of 21st-Century Capitalism," said the verdict posed a problem for Wal-Mart on two fronts, affecting both its reputation and its bottom line.
"It's a clear pattern that Wal-Mart has: Managers of the individual stores have a labor budget which is so tight that the store can't function without shaving the law, cutting corners and engaging in this practice of super-exploiting the workers," Lichtenstein said. "Wal-Mart just can't get out from under their public relations problem -- that's one side. Here, though, we're actually talking about real money, not just reputation."
Pasadena attorney Dan Stormer, one of several lawyers representing the foreign factory workers suing Wal-Mart, called the verdict "a message that those days are over -- they can't simply oppress their workers, ignore the laws and expect to get off scot-free."
Los Angeles lawyer Richard J. Simmons, who represents employers, said that by Thursday afternoon news of the verdict was "absolutely burning up the wires of employment attorneys around the state."
He called the punitive damage verdict "not typical" for cases involving meal and rest periods and said that part of the jury's award "is extremely vulnerable" on appeal.
In his view, the verdict will have widespread implications by encouraging more litigation, he said.
Said juror Pector: "I personally was hoping that our decision would send a message beyond Wal-Mart. We were really ruling on the Wal-Mart case and that's what it was about, but I hope other businesses in California are paying attention."
Thursday's jury award represents about one week's worth of Wal-Mart's $10.3 billion in profit last year. The company has more than 3,800 stores nationwide and more than 1.3 million employees. It operates 157 Wal-Mart stores and 34 Sam's Club stores in California, which employ nearly 74,000.
The verdict was announced after the close of markets. Shares of Wal-Mart, which are down 8% this year, fell 5 cents to $48.60.