Walmart to Contest $97 Million Award in California Pay Stub Case

Walmart Inc. is expected to tell the Ninth Circuit on Thursday that a $102 million judgment, including $97 million in statutory and civil penalties, for more than 50,000 employees who received deficient pay stubs but weren’t underpaid, is unconstitutional.

The outcome could affect the extent to which California employers can be penalized for wage and hour violations that might not necessarily cause any financial harm but affect employees’ ability to ensure they’re getting paid what they’re owed.

Walmart primarily argued in its brief that Rodrick Magadia, the lead plaintiff and class representative, lacked Article III standing to bring the suit, noting that the lower court never attempted to determine if the other class members had standing either. Magadia admitted he received all wages owed and never suffered any other injury from the alleged wage statement violations, the company said.

A “pure procedural violation” of California wage statement law doesn’t confer standing, Walmart argued. Although California law presumes an employee is automatically harmed by a deficient wage statement, state legislatures don’t have the power to transform such “technical” violations into concrete injuries under Article III.

But Magadia suffered the type of concrete injury that California’s wage statement laws were designed to prevent, which is enough to satisfy standing requirements, the plaintiffs argued in their brief. The laws were enacted to protect employees’ concrete interest in receiving accurate information about their compensation so they can determine if they’ve been paid the wages they’re owed, they said, making it irrelevant if they also suffered wage theft.

Here, Walmart’s witness testified that employees wouldn’t be able to tell from looking at their pay stubs how their pay was calculated with respect to adjusted overtime or which pay period they were being compensated for on their last wage statement, the plaintiffs said.

Oral arguments are scheduled before a panel of the U.S. Court of Appeals for the Ninth Circuit, in Pasadena, consisting of Judges Consuelo M. Callahan, Patrick J. Bumatay, and Gregory A. Presnell, sitting by designation from the Middle District Of Florida.

Magadia sued on behalf of other Walmart associates who received quarterly incentive bonuses and worked overtime during the same quarter. When that happens, Walmart retroactively adjusts their overtime rates for the quarter to reflect the increase in their regular rate of pay from the bonus, as required by law, and pays this “overtime true-up” amount in their next paychecks.

The class alleged Walmart violated California wage statement rules by issuing pay stubs that only listed the lump-sum “overtime true-up” amounts, without identifying the rates of pay or number of corresponding hours worked for all wages paid. They also claimed Walmart failed to provide accurate itemized final wage statements and compensate them for missed meal breaks.

After a three-day bench trial, the district court held Walmart liable and awarded the wage statement class $48 million in penalties under California labor law and $54 million in penalties under the state’s Private Attorneys General Act.

The court also awarded $5.8 million in PAGA penalties to the final wage statement class. Although the court decertified the meal break class, it awarded $70,000 in PAGA penalties to the employees who weren’t properly compensated for missed meal breaks since October 2015.

Hyun Legal APC, Diversity Law Group PC, Polaris Law Group LLP, and Gupta Wessler PLLC represent the class. Gibson, Dunn & Crutcher LLP and Duane Morris LLP represent Walmart.

The case is Magadia v. Walmart Inc., 9th Cir., No. 19-16184, oral arguments 11/19/20.