Appeals Court Overturns Wal-Mart’s $102 Million Penalty and Damages Judgment

Under the California Private Attorney General Act (PAGA), current or former employees can sue employers in a “representative” capacity for alleged Labor Code violations.  PAGA claims, filed by employees when the state declines to do so, seek civil penalties to be shared 75 percent for the state of California and 25 percent between the plaintiff and other employees.

The $102 million award in Magadia v. Wal-Mart Associates, Inc.  for alleged missed meal premiums and paystub violations demonstrates the proliferation of PAGA cases as one of the greatest dangers to California employers.  See, Cautionary Tale Episode 42 The PAGA Monster Is Hungry: Non-Compliant California Employers at High Risk under Special Law(May 14, 2021).

Yet, in a narrow victory for employers, the federal appeals court recently overturned that award, finding  Wal-Mart’s paystubs did not violate Labor Code 226’s nine basic requirements by listing certain specialized information semi-monthly.

The court also invalidated a $70,000 meal premium violation under Labor Code 226.7 for failure to pay an extra hour for non-provision of breaks, observing that Magadia had no such claim personally and, under federal law, could not then assert that claim for other workers. The court ordered this meal claim back to state court, where there may be a different result under California law.

Take Aways: While Wal-Mart may have dodged bullets in this case, the decision reinforces that all businesses, regardless of size, must ensure they are applying California employment law correctly.  An employer’s intentional actions to evade the law are not required; business-killing PAGA liability can arise from management inattention to compliance fine points alone.

A company’s receipt of a worker’s pre-lawsuit PAGA letter to the Labor and Workforce Development Agency (LWDA) requires immediate action, including consultation with experienced legal counsel. For example, by taking steps within 30 days of the letter, an employer may be able to cure certain alleged violations and avoid liability altogether.

See also:

• Please: Document Workplace Meal Breaks – Require Employees to Clock Out and Back In on Their Meals (June 4, 2021)
• The Peril of Ignorance: Know and Comply – California’s Itemized Paystub Requirements (May 6, 2021)
• Cautionary Tales Episode 16 – Spa Nailed for $1.2 Million, Wage Theft (August 1, 2018)

For more information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Helena Kobrin
July 2, 2021