How NOT to Go Out of Business

So, apparently it’s not a great time to be in the baked goods industry.

Hostess has filed for Chapter 11 for a second time in 10 years.1 And last month the locally-renowned bakery Rolf’s Patisserie shuttered its doors permanently.

It’s obviously not fair to compare a multinational food product manufacturer with a micro-regional fancy-cake-maker, but I’m going to do it anyway, because it’s an easy way to make a point.

Both of the news stories surrounding these companies center on employment issues. Almost immediately after it filed for bankruptcy, Hostess cited its pension liability and rigid work rules as the principal issue in restructuring the company; it needs to get out of its current collective bargaining agreements and start over, it says. The Teamsters disagreed, of course, but the correlation was there. Even though the unions are going to take it on the chin, the message turned out all collaborative and warm. The company that brought us Twinkies and other delicacies was fighting for its life, and it just needs the union’s help to stay afloat. The union obviously held a press conference of its own, but the tone was already set. Hostess, for PR purposes, at least, was playing nice.

1. The BK people call that Chapter 22, btw. Those bankruptcy lawyers are hilarious! [↩]
2. And the Illinois WARN Act [↩]
3. Okay, maybe. [↩]

Zapping the Fair Labor Standards Act

There’s a super-sized question floating around L&E blawgs right now, posed by Walter Olson at Overlawyered.com, that goes something like this:

If you could press a button and instantly vaporize one sector of employment law, what would it be?

Walter, in an article on Reason.com about promoting job growth, picked age discrimination. I, for one, want to be on Jon Hyman‘s superhero team.

Jon picked the Fair Labor Standards Act.

Jon’s reason was that it is essentially actually impossible to be in full compliance with the hedge-maze of regulations set up under the FLSA. He’s right, of course, but like all superheroes, my reasons for doing away with our shared nemesis are my own.

I think the FLSA is one of the most outdated laws in the Federal Lexicon. It’s not surprising. By my count, the way Americans think of work has fundamentally shifted at least three times since I was born. The FLSA – a law whose sole purpose is to protect the American workforce – is almost 80 years old. That’s where all those byzantine regulations came from. Some really smart businessperson came up with a new way to interact with their employees1, and the FLSA people2 had to figure out what the FLSA said about whatever that novel idea was. So they jury rigged the old law to fit the new system of work – cramming workers into classifications that didn’t really fit.  Multiply that by every innovative workforce procedure for the past 80 years, and you can understand why employers feel so squeezed.

Now, we’ve got news articles and pundits galore telling us that the future is an independent workforce – full of freelancers and mobile offices and microdistributors – and we’re still going to try and use this 1930′s regulatory model? That is a crisis that needs heroes.

Now where did I leave that spandex?

1. you know, like, intra-office telephones [↩]
2. that means the DOL [↩]

The Walmart Wage & Hour Train Rolls On

News came yesterday that Walmart lost its appeal of a $187.6 Million verdict in a Pennsylvania wage & hour case originally tried back in 2006.  The suit alleged that 187,000 workers were denied their right to rest and lunch breaks under Pennsylvania state law. The case was notable because Walmart attempted to distance itself from its own documentation of time records for its PA employees, claiming that the timesheets were too faulty to be trusted.

The Plaintiffs argued that local managers were under ever-increasing pressure to cut costs, resulting in chronic understaffing that led some workers to work through their breaks, whether or not they were still on the clock. Walmart claimed the records that showed when employees punched in or out were too inaccurate to be used as legal evidence.

The Pennsylvania Superior Court apparently wasn’t thrilled with the argument, noting that the company’s own internal investigations had revealed illegal “off-the-clock” work. According to the Plaintiff’s Attorney’s press release, Walmart also tried to argue that it had been denied due process because the trial court refused to let it question each individual class member regarding their hours worked.

It wasn’t a total loss, though – the Court said that some of the plaintiff’s attorney’s fees were counted twice, and would have to be recalculated. That’s a drop in the bucket compared the the verdict and add-on penalties levied against the company. For a great breakdown of how the Pennsylvania Wage Payment and Collection Law turned a $49 Million verdict into $187 Million payout, see Phillip K. Miles’s Lawffice Space post here.

A Walmart spokesman said they are looking forward to further appeal.

All the while, the world is waiting with bated breath to see what the Supreme Court has to say about Dukes v. Wal-Mart, the biggest wage-and-hour class action ever1, which finally made its way to Washington. Though it is on the tip of every employment lawyer’s tongue, the question before SCOTUS doesn’t have that much to do with the wages or hours of Walmart employees, and everything to do with the nature and future of class actions in American jurisprudence.

The question before the Court is not whether Walmart violated any wage laws, but whether a class of this size – all women who worked for Walmart between 1998 and now – is really ever fair. Walmart is arguing that it is impossible for every women it’s employed for the past 13 years to have enough in common to be certified as a single class.

Oral arguments in that case are over (and seemed to go well for the retailer), and the decision is expected early this summer.

1. I think. Am I wrong about this? [↩]