Iliadis v. Wal-Mart Stores, Inc.

• Court: New Jersey Supreme Court
• Writing for the Court: Zazzali
• Citation: Iliadis v. Wal-Mart Stores, Inc., 922 A.2d 710, 191 N.J. 88 (N.J. 2007)
• Decision Date: 31 May 2007
• Docket Number: A-69 September Term 2006
• Parties: Michelle ILIADIS and Angela Nelson-Croxton, individually on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware Corporation, Sam's Club, an operating segment of Wal-Mart, Inc., Derrick Zimmer and Glen Spencer, Defendants-Respondents, and and presently unidentified John Does 1 through 10, Defendants.

922 A.2d 710

191 N.J. 88

Michelle ILIADIS and Angela Nelson-Croxton, individually on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware Corporation, Sam's Club, an operating segment of Wal-Mart, Inc., Derrick Zimmer and Glen Spencer, Defendants-Respondents, and and presently unidentified John Does 1 through 10, Defendants.

A-69 September Term 2006

Supreme Court of New Jersey.

Argued April 5, 2007.

Decided May 31, 2007.

Judith L. Spanier, a member of the New York bar, New York City, argued the cause for appellants (Hanlon & Niemann, attorneys, Freehold; Ms. Spanier and Christopher J. Hanlon, Freehold, of counsel and on the briefs).

Michael K. Furey, argued the cause for respondents (Riker, Danzig, Scherer, Hyland & Perretti, attorneys, Morristown; Mr. Furey and Sandi F. Dubin, New York City, on the briefs).

Mark Hanna, Clifton, submitted a brief on behalf of amicus curiae United Food and Commercial Workers Union District Council of New York and Northern New Jersey (Davis, Cowell & Bowe, attorneys).

David R. Kott, Newark, submitted a brief on behalf of amicus curiae New Jersey Business & Industry Association (McCarter & English, attorneys; Mr. Kott, Adam N. Saravay and Edward J. Fanning, Jr., of counsel and on the brief).

Chief Justice ZAZZALI delivered the opinion of the Court.

The named plaintiffs, former hourly employees of defendant Wal-Mart Stores, Inc., allege in their class-action complaint that Wal-Mart, through centralized control over business operations, denied them earned rest and meal breaks and forced them to work "off-the-clock." In seeking to represent a state-wide class of similarly-situated Wal-Mart hourly employees, plaintiffs claim that defendant engaged in widespread conduct in contravention of published corporate policy, statutory law, and administrative regulations. Citing concerns about the manageability of the litigation, the trial court denied class certification to the proposed class of approximately 72,000 current and former Wal-Mart employees. The Appellate Division affirmed.

In this appeal, we must determine whether the putative class of current and former employees may be certified pursuant to Rule 4:32-1. We find that common questions of law and fact predominate over individualized questions and that the class-action device is superior to other available methods of adjudicating this dispute. We therefore reverse and remand for the entry of an order certifying the class. By allowing this manageable litigation to proceed, we permit a class of hourly, retail employees to unite and — on an equal footing with their adversary — to seek relief for their "small claims" that arise from defendant's alleged violation of contractual promises, statutory enactments, and regulatory mandates.

I.

A.

Plaintiffs ask us to certify a class of "all current and former hourly employees of Wal-Mart (including Wal-Mart Stores, Supercenters and Sam's Clubs) in the State of New Jersey during the period May 30, 1996 to the present," (formatting altered), a class consisting of approximately 72,000 workers. When deciding whether to certify a class, we "accord[ ] plaintiffs every favorable view" of the complaint and record. Riley v. New Rapids Carpet Ctr., 61 N.J. 218, 223, 294 A.2d 7 (1972); see also Delgozzo v. Kenny, 266 N.J.Super. 169, 181, 628 A.2d 1080 (App.Div.1993) (accepting as true all substantive allegations of party seeking certification).

Plaintiffs allege that Wal-Mart, in an effort to reduce labor costs and increase profits, systematically declined to honor its contractual promises concerning rest and meal breaks. Plaintiffs also maintain that Wal-Mart failed to compensate its employees for all time worked by forcing employees to work through meal breaks, by locking employees in retail stores after they had clocked out, and by coercing employees to work off-the-clock. Premised on those allegations, the putative class advances nine causes of action: (1) breach of implied-in-fact contract regarding missed rest and meal breaks; (2) breach of implied-in-fact contract regarding off-the-clock work; (3) breach of unilateral contract regarding missed rest and meal breaks; (4) breach of unilateral contract regarding off-the-clock work; (5) breach of the covenant of good faith and fair dealing; (6) violation of the New Jersey State Wage and Hour Law, N.J.S.A. 34:11-56a to -56a30 (requiring overtime pay); (7) violation of N.J.A.C. 12:56.5.2 (mandating compensation for all hours worked); (8) entitlement to restitution; and (9) unjust enrichment.

Defendant operates forty-four Wal-Mart stores, one Wal-Mart Supercenter, and nine Sam's Clubs in New Jersey. Wal-Mart, 2007 Annual Report 63 available at http://walmartstores.com/Files/ 2007_annual_report.pdf [hereinafter Annual Report]. Management within those stores is multi-layered, with numerous managers supervising hourly employees who are categorized in approximately eighty-five different Wal-Mart job classifications and one hundred Sam's Club job classifications.

A corporate-wide policy governing rest and meal breaks — Wal-Mart Corporate Policy PD-07 — applies uniformly to all Wal-Mart hourly employees. Pursuant to that policy, employees are entitled to paid rest periods based on the number of consecutive hours in their assigned shift. A shift of three to six hours merits one uninterrupted, fifteen-minute paid break, and a shift exceeding six hours earns two such breaks. Each hourly employee's immediate supervisor is responsible for scheduling rest breaks.

Corporate Policy PD-07 also governs meal breaks. That policy entitles hourly employees to a supervisor-scheduled unpaid meal break of thirty minutes for every shift in excess of six hours. If a rest or meal break is interrupted by work, in addition to providing a substitute break, Wal-Mart policy requires the company to compensate the affected employee for the time worked. Failure to comply with the directives of Corporate Policy PD-07 subjects both supervisors and employees to discipline. In fact, a former President and Chief Executive Officer of the Wal-Mart Stores Division referred to Corporate Policy PD-07 as "the LAW," stating that its mandates are "NOT optional."

Wal-Mart policy also requires accurate payroll records. "No Wal-Mart Associate should perform work for the Company without compensation," and failure to adhere to that rule may warrant discipline. According to its Associate Handbook, Wal-Mart's "expectation is very clear":

Always clock in before beginning your work day and at other appropriate times . . . Your hard work is appreciated, and we want to pay you for this work. Remember, working off-the-clock is not only against Wal-Mart policy — it's against the law. Always clock in when you are working — Always! There are no exceptions.

Nevertheless, if an employee works off-the-clock, Wal-Mart has established a protocol to ensure appropriate compensation, allowing employees to submit documentation to correct discrepancies.

The foregoing policies are widely disseminated and communicated to employees through varied media. For example, the policies are explained to new employees at their orientations and reinforced in an Associate Handbook. However, that handbook includes a disclaimer, expressly stating that it "is not a contract."

Plaintiffs contend that Wal-Mart systematically ignores and disregards those written policies. Wal-Mart, it is claimed, provides financial incentives to store managers to increase store profits by lowering store expenses. This approach allegedly has produced a work environment where Wal-Mart regularly contravenes uniformly-declared policy, as well as statutory and regulatory law. According to plaintiffs, that scheme and defendant's "gross[ ] understaffing" of its retail stores has made off-the-clock work "essentially mandatory," as evidenced by corporate e-mail encouraging store managers to "get volunteers" to "cut hours."

In addition to obtaining certifications from current and former employees supporting their respective contentions, both parties retained experts to substantiate their positions. Plaintiffs first offered the report of L. Scott Baggett, Ph.D., a consulting statistician, who analyzed 31,466 shifts from seven New Jersey Wal-Mart stores. Baggett found a "statistically significant" deficiency in the quantity and duration of earned breaks. Per pay period, Baggett noted that ninety-three percent of employees suffered a shortfall in the length of their earned breaks and eighty-five percent of employees experienced a deficiency in the number of earned rest and meal breaks. Baggett then supplemented his report, finding that nearly sixty-three percent of employees in the sample experienced at least five missed or shortened breaks per pay period. Additionally, Baggett estimated that the members of the proposed class suffered a deficiency of 1.3 million hours in earned rest periods since 1996. In a word, "[a]ssociates did not receive the rest break time nor the meal time they earned."

Baggett also discovered a practice of shift editing by management. Specifically, when an employee failed to punch out at the end of a shift, the employee was credited with only a one-minute-long shift, regardless of the employee's actual time worked. Baggett recorded 250 management-edited one-minute shifts in his sample, leading him to observe that "[a] disproportionately large number of shifts are edited by Wal-Mart management such that pay for hours worked is minimized."

Baggett's report is consistent, in part, with the July 2000 findings of an internal, nation-wide Wal-Mart audit. Conducted over a week-long period, that audit of 127 Wal-Mart stores, including at least one New Jersey store, was distributed to senior officials including regional vice presidents. The internal report concluded that "[s]tores were not in compliance with company and state regulations concerning the allotment of...