Burberry has reached a $2.54 million settlement with workers in New York who claimed the luxury retailer deprived them of overtime wages.
The class action lawsuit filed in federal court in the Southern District of New York in December 2015 reached a resolution this week that, after attorney fees were limited to one-third of the settlement award, could amount to about a $2,500 payout for each of the 643 workers in the class.
According to lawyers who deal with employment matters, the case, Payano v. Burberry Limited, contains some important lessons for in-house counsel about issues such as litigating versus settling and keeping tabs on employees.
In the 24-page complaint, Burberry workers claimed they routinely had to work off the clock to complete duties before and after their shifts. The lawsuit also alleges they often had to work through their lunch breaks, in violation of the Fair Labor Standards Act and New York Labor Law.
"We are pleased with the settlement," said David Harrison, a partner with Harrison, Harrison & Associates, one of the firms representing the plaintiffs, in an email. "We think it is a very fair result for the class."
Maimon Kirschenbaum, a partner at Joseph & Kirschenbaum, another firm representing the employees, added in an email, "We are glad that Burberry and their counsel resolved this in a manner that puts real money into the pockets of Burberry's employees."
Burberry did not respond to requests for comment but a company spokeswoman told The Fashion Law blog, Burberry "takes the treatment of its employees very seriously and we are committed to complying with all required employment regulations and guidelines, everywhere we operate."
On its face, the case could be considered "run of the mill," as Justin Swartz, a partner at Outten & Golden, put it, because these types of suits occur often in many industries, with retailers frequently finding themselves as defendants. But there is still much legal departments can learn from the situation, he said.
Swartz, who is not involved in the case, said the reason employers continue to see these types of suits is because "it always makes economic sense for a company to cheat its workers." He explained that from a "dollars and cents" perspective, "It's always more profitable for a company to cheat. There's not a 100 percent chance they'll get caught. If they do, there's not a 100 percent chance the case will reach a verdict."
Even in the case of a settlement, such as with Burberry, "companies come out ahead," according to Swartz. "That's why these companies don't stop," he said.
Many in-house lawyers, Swartz said, want to comply with wage-and-hour laws, but "the business side doesn't always listen to the legal department."
For that reason, he recommends that in-house lawyers try their best to "make sure that businesspeople are evaluated not only by profits and losses but by employee satisfaction and compliance with employment laws."
Swartz also said that lawyers need to consider settling more cases before they go to court. One reason he thinks in-house lawyers may fail to consider the long term as much as they need to is because "sometimes you have in-house lawyers who think: It's better to pay $100,000 in legal fees now for outside counsel than $3 million later [in settlement costs] if I'm not going to be here in two years."
"Have a long-term outlook," Swartz said. "It never makes financial sense to refuse to engage in settlement negotiations."
Jessica Wilson, an attorney at FisherBroyles, said that to help avoid a lawsuit, in-house counsel need to do as much as they can to break down the walls between the corporate executives and the employees on the sales floor. They have to find ways to communicate in order to reach the employees working in their stores. "I don't expect this was something where the C-suite executives said: 'Don't pay them for their hours,'" she explained. "It's usually just lower-level managers not understanding the consequences."
Wilson, who is not involved in the lawsuit, thinks in-house lawyers should focus on training and communication, and try to audit their stores as much as possible. "Depending on the industry and the size, I'd suggest walking the store floor and seeing what's actually going on," she said, acknowledging that "in-house counsel are busy." If they don't try to engage lower-level workers, though, the issue "won't hit their desk" until a lawsuit is filed, she noted.
In the Burberry lawsuit, workers claim much of the recording of hours worked was done through handwritten reporting. Wilson said companies that have not already adopted electronic time-tracking systems should. "What might seem like 30 minutes here and there can really add up," she said.
Contact Stephanie Forshee at email@example.com.