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.
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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.”
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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.