Retailers Under Fire: Urban Outfitters Becomes Latest Chain to Settle Wage Dispute

In 2013, a group of current and former employees represented by Plaintiff David Berry, filed a class action complaint on behalf of themselves and approximately 11,850 current and former individuals who were hourly employees at Urban Outfitters and Free People retail stores in California. The Complaint alleged that Urban Outfitters and its subsidiary failed to pay its non-exempt employees the correct overtime pay. Specifically, the Complaint alleged that Urban Outfitters failed to include non-discretionary bonuses, service awards, and other remuneration in an employee’s regular rate calculation as required under California and Federal law. Instead, Urban Outfitters allegedly calculated overtime based on the employee’s hourly rate of pay and nothing more. 

The Complaint also made a number of additional allegations concerning Urban Outfitters’ violation of specific California labor laws: (1) that Urban Outfitters issued wage statements that did not comply with California labor law because the statements failed to include the inclusive pay periods, the legal name and address of the employer, and the applicable rates of pay; (2) that Urban Outfitters’ loss prevention policy required employees to clock-out and undergo mandatory off-the-clock security inspections before leaving the premises for meal periods or rest breaks, or before leaving at the end of a shift, resulting in unpaid hours worked; (3) that the Company did not provide non-exempt employees with a timely first meal break for the first 5 hours worked or a second meal break for 10 hours worked; (4) that employees did not receive sufficient rest breaks; (5) that Urban Outfitters maintained and implemented a “use it or lose it” vacation policy and treated all unused vest vacation as forfeited at termination, thus failing to pay former employees all vacation pay owed; and (6) that the Company failed to reimburse employees for all business expenses that were necessarily incurred as a result of their employment by not paying for mileage expenses that were consistently incurred.

After participating in a third court-ordered settlement conference, Urban Outfitters and the Plaintiffs settled the lawsuit for $5,000,000. Of this amount, $1,716,667 will be set aside for attorneys’ fees and costs, $75,000 for the class action settlement administrator, $37,5000 for the California Labor and Workforce Development Agency, and $10,000-$15,000 for the Class Representatives. The remainder ($3,111,833) will go to the class fund where members of the class can file for awards. The class is composed of all persons who are or were employed in non-exempt positions at Urban Outfitters’ retail stores in California anytime from May 1, 2009 and Free People stores from October 29, 2009, both through the date on which the Court approves the Settlement Agreement.  

Urban Outfitters is not the first retailer to run into trouble under California labor laws. In October 2015, lawsuits were filed against BCBG Max Azria alleging the retailer tells employees to consider on-call shifts as guaranteed work but frequently only gives them unreasonably short notice that they are not required for that shift. The lawsuit alleges that sometimes the on-call shifts are scheduled after a regular shift and others on days when employees are not regularly scheduled in violation of labor laws. Similarly, a lawsuit against Forever 21 alleges that the clothing retailer does not pay its employees for reporting time even when employees report for work and are either sent home or work less than half the scheduled day’s work. The lawsuit alleges that the on-call shifts at Forever 21 have designated beginning and quitting times and are the same as regular shifts but are classified differently to avoid paying employees. These are significant issues because under California law, non-exempt employees must be paid for reporting time when they report to work but are either sent home or work less than half the scheduled day’s work. California labor law states that for each workday an employee is required to report to work but is either not put to work or is given less than half a scheduled day’s work, the employee must be paid for half the usual or scheduled day’s work (no less than two hours and no more than four hours).

The Urban Outfitters lawsuit and settlement is a reminder to employers about the importance of understanding the intricacies of wage and hour laws at the federal and state level.