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Darden Restaurants Inc., the owner of Red Lobster and Olive Garden, disclosed Thursday that it has settled with a group of former employees who sought unpaid overtime wages and penalties and will pay up to 11 million dollars. Beginning in 2002, a total of five purported class action lawsuits were filed in Superior Courts of California (two each in Los Angeles County and Orange County, and one in Sacramento County) in which the plaintiffs allege that they and other current and former service managers, beverage and hospitality managers and culinary managers were improperly classified as exempt employees under California labor laws. According to its SEC filings, Darden has agreed to pay up to a maximum total of $11.0 million to settle all five cases. The settlement agreement has received final court approval and payment of the settlement proceeds is expected to occur before the end of fiscal 2007.

This is not Darden's first big wage/hour settlement in recent years. From a year ago:

More than 40,000 current and former hourly workers at California Red Lobster and Olive Garden restaurants will share $9.5 million as part of a settlement involving claims that they were prevented from taking breaks, and that they were required to purchase and maintain their own employee uniforms. Red Lobster workers from more than 40 locations in California who worked there from February 21, 1998 to the present will share $5.5 million, while Olive Garden employees who worked from March 24, 1999 to the present will share another $4 million.

Two food servers at the Brea Red Lobster restaurant filed the first class action complaint in Orange County Superior Court in February 2002, alleging that Red Lobster refused to allow breaks to its non-exempt workers throughout the State of California. The complaint was subsequently amended to include damages and restitution for Red Lobster's former policy of charging workers for uniforms, and for making the employees maintain their own uniforms. In March 2003, an Olive Garden employee filed a similar complaint, seeking certification of all GMRI workers, including both the Red Lobster and Olive Garden chains. In May 2004, while the first case was on appeal from an Orange County Superior Court ruling denying the defendant's motions for summary judgment and to compel arbitration, a third lawsuit was filed in Sacramento, California.

Under California Labor Code § 226.7 and Industrial Welfare Commission Wage Order 5, employees are entitled to a paid ten-minute break for every four hours of work, or major fraction thereof. Employees working at least 3½ hours are entitled to one paid break, and earn a second paid break after six hours. Furthermore, employees who work more than five hour shifts are entitled to a 30 minute break which need not be paid. Under California Labor Code § 450 and Industrial Welfare Commission Wage Order 5, employers are required to pay for the cost of purchasing and maintaining employee uniforms and may not require employees to purchase anything of value, including uniforms, from the company.

Source: California Wage/Hour Law

Wal-Mart Stores, Inc., has agreed to pay nearly $34 million in back wages and interest for calculating overtime incorrectly over a span of almost 5 years. The agreement with the Department of Labor covers 86,680 employees who worked for the company from February 1, 2002 to January 19, 2007. The department says that Wal-Mart brought the matter to its attention after an internal audit raised concerns regarding overtime calculations. Wal-Mart says it failed to include periodic bonuses and other earned income in determining some employees' regular rate of pay for overtime purposes. In addition, some overtime payments were based on a regular rate calculated for each two-week payroll period, when they should have been calculated weekly.LaborProfBlog makes two points regarding this story:

1. He says Wal-Mart deserves credit for self-reporting this error; but
2. It is very surprising that Wal-Mart's HR department allowed this to happen at all. This is not a complicated area of FLSA law.

While Wal-Mart does deserve some credit for self-reporting the issue, it is likely they did so because it was simply good business. By self-reporting and negotiating directly with the Labor Department, they were apparently able to cut a deal in which they are not required to pay any interest or penalties (including standard double damages) that they would most likely have had to pay had this been brought as a lawsuit against the company. It is also as yet unclear to me whether the Labor Department obtained all of the pay records at issue and calculated the wages owed themselves or whether they simply took Wal-Mart's word for what was owed.