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Distributor Faces Wage-Hour Lawsuit

C& S undercounted workers’ overtime hours by not including compensable time workers spent working off the clock before and after shifts, as well as during lunch and other breaks. To keep their eight-week hourly wages up, employees “ordinarily worked through their half-hour allotted lunch and dinner breaks as well as two 15-minute breaks without recording this as time worked.” This was meant to force the average hourly rate higher, the lawsuit says. This average hourly rate formed the basis for the plaintiffs’ and class’ eight-week average, the lawsuit alleges.

The lawsuit alleges supervisors encouraged this practice and even oversaw employees’ work during breaks.

C& S Response to Lawsuit
From a statement released by C& S in response to allegations: “The wage-and-hour class action lawsuit naming C& S Wholesale Grocers is without merit and C& S rejects the allegations in their entirety. It should be recognized that this lawsuit was commenced by four individuals one current employee and three former employees two of whom left the company in 2002 and one that left the company in 2004.

“It is simply the case that the C& S team structure does not in any way violate any law or regulation. C& S is very proud of its self-managed teams, which are the cornerstone of creating an empowered and engaged workforce. Industry analysts and academics alike have praised the C& S team concept.

“Beyond that, a case study by one of the nation’s premier business schools has taken a favorable position on the team concept in place at C& S. Unlike the plaintiffs, who desire to try this case through the press, C& S will instead vigorously defend this lawsuit through our court system. The company is confident that it will be completely vindicated on all counts.”

According to a Harvard Business School case study, C& S’ goal in implementing self-managed teams was to boost productivity, reduce costs, and improve quality so it could meet the demands of its fast-growing large-supermarket customer base.

The concept also increased employee accountability. Before implementing this process, the company had no way to track where or whether a mistake was made when a customer reported missing product.

Teams, however, were responsible for completing every step of an order selecting, loading, clerking and signing off as well as following up with the customer after shipment. Teams were self-selected, according to the case study, and paid bonuses for quality and received deductions for errors in shipments. In addition, the team’s performance as a whole would determine pay for each individual.

Lawsuit: As Filed

FLSA Primer: What Distributors Need to Know About Wage-Hour Laws

Employees sued C& S Wholesale Grocers, a $18 billion grocery distributor, at the start of April, alleging violation of federal and state wage-hour laws. The lawyers are seeking to classify the suit as class-action and have recruited potential plaintiffs throughout the country.

Employees want $750 million in unpaid wages and overtime under the federal Fair Labor Standards Act and state labor laws in 14 states where the company operates. The case applies to workers who have been employed by C& S since 2000. C& S denies the allegations.

The Company
C& S Wholesale Grocers Inc., based in New Hampshire, is the second-largest U.S. wholesale food distributor to grocery chains and large independent food stores throughout the U.S. The company projects 2006 sales to surpass $18 billion; C& S has recorded annual average growth of 19.6 percent since 1995. The wholesaler employs more than 20,000.

C& S has 50 facilities in 14 states and provides 53,000 food and nonfood items to 4,000 corporate customers, including Safeway, Giant Food Stores, SavMart/Foodmax, A& P Food Mart, Pathmark, and others. The company owns more than 50 warehouses, open 24 hours a day.

The lawsuit alleges C& S:

  • illegally chopped workers’ wages as punishment for mistakes on the job, safety concerns or absences;
  • failed to pay overtime and for time worked in excess of 10 hours;
  • failed to pay employees their agreed hourly rates; and
  • encouraged employees to work off-the-clock and through lunch without pay.

Court documents show many of the allegations stem from a pay system C& S implemented in 1988. The piece-rate system is incentive-based. According to the lawsuit, C& S told its employees it would pay them 10 cents per case picked from the warehouse. In the case of hi-lo lift operators, they would be paid $1 per pallet.

The lawsuit alleges C& S usually pays less than the going rate, “relying on so-called worker infractions’ to deduct earned wages. Defendant C& S knowingly breaks the law in all 14 states by decreasing the per-case rate as low as 7 or 8 cents and calling it a Disciplinary Rate,'” according to court documents. (State FLSA laws can differ on this point.) For time on the job they were not selecting, employees were told they would be paid their eight-week average piece-rate wage, according to the lawsuit.

C& S created teams of four to eight warehouse workers to fill customer orders. Upon filling an order, the employee working in shipping would record the number of items picked on a team summary sheet. At the end, the number of loads would be logged into the computer. Wrapping, stacking and stickering errors or lack of cleanliness were reasons per-piece rate could be cut, court documents say. The suit also alleges supervisors would punish every member of a team if just one member made a mistake.

The lawsuit alleges that when the employees (plaintiffs) finished picking for the day, they were not paid their eight-week average piece-rate. Instead, the suit says, C& S “arbitrarily paid a lower rate of $9 (or $8) per hour for the remaining hours worked during the shift.”

The lawsuit also alleges that C& S failed to pay its workers for the time it took to prepare for work (a half hour before shift starts) and to clean up after (about a half hour). (This has been the subject of several sticky lawsuits in the past several years, including a few that made it to the Supreme Court. See this story online for a link to a recent MDM legal article on the subject.)

The lawsuit alleges

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