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California Catastrophe

BY Katherine Boccaccio

Retail employers uttered a collective gasp when the California Supreme Court handed down its April 16, 2007, decision that could ultimately cost all employers millions of dollars. In Murphy v. Kenneth Cole Productions, Inc., the top court unanimously found that the “additional hour of pay” that employees may be awarded for missing meal breaks and rest breaks under the California Labor Code is subject to a three-year, rather than a one-year, statute of limitations, effectively tripling what an employer could be forced to pay.

Chain Store Age talked with California attorney Paula Weber, leader of the employment and labor group for San Francisco-based Pillsbury Winthrop Shaw Pittman, who discussed the potentially widespread ramifications of the recent ruling.

“In the Kenneth Cole decision,” said Weber, “the store manager [John Paul Murphy] had been misclassified as exempt from overtime and, because of that, Kenneth Cole understandably didn’t insist that he take the meal and rest breaks required only for non-exempt employees. So, when Murphy was deemed to have been misclassified, he not only brought a claim for overtime wages, but he also brought a claim for missed meal and rest breaks.”

In California, explained Weber, non-exempt employees are entitled to a 30-minute meal break after five hours of work; a 10-minute rest break must be offered after every four hours of work.

Training for the Future

Educating both retailers and prospective employees can be a powerful first step toward nurturing mutual understanding and avoiding future lawsuits. The National Retail Federation (NRF) has taken its 22nd such step, with the opening of its Center for Professional Development at Westfield Old Orchard shopping center in Skokie, Ill. Located in one of Chicago’s most diverse suburbs, the newest center, like its 21 predecessors, offers basic and customized service-skills training, skills assessments, staff certifications and English as a second language courses. Not only will the Skokie center help place Chicago candidates in careers with retailers such as Macy’s, Nordstrom, Starbucks, and Crate and Barrel, but it will perpetuate the NRF’s long-time objective to link retail employers with the public employment and training system.

Most significant, given today’s litigious climate, the NRF Skills Centers work to develop curriculum and career-advancement tools from best-practice employer models.

Since the first NRF Foundation Skills Center opened 10 years ago at the Mall & Court at King of Prussia near Philadelphia, more than 15,000 potential retail employees have found jobs through the Skills Centers, which operate in large shopping centers or as part of public-employment services.

“The fact that the California Supreme Court ruled that a three-year statute of limitations would apply, basically tripling what plaintiffs will recover, means that you’ll see even more of these cases being brought,” said Weber. And not just in California.

“This is very much a California rule,” she said. “And this state tends to be more restrictive to employers than most states.”

But, Weber added, just as the Wal-Mart discrimination suits elevated discrimination class actions overall, so too could the Kenneth Cole decision.

“Retailers around the country really do need to be very careful that they are in compliance with all the wage and hour laws—not just federal law, but the unique state laws,” she said.

Weber also mentioned another work-force management issue that will not raise any cheers among retailers: the higher propensity toward class-action suits, which has retailers tiptoeing through discipline, termination, and wage and hour issues. However, she noted, some other work-force trends demonstrate a growing understanding between employer and employee that can only be helpful in the long haul.

Increased consumer interest in health care has employees taking a more hands-on role in their own health-care choices and needs. On the employer side, Weber said, more attention is being paid to training and development and, more and more, human-resources (HR) activities such as recruitment are being outsourced to qualified third-party vendors. Increasingly agile HR solutions, from workflow technology to training and certification to compliance controls, are shoring up retailers’ soft spots.

“Retailers are monitoring more closely than ever before when employees are taking breaks and hours worked, and making sure they are keeping the proper records,” Weber added.

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Sears comps hurt by energy costs

BY CSA STAFF

HOFFMAN ESTATES, Ill. Sears Holdings today reported net income of $216 million, or $1.40 per diluted share, for the first quarter ended May 5, compared with net income of $180 million, or $1.14 per diluted share, for the first quarter ended April 29, 2006.

“In part, our domestic operating results reflect the impact of some of the same challenges being faced by our customers, such as rising energy costs and a slower housing market,” said Aylwin Lewis, Sears Holdings’ ceo and president. “However, as an organization, we need to overcome these factors by better controlling costs and developing innovative solutions that better meet our customers’ needs and allow us to generate a more reasonable level of profitability even in the face of such challenges.”

Domestic comparable-store sales declined 3.9% during the first quarter of fiscal 2007. Sears domestic comparable-store sales declined 3.4% for the quarter, while Kmart comparable-store sales declined 4.4%. We believe these declines reflect both increased competition and the impact of external factors such as rising energy costs, a slower housing market and poor weather conditions during the latter part of the first quarter of fiscal 2007. Kmart experienced lower transaction volumes across most merchandise categories, most notably within home goods, health and beauty products, and food and consumables. Similarly, Sears domestic recorded comparable-store sales declines across most merchandise categories and formats, with a notable decline in home appliance sales, which we believe reflects both a slower U.S. housing market and the impact of increased competition.

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Big Lots 1Q net sales up 3.4%

BY CSA STAFF

COLUMBUS, Ohio Big Lots today reported first quarter fiscal 2007 income from continuing operations of $29 million, or 26 cents per diluted share, compared to income from continuing operations of $14.5 million, or 13 cents per diluted share, in the first quarter of fiscal 2006. Including the impact of discontinued operations, first quarter fiscal 2007 net income totaled $28.8 million, or 26 cents per diluted share, compared to $13.7 million, or 12 cents per diluted share, in the prior year.

Net sales for the first quarter ended May 5, increased 3.4% to $1.13 billion, compared to $1.1 billion for the same period in fiscal 2006. Comparable-store sales for stores open at least two years at the beginning of the fiscal year increased 4.9% for the quarter.

For the second quarter 2007, the company expects income from continuing operations of 7 cents to 10 cents per share versus income from continuing operations of 4 cents per share last year. Comparable-store sales are expected to increase 2% to 4%, compared to a 5.2% comparable-store sales increase recorded last year.

For fiscal 2007, the company expects income from continuing operations of $1.25 to $1.30 per share versus income from continuing operations of $1.01 per share last year.

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