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Petsmart Settles California Class Action Alleging Unlawful Payment Via Paycards That Cause Employees to Incur Use Fees

The federal Fair Labor Standards Act (FLSA) and various state laws exist to make sure employers don’t take advantage of their workers. These laws regulate things like minimum wage, overtime, and how and when employees are to be paid. For example, the California Labor Code, Section 212(a), states that wages are “negotiable and payable in cash, on demand, without discount, at some established place of business in the state.”

Instead of abiding by the above restriction, PetSmart allegedly paid its employees their severance pay in the form of a paycard, which is similar to a prepaid ATM card. Cassandra Pace, a former PetSmart groomer who used to work at one of their California locations, alleges using these paycards to pay employees constituted a violation of the California Labor Code. The cards allegedly charge various fees when used, which meant the employees were deprived of some of the wages they were owed.

Pace filed a wage and hour class action lawsuit against PetSmart to recover these lost wages. She is representing a class of 1,100 former employees of PetSmart, all of whom received severance pay in the form of one of these paycards.

The California Labor Code, Section 213, does allow for payment of wages in the form of paycards, but only if the employer receives the worker’s authorization to do so. Pace alleges PetSmart never received any such authorization from its employees. Instead, workers were allegedly made to choose between direct deposit or paper check to receive their regular paychecks. Neither of these options allegedly included paycards and PetSmart employees allegedly never provided any sort of written consent to receive payment in the form of these cards. Petsmart denied the claims.

PetSmart has offered to settle the lawsuit for $1 million and the class of plaintiffs has agreed. The court still needs to approve the settlement and make sure it is fair to both parties before PetSmart can start issuing checks to class members. Once the settlement is finalized by the court, approximately $570,000 will be distributed among the class members to compensate them for the wages they lost in paycard fees. The rest of the settlement will go to pay for attorneys’ fees and costs. Assuming none of the potential class members choose to opt out of the class, each class member will receive approximately $515.

Defendants and plaintiffs often agree to settle class action lawsuits because it is faster and easier than battling the case in court. Large class action lawsuits can easily drag on for years, piling up higher and higher attorneys’ fees and legal costs for both sides. By agreeing to settle the dispute out of court, both sides avoid the risk that inherently comes with fighting a legal battle. Better for defendants to pay up now than risk the possibility of facing a higher fine if the court rules in favor of the plaintiffs.

It is also common for defendants to refuse to admit they did anything illegal as part of a settlement agreement. Such is the case with PetSmart, which insists it acted within the bounds of the federal FLSA.The Chicago overtime lawyers at the Chicago Overtime Law Center are investigating unpaid overtime claims against large retail chains such as Petsmart, Officemax, Staples, Smart & Final, Apple, Walgreen’s, CVS, Urban Outfitters, GAP, Abercrombie & Fitch, Limited, Forever 21, Macy’s, Target, JC Penney’s, Lowes, Marshalls, TJ Max, Victoria’s Secret, Nieman Marcus, Saks Fifth Avenue, Best Buy, Home Depot, Apple, Best Buy, Sears, K Mart, J.C Penney, Walmart, Costco and other retail chains for misclassifying employees as managers, erasing or altering time sheets or time records, pressuring workers not to report or record overtime, failing to pay for time spent on security checks, and otherwise failing to pay workers for overtime and other wages. If you are the victim this practice call us at (312) 869-4095 or contact us online.