Former Employee Suing Michael Kors for Labor Abuses

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Pamela Thomas-Byass alleges the retailer did not properly pay her overtime or give her legally required meal breaks while she worked for them, between 2012 and 2014. “It’s cheaper to get sued than pay all of their employees proper overtime,” says the former employee’s lawyer.

A former Michael Kors employee has filed a potential class-action lawsuit against the apparel retailer, alleging the company did not calculate overtime properly or afford employees proper meal breaks.

In the lawsuit, former Michael Kors employee Pamela Thomas-Byass, who worked for Michael Kors in a Macy’s department store between 2012 and 2014, alleges that she, and potentially other employees, were not properly compensated for overtime or given legally required meal breaks.

New York-based Michael Kors sells clothes, bags and other accessories through retail stores and other distribution channels.

Class-action suits are common in the retail industry, where the shareholders’ bottom line comes first, says Nicholas De Blouw, an attorney at Blumenthal Nordrehaug & Bhowmik, the San Diego law firm that represents Thomas-Byass in the Michael Kors suit.

This also isn’t the first time a retailer has been sued for this kind of thing—Blumenthal Nordrehaug has worked on cases against all kinds of retailers, including Forever 21, Walgreens, Lorna Jane and Oakley, De Blouw says.

“It’s cheaper to get sued than pay all of their employees proper overtime,” he says.

Though according to De Blouw, Blumenthal Nordrehaug hasn’t sued Michael Kors before, the firm, which specializes in employment law, cyclically finds itself suing the same retailers every four years or so and filing between 50 and 60 new lawsuits per year.

“Pick any retailer focused on apparel and it’s likely they have received a lawsuit like this,” says Andrew Livingston, an employment lawyer in San Francisco with Orrick Herrington & Sutcliffe LLP who is not involved in Michael Kors litigation.

The suit suggests Michael Kors could pay up to $5 million in damages, and up to $75,000 to Thomas-Byass individually. Michael Kors does not comment on pending litigation, according to Communications Director Kate Bartle.

Under California law, companies have to give employees a non-interrupted, 30-minute meal break during the first five hours that they are at work. If an employee is delayed even one minute late (after he or she had already worked five hours) to a meal break, the employer is supposed to grant them one hour of pay, but if the business doesn’t give the employee that money, “then they’ve broken the law,” De Blouw says.

Specifically, the suit charges Michael Kors with unfair competition, failure to pay overtime compensation, failure to provide accurate itemized statements, failure to reimburse employees for required expenses and failure to provide wages when due, according to court papers.

“They are not calculating overtime correctly,” De Blouw says.

Thomas-Byass also accuses her former employer of failing to reimburse employees for buying brand merchandise. “In the course of their employment, plaintiff and other California class members as a business expense, were required by defendant to purchase defendant’s clothing and other accessories as a result of and in furtherance of their job duties as employees,” the lawsuit states.

The suit also alleges unfair competition—something common in class-action cases, saying that to compete against other apparel companies Michael Kors cut labor costs by placing the labor burden on fewer employees.

“There is the benefit of increasing possible damages,” Livingston says. As far as the competition allegations go, in California, they could allow plaintiffs to claim an extra year of damages.

Here’s how it works: generally, a plaintiff in a suit like this could collect damages going back three years—but if a suit pleads unfair competition, he or she may get an extra year of damages to collect, according to Livingston.

Michael Kors says it faces intense competition, not only in terms of product, but also for manufacturers, importers and distributors, according to the company’s latest annual filing with the U.S. Securities and Exchange Commission, dated May 28.

“Competition, along with such other factors as consolidation and changes in consumer spending patterns, could also result in significant pricing pressure. These factors may cause us to reduce our sales prices to our wholesale customers and retail consumers, which could cause our gross margins to decline if we are unable to appropriately manage inventory levels and/or otherwise offset price reductions with comparable reductions in our operating costs,” Michael Kors says in the filing.

Opening new retail stores and shop-in-shops in department stores is part of the brand’s growth strategy, the company says in the filing. Michael Kors has grown considerably in recent years, since the December 2011 initial public offering. In the nine months before Dec. 28, the brand opened up 114 retail stores, including concessions, according to the filing. Michael Kors expects to shell out $118 million in capital expenditures during the rest of fiscal 2015, which would be used for retail store openings, among other things, according to the SEC filing.

“Our continued growth could strain our existing resources, and we could experience operating difficulties, including the availability of desirable locations and the negotiation of acceptable lease terms, difficulties in hiring, training and managing an increasing number of employees, difficulties in obtaining sufficient raw materials and manufacturing capacity to produce our products and delays in production and shipments,” the company says in the SEC filing.

In July, analysts raised some concerns about the company’s discounts, which they said had increased from previous seasons.

In Thomas-Byass’ lawsuit, filed on Dec. 23, she also alleges Michael Kors misclassified her as an exempt employee, meaning she would have been salaried and not necessarily afforded the meal breaks and overtime pay of other workers. Blumenthal Nordrehaug plans to file an amendment to the suit because Thomas-Byass was not classified incorrectly, according to De Blouw. The suit was filed in the San Bernardino County Superior Court for the State of California, and is now pending in the U.S. District Court for the Central District of California. A scheduling conference is set for April 20, with Judge Jesus Bernal, the court docket shows.

Thomas-Byass worked as a shop manager for Michael Kors from August 2012, to June 2014. During the time she worked in a Montclair, California-based Macy’s, Thomas-Byass earned $16.82 per hour to start, which increased to $17.29 per hour on June 1, 2013, according to a declaration filed with the court by Michael Kors vice president and associate general counsel Krista McDonough.

De Blouw declined to discuss the terms on which Thomas-Byass left the job.

This isn’t the first time Michael Kors has been sued. In July, the company was hit with a consumer-fraud suit in New York alleging discount prices offered at outlet stores were based on suggested retail prices that never existed, according to an article.

The company denied many of the allegations in that suit, court documents show, and asked for the case to be dismissed.

That case in ongoing.

The Michael Kors case comes as the fashion industry faces continued scrutiny over the pay of interns. Brands including Lacoste, House of Z, Burberry, Marc Jacobs, Oscar de la Renta, Calvin Klein, Gucci and Kenneth Cole have been hit with lawsuits in recent years from former interns that allege they were not paid properly, according to a blog post by employment lawyers Pat Gilette, Tracy Scheidtmann and Lindsay Nichols, who also work for Orrick.

The way a class-action suit like Thomas-Byass’ begins is that someone thinks: “I have suffered this wage-hour violation, and believe there are others like me,” Livingston says.

But before the lawsuit that person files can really count as a class action, it needs to be approved as such by a court, which can take anywhere from a few months to a few years. That process, called the class certification process, is where a lot of the time is spent during these types of cases. “A lot of the litigation is focused on that part, says Livingston.

If the court doesn’t approve a suit, the case can move forward, but on an individual basis.

“If the motion is granted then you’re dealing with a true class action … there could be large amounts of potential liability facing the company,” Livingston says.

In her suit, Thomas-Byass is asking for a jury trial, but often class-action lawsuits settle outside of court because the trial process is so expensive.

Because of the lawsuit’s infancy, notices haven’t yet been sent out to those who may want to join. “We always welcome class members to come forward and join the case,” says De Blouw.

April 14, 2015. NOTE: When speaking with Glammonitor, De Blouw says he was not referring specifically to Michael Kors, but more broadly to other companies in California.