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A federal judge in Northern California granted final approval to a $12 million settlement in a wage and hour class action against Rite Aid. The company operates retail drug stores throughout the United States, including approximately 544 stores in California.

California Rite Aid employees Kristal Nucci, Kelly Shaw and Ana Goswick filed a putative class action lawsuit against Rite Aid and its subsidiary, Thrifty Payless Inc., in 2019, claiming that the companies failed to reimburse them for navy blue shirts and khakit pants employees were required to wear.

The employees alleged that Rite Aid’s “Team Colors” policy, which required them to buy and wear navy blue tops and khaki pants to work, qualified as a uniform and that Rite Aid violated state wage law by failing to reimburse them for these expenses.

The claim is based upon California Labor Code Section 2802 which states: “An employer shall indemnify (i.e. reimburse) his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.”

Rite Aid responded, saying its store-issued vests were also an option, therefore it was a worker’s personal choice if they bought a uniform. It’s written company policy allows for what the parties call the “blue vest” alternative. The written company policy notes that “[i]n the event an associate is unable to report to work in team colors, Rite Aid will make available a company issued vest, which he/she will be required to wear.”

However, the workers argued it did not matter if a store-issued vest was an option because, in 71.5 percent of the stores, there were no blue vests available.

The complaint also included allegations of failure to pay minimum wages and claims under the Private Attorneys General Act, a California law that allows workers to sue on behalf of the state and other workers for labor law violations. Plaintiffs argue that “by requiring members of the putative class to purchase their own uniforms, Rite Aid effectively pushes their wages below the legal minimum.”

Plaintiffs’ claims for inaccurate wage statements and waiting time penalties, are based in part “on the theory that the amounts Rite Aid failed to reimburse for uniform expenses are themselves wages which, for example, are owed at termination for employment under Labor Code §§ 201 and 202.”

The class, certified in June 2020, includes about 25,000 nonexempt Rite Aid employees, excluding pharmacists, pharmacy interns and asset protection agents, who worked at any California store from March 19, 2015, through Feb. 3, 2022, the date of preliminary settlement approval.

The workers filed an unopposed motion for preliminary approval of the settlement in October, just a month before the case was set for trial, after four mediation sessions between 2019 and 2021.The settlement provides an average reimbursement of $600 gross and $365 net to each class member, which includes the cost of the uniform plus a compromised amount for potential penalties.

Another take away for employers is that employees who are required or expected to use their personal property for their work, including computers, cell phones, and tools, may also be able to recoup these expenses from their employer.

Note that California law in this area differs from federal law. The Fair Labor Standards Act (FLSA) does not require employers to reimburse employees for cell phone use.

However, there is a stipulation with the FLSA which says an employee’s earnings can’t be below the minimum wage. This means that an employer must reimburse business expenses such as the use of a cell phone if the employee’s wage falls below minimum wage after paying for the work-related expenses, according to the Society for Human Resource Management (SHRM).