Although the business closed prior to the pandemic, the pattern of events – the large-scale layoffs, the failure to pay wages owed, and the wage and hour lawsuits that ultimately resulted – may be what the future holds as the economic slowdown triggered by the pandemic wears on.
Bad news for bakery workers
Baked in the Sun, a wholesale bakery located in Vista, California closed on January 26, 2019, leaving 211 workers without jobs. The company allegedly failed to pay them for their last two weeks of work or any of their accrued vacation wages.
The bakery’s creditors took possession of all of the bakery’s assets except accounts receivable and sold the property to new owners. The Labor Commissioner’s Office became aware of the situation only after 70 of the workers filed unpaid wage claims. California law requires that workers must be paid first when a business closes and its assets are sold.
On January 25, 2021 the Labor Commissioner’s Office issued citations totaling $1,298,331 in wages and penalties against Baked in the Sun, New Vista Baking LLC and private equity firm HCAP Partners III, L.P. Directors and officers of Baked in the Sun were also named in the citations.
The citations include $216,045 in minimum and contract wages, $20,855 in overtime wages, $58,716 in vacation wages, $190,704 in liquidated damages and $800,981 in waiting time penalties. The Labor Commissioner’s Office has also filed for damages related to the transfer and sale of the business to new owners.
Two years that have passed since the bakery closed. The 189 workers included in the lawsuit still have not gotten paid for their last two weeks work or accrued vacation. In the meantime, however, much has changed for businesses and workers.
A harbinger of things to come?
Predicting the economic future is a risky business. Suffice it to say, though, after a year of sporadic lockdowns and pandemic-induced closures, the business outlook is generally grim. At the beginning of January, Steven Pearlstein of the Washington Post captured the moment:
“With covid-19 deaths heading toward 4,000 a day, overwhelming hospitals, don’t be surprised if much of the country will be forced to shut down for a month or two. That could mean a first quarter with negative output growth and a significant jump in the unemployment rate as more schools and businesses close, consumer spending falls and cash-strapped governments are forced to lay off employees and curtail services.”
In California, for example, the real rate of unemployment has been estimated to be close to 15 percent when those who dropped out of the labor force or were involuntarily working part-time are included. Overall, California had lost 1.5 million jobs in the year of pandemic and economic turmoil.
As Gerald Maatman, author of Seyfarth Shaw’s 2021 Workplace Class Action Litigation Report has noted, an increase in termination and unpaid wages lawsuits commonly follows an economic downturn that puts large swaths of people out of work. People tend not to bring a lawsuit while they are still working for an employer; there also tends to be some “lag time” between job loss and the commencement of a lawsuit.
It would be reasonable to suppose that a large number of wage and hour lawsuits are still in the litigation pipeline. The process of organizing a lawsuit against a failed business also takes considerable time. For the workers laid off from Baked in the Sun bakery, it took two years for the California Department of Industrial Relations to issue citations and file a lawsuit.
Light at the end of the tunnel
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Few, if any, workers look forward to the prospect of having to initiate a lawsuit in order to get paid as required by law. As they face continuing economic uncertainty, however, they may be encouraged to realize that the prospect for success in a class action unpaid wages lawsuit looks solid into the future.