The Exit Inspection, the Retreat of Toys”R”Us, and a Farewell to Sticky Myths

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Security Footage Sinks Employee Lawsuit Targeting Bag Checks

By Garett Seivold

Nike has prevailed in a class-action lawsuit filed by hourly retail workers demanding that the company pay them for the time they spent waiting for loss prevention inspections after clocking out and before leaving stores.

According to Seyfarth Shaw LLP, Nike’s attorneys in Rodriguez v. Nike Retail Services, the court decision was influenced by the retailer’s time and motion study that showed associates spent an average of 18.5 seconds in off-the-clock employee bag checks—and that 60.5 percent of all exits required zero wait time. US District Judge Beth Freeman said Nike store employee Isaac Rodriguez didn’t submit evidence contradicting the Nike Retail Services study, which was based on 700 hours of security footage.

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That length of wait is too trivial and difficult to capture to require payment, the judge suggested. “Evaluating Nike’s evidence under the de minimis defense, and recognizing that daily periods of up to ten minutes have been found to be de minimis, Judge Freeman ruled that the workers hadn’t shown that their off-the-clock exit time was close to meeting that threshold,” according to Nike’s attorneys.

“As the court found, brief exit inspections are a modern business reality that most retailers, like Nike, use for the legitimate reason of reducing theft,” Nike spokesperson Greg Rossiter told Law360.

Although Nike employees lost their claim, the California Supreme Court is reviewing the de minimis doctrine in a separate legal case against Starbucks. Troester v. Starbucks claims the company violated the California Labor Code by failing to pay an employee for the brief time he spent closing up the store after he clocked out at the conclusion of certain shifts. In granting Nike summary judgment, the judge said she was compelled to apply existing law to the case and would not “predict how the California Supreme Court will rule.”

“For the moment, this ruling is good news for employers who can put away their stop watches when small increments of off-the-clock time are irregular and difficult to record,” according to Seyfarth Shaw. “But keep your eye on the ball because the California Supreme Court will be making the final call on the de minimis doctrine and whether or how it applies in the state.”

In a similar case, DICK’S Sporting Goods (DSG) has asked the Eastern District of California to stay a workers’ suit while waiting on the California Supreme Court to rule on the Starbucks case and a related case against Apple. DICK’S workers countered that the court should not stay their class action, alleging that their claim is different than the two other wage suits before the state’s highest court. In addition to claiming they should be paid for time spent in store security checks, which also involves visual inspections of workers and the physical inspection of personal belongings other than bags, DSG workers are asking to be reimbursed for clothing-related expenses (Greer et al. v. DICK’S Sporting Goods).

Employees have raised the matter of unpaid time during security checks in several venues, with courts typically siding with employers. In 2015, for example, a California judge denied a plaintiff’s request for class certification in a lawsuit accusing Nordstrom of failing to pay its workers for time spent waiting in line and undergoing bag checks during their work shifts. Although the loss prevention checks were alleged to be mandatory, the employee admitted in her deposition that employee bag checks could be avoided if employees refrained from bringing bags into the workplace.

Employees have also lost cases involving longer wait times. For example, employees of a nuclear power station sued under the Fair Labor Standards Act (FLSA) for compensation for the ten to thirty minutes per day they spent passing through multiple layers of security, which included waiting in line for badge inspections, random vehicle checks, passing through radiation detectors and x-ray machines, and waiting to use the biometric handreader.

While the appeals court noted “some force” to the workers’ claim that security is becoming increasingly invasive, layered, and time-consuming, it ruled that passing through security isn’t covered by the FLSA because it’s not a “principal activity” of the job, noting that facility visitors—not just workers—were required to go through the same security measures (Gorman Jr. et al. v. The Consolidated Edison Corporation).

What Happened to Toys”R”Us?

By Bill Turner, LPC

September 2017: Toys”R”Us declares bankruptcy.

Early 2018: Toys”R”Us announces the closure of 180 stores.

February 2018: Toys”R”Us announces the closure of 200 more stores.

March 2018: Speculation abounds that Toys”R”Us will close all US stores and liquidate.

March 14, 2018: Toys”R”Us announces that it will close or sell all 800 of its US stores.

I would bet that everyone reading this article has either shopped at Toys”R”Us or received a gift from Toys”R”Us. Founded in 1957 and morphing into its current format in about 1969, Toys”R”Us became the first mega “category killer” toy store. Most kids in the seventies, eighties, and nineties begged their parents to take them to Toys”R”Us. I know; I was one of those parents. The Toys”R”Us dominance of the toy market made small toy stores and hobby shops almost obsolete. Even KB Toys couldn’t keep up.

So what happened? What went wrong? Some say bad planning. Some say bad luck. Probably both, but the real beginning of the end was the leveraged buy out of Toys”R”Us in 2005 by Bain Capital and KKR & Co. That leveraged buyout resulted in a staggering debt load of $6.6 billion for the company. This resulted in management distraction and put Toys”R”Us in a constant refinancing mode.

The tremendous growth in competition from Amazon and Walmart made things worse. With much deeper pockets, both retail giants began heavy discounting of toy prices to get parents to switch loyalties.

Then add kids’ changing tastes to the mix. Toys”R”Us said “kids never want to grow up.” That may be partly true, but online video gaming and phone apps have taken a huge chunk out of the physical toy market. The financial crisis of 2008 and 2009 didn’t help matters.

The irony is that Toys”R”Us still sells millions and millions of dollars’ worth of toys, and toy sales rose 5 percent last year. But continued aggressive competition and the Toys”R”Us financial difficulties have taken their toll. Toys”R”Us continuing as a going concern is in doubt by most of the financial community. But there’s still hope. As of this writing, Toys”R”Us has officially announced the company’s liquidation, but it’s working on a possible plan to keep about 200 of its most profitable US stores open, according to CNBC. Can they make it? Maybe. Plans continue to evolve, and as of now, it’s unclear when exactly the doors will close.

Stop Basing Your Loss Prevention Procedures on Sticky Myths

By Mike Giblin, LPRC

“Wait, I’m thinking about this all wrong.” Even the most careful and logical among us catch ourselves on occasion. We thought something was true, but we learned that it wasn’t. Further, we realize that our thought process had been illogical. In some rare instances, that realization is fleeting, and we end up reverting back to what’s familiar and comfortable. Some habits, some beliefs, and some trains of thought regarding loss prevention procedures we choose to follow die hard.

Take a common example. Most of us are aware that science has debunked the myth that “lightning can’t strike twice in the same place.” There are hundreds of recorded incidences proving that it can and has. In fact, it directly defies logic, not to mention defeats the purpose of lightning rods, to think that lightning won’t choose the highest and most conductive target over and over again. It’s not just untrue; it’s illogical, and we know it. Yet that truth hasn’t really stuck with us as well as the myth has.

This happens for three reasons: the myth came sooner, the myth sounds right, and the myth is simpler.

The “First Thing” Is Sticky. The first way that we’re able to conceptualize something in the world around us becomes our default, whether it’s true or not. Much of the first explanations presented to us were correct, like learning about light refracting to form a rainbow in grade school.

Especially if It Sounds Right. Some explanations we heard first, like the stork explanation for where babies come from, are simple enough but start to attract attention as we grow our knowledge database. If it starts to sound wrong, we become willing to allocate the cognitive resources necessary to attend to it and seek to replace it with a new conceptualization. But without those red flags, myths tend to stick around. Even when you’ve heard they aren’t true.

Simple Is Also Sticky. Simpler can mean more parsimonious overall, or it could mean a better fit into the rest of your worldview. It’s simpler to think that the cold weather causes us to fall ill (it doesn’t) than it is to conceptualize the seasonal lifecycles of viruses and the complex epidemiology of bacteria and the spread of disease.

Five Myths That Still Inform Many Ill-Advised Loss Prevention Procedures

Myth 1: Thinking a Strategy Works or Doesn’t Work Based on Anecdotal Evidence. If someone wore a seatbelt but was still injured in a car accident, we don’t say, “Seatbelts don’t work!” We know better, and yet all of us hold on to a few lurking beliefs that are predicated on a single event or a funny story. Stop and ask yourself why. Why do you think EAS is ineffective? Is it because you’ve looked at the overall statistics, or because of a small handful of events?

Myth 2: An All or Nothing Mentality with Solutions. If it can’t stop everyone, it can’t stop anyone. If I can’t use it to protect everything, it’s not worth anything. All LP solutions can be defeated. Every single one. Most in multiple ways. The question is, how far can a given technology move the needle? That’s a function of both how many categories it can protect and how well it protects them. How does that compare to your current state?

Myth 3: My Current Solution Stopped 0 Percent of the Thefts That Happened. It’s easy to watch endless hours of video of offenders walking right past your solution. It’s much more difficult to quantify and focus on who it successfully stopped. The consequences of removing a solution are just as important as the consequences of introducing a new one. Your loss prevention procedures should require that both are studied with the same rigor.

Myth 4: Opportunity Starts at the Door. An offender doesn’t pop into existence when they walk through your door. They walked through your parking lot, they live in a community that’s likely nearby, and you’ve been touching their lives for as long as you’ve been in business. Think about it: those friendly commercials your company airs on TV, that news story saying your company is cutting 1,200 employees, their friend who works for you complaining about how they’re treated-all of these are opportunities to affect the offender’s perception of whether you are a suitable target for them.

Myth 5: Offenders Are Stupid and Irrational. An irrational decision is not always indicative of an irrational decision process or of stupidity. Remember when you had that dessert you probably shouldn’t have? Looking back, that was an irrational decision. That doesn’t mean you’re an irrational person. Instead, you had competing goals: being healthy versus enjoying the moment. The second won out. Your decision process was still a rational and intelligent one, and is still one that can be studied and understood. If you understand a behavior, you can affect that behavior.

To follow the sixty LP research projects that are underway from the LPRC in 2018 and to learn more about key theories, visit lpresearch.org.

Rhett Asher Joins Cyber Security Firm to Develop Retail-Specific Services

Rhett Asher

Rhett Asher, a well-known executive in the retail loss prevention industry, has been hired as the executive vice president and director of retail solutions for Fortalice Solutions. He will be responsible for working with the Fortalice team to develop and refine service offerings specific to retailers and creating the company’s entrance strategy to the retail industry.

“I could not be more thrilled about joining the Fortalice team,” said Asher. “My passion is retail and doing everything I can to help protect the people and businesses that represent this industry. Being able to work with and learn from such a talented and knowledgeable team is an exciting opportunity for me.”

Fortalice Solutions was founded by former White House CIO Theresa Payton who has assembled what she believes are the sharpest minds in cyber security to protect people, businesses, and nations from the world’s most sophisticated adversaries. Fortalice services are grounded in a practical, real-world understanding of the threats in today’s environment. Payton will be a keynote speaker at this year’s NRF PROTECT conference in Dallas this June.

Asher brings more than thirty years of retail operations, business development, and trade association experience in the retail industry. He has previously served as director of business development for CONTROLTEK USA; vice president of asset protection, data security, and crisis management at the Food Marketing Institute; vice president of LP for the National Retail Federation; a cofounder of the non-profit Loss Prevention Foundation; and vice president of LP for the Retail Industry Leaders Association.

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