Club Demonstration Services, the company that runs the free sample stations inside Costco warehouses, has been sued repeatedly over the past decade. The most significant Club Demonstration Services lawsuit was a federal disability discrimination case brought by the Equal Employment Opportunity Commission that ended in a $50,000 settlement and a two-year consent decree. CDS has also paid $4.25 million to settle a California wage class action, lost an appellate ruling that expanded its duty to Costco shoppers, and is currently defending two active labor cases filed in 2025.
The EEOC Bathroom-Break Case
On May 8, 2019, the EEOC sued CDS in the U.S. District Court for the District of Alaska on behalf of Terry Baker, a part-time sales advisor in Juneau. Baker had a neurogenic bladder condition and a history of cauda equina syndrome, both stemming from a nerve severed during spinal surgery, and her conditions caused urinary incontinence that required frequent restroom access.1KRBD. EEOC v. Club Demonstration Services Federal Complaint
In June 2017, CDS put in place a policy that barred bathroom use during a six-and-a-half-hour shift outside of a scheduled lunch and one 15-minute break. Baker gave the company a doctor’s note asking for additional breaks as a reasonable accommodation. CDS denied the request, and the EEOC said the company failed to engage in the interactive process the Americans with Disabilities Act requires.2EEOC. Club Demonstration Services Sued by EEOC for Disability Discrimination According to the complaint, Baker was forced to work in urine-soaked diapers and avoid drinking water during her shifts, and CDS acted “with malice or with reckless indifference” to her federally protected rights. The EEOC alleged the conditions amounted to constructive discharge.1KRBD. EEOC v. Club Demonstration Services Federal Complaint
Judge H. Russel Holland approved a consent decree on September 30, 2021. CDS agreed to pay Baker $50,000 in back wages and other compensation.3EEOC. Club Demonstration Services to Pay $50,000 to Settle EEOC Disability Discrimination Lawsuit4KRBD. Costco Contractor Settles With Feds After Denying Juneau Employee Extra Bathroom Breaks The non-monetary terms ran through September 2023 and required CDS to rewrite and distribute anti-discrimination policies for management and demonstrator staff, provide two hours of interactive EEO training to managers in both 2022 and 2023, submit four compliance reports to the EEOC, and post a notice about the case in the Juneau warehouse break room. The decree also required the company to segregate accommodation documents from Baker’s personnel file and limit any employment reference to her job titles and dates of employment.5KRBD. EEOC v. Club Demonstration Services Consent Decree
Wage and Hour Class Actions
The largest wage claim against the company was Prado v. Warehouse Demo Services, Inc., filed in the Central District of California in 2014. The suit alleged the company failed to pay for rest and meal breaks, failed to pay final wages promptly, and failed to fold performance-based bonuses into overtime calculations. The class covered roughly 7,350 California demonstrators who received a bonus during a week with overtime or who worked shifts between six and seven-and-a-half hours since 2011. A $4.25 million settlement received final approval on November 2, 2015.6Bloomberg Law. Costco Contractor to Pay $4.25M to Settle Wage Claims
Two more California wage cases were filed in May 2025 and remain open. A putative class action filed in Fresno County Superior Court on May 26, 2025 (Case No. 25CECG01577) alleges CDS failed to provide the ten-minute rest breaks required for shifts over four hours and failed to reimburse employees for using personal cell phones for work, which California Labor Code Section 2802 requires.7PR Newswire. Lawsuit Against Club Demonstration Services Alleging Failure to Provide Employees With All Required Meal Breaks A separate case, Gustin v. Club Demonstration Services, Inc. (Case No. 1:25-cv-00579), was filed on May 15, 2025, and removed to the Eastern District of California under federal labor-management jurisdiction. CDS moved to compel arbitration and dismiss all claims in October 2025. As of May 2026, the case remained active before Judge Jennifer L. Thurston.8CourtListener. Gustin v. Club Demonstration Services, Inc.
Hassaine v. CDS and Duty to Costco Shoppers
A different kind of case tested how far CDS’s responsibility extends inside a Costco. On October 19, 2018, Lilyan Hassaine slipped on liquid soap that had leaked from a product in her shopping cart at a Costco in Carmel Mountain Ranch, San Diego. She fell about 16 to 17 feet from the nearest CDS sample station.9FindLaw. Hassaine v. Club Demonstration Services, Inc.
The trial court granted summary judgment for CDS, reasoning that the spill sat outside the 12-foot perimeter CDS was contractually required to keep clear around its workstations. The California Court of Appeal for the Fourth District reversed that ruling on April 22, 2022. Surveillance video showed a CDS employee walking past the visible spill twice in the seven minutes before Hassaine fell. The appellate court held that a private contract between CDS and Costco cannot shrink the duty of care CDS owes to shoppers under California Civil Code Section 1714, and that CDS’s role in Costco’s business enterprise creates a “special relationship” with customers that extends to any area shoppers are expected to occupy. “There is no legal basis to permit two participants in a business enterprise … to contractually limit between themselves the scope of the tort duty that one of them owes to a third-party plaintiff/victim who was not a party to the contract,” the court wrote. The case was returned for a jury to decide whether CDS’s inaction was negligent.9FindLaw. Hassaine v. Club Demonstration Services, Inc.10HRD America. Customer Sues Costco Independent Contractor for Slip-and-Fall Accident
Espinoza and the Outside Salesperson Exemption
A closely related California ruling reshaped how demonstration companies can defend wage claims. In Espinoza v. Warehouse Demo Services, Inc., decided December 23, 2022, the California Court of Appeal considered whether Costco demonstrators fit the “outside salesperson” exemption, which would have removed them from overtime, minimum wage, and meal and rest break protections.11FindLaw. Espinoza v. Warehouse Demo Services, Inc.
Warehouse Demo Services argued that because it did not own or lease the Costco locations, its demonstrators worked “away from the employer’s place of business.” The court disagreed. It found the company kept office space inside Costco warehouses, required employees to clock in and out on company tablets, confined demonstrators to small designated areas, and barred them from leaving without relief. Demonstrators worked fixed six-hour shifts on set schedules, unlike the autonomous, commission-driven workers the exemption was designed for. The relevant question, the court held, is not who owns the physical workspace but how much control the employer has over a worker’s hours and conditions.11FindLaw. Espinoza v. Warehouse Demo Services, Inc. For companies operating inside host retailers, the ruling effectively closed the exemption as a shield against wage claims.12Cal Employment Law Update. Outside Salesperson Exemption Does Not Apply to Workers Whose Employer Controls Their Hours and Working Conditions
What’s Still Pending
Both 2025 California cases remain live. The Fresno County meal-and-rest-break class action is in early stages, and the Gustin case is awaiting a ruling on CDS’s arbitration motion. A charge filed with the National Labor Relations Board in Irvine, California, on July 9, 2025 (Case No. 21-CA-369013) has been closed, though the substance was not made public.13National Labor Relations Board. Case 21-CA-369013 The recurring themes across more than a decade of litigation are consistent: break and bathroom policies, how demonstration workers are classified and treated, and how far CDS’s legal responsibilities extend inside Costco stores.