Wal-Mart to Pay $33 million for Overtime Violations

Published: Jan. 25, 2007 at 7:08 PM CST|Updated: Mar. 29, 2007 at 5:30 PM CDT
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BENTONVILLE, Ark., Jan. 25, 2007  --  Wal-Mart will pay $33 million in back wages for paying too little in overtime to nearly 87,000 employees. The payment is from an agreement announced Thursday by the U.S. Labor Department.

According to the court filing, Wal-Mart will set up a Web site for a period of at least 12 months following the date of the entry of the judgment in order to answer current and former employees' questions regarding the back wages and inform employees about the Web site.

The Web site is www.dol.settlement.wal-mart.com .  The company has to also staff a toll-free telephone number, (888)262-1559 or TTY (800)318-7442, to answer questions regarding the back wages for a period of 120 days from today.

To finalize the agreement, the Labor Department filed a complaint in federal court Thursday.  The complaint alleges:

"During the period from February 1, 2002, through January 19, 2007, Defendant violated provisions of sections 7 and 15(a)(2) of the Act, 29 U.S.C. Subsection 207 and 215(a)(2), by employing employees in an enterprise engaged in commerce or in the production of goods for commerce within the meaning of the Act for workweeks longer than 40 hours without compensating such employees for their employment in excess of 40 hours per week at rates not less than one and one-half times the regular rates at which they were employed.

Specifically, Defendant failed to pay employees identified in Exhibit A in accordance with section 7 by improperly:

(a)  Failing to pay certain salaried, non-exempt managers-in-training, programmers-in-training, and interns who received a predetermined salary for 45 or 48 hours of work each week an overtime premium for hours worked over 40 in a workweek, up to the numbers of salaried hours worked (for example, an employee receiving a salary for 45 hours of work a week would not be paid an overtime premium for hours worked between 40 and 45 hours);

(b)  Calculating the regular rate on a bi-weekly basis rather than on a weekly basis, resulting in a lower regular rate than the employee was due;

(c)  Including hours and pay for vacation, sick leave, and other paid time off in calculating the regular rate, resulting in a lower regular rate than the employee was due;

(d)  Failing to properly include Geographic Assistance Program (GAP) and Regional Pay Zone (RPZ) pay in calculating the regular rate, and

(e) Excluding the amounts of certain prizes, awards, premium payments and incentive bonuses when calculating the regular rate.....

As a result of the violation of the Act, overtime compensation was unlawfully withheld by Defendant from the employees identified..."

Steven Mandel of the Labor Department's Fair Labor Standards Division says the case was the result of Wal-Mart coming to the department in early 2005 and asking for a review of its overtime calculations.

Mandel says the settlement was one of the largest ever reached by the department's wage and hour division.

He says the Labor Department carried out a national review of all Wal-Mart stores over a two-year period from February 2005 to this year.

The department says the highest award to an individual employee was about $39,000 dollars.

Wal-Mart said the settlement includes no fines or penalties and that it has adopted measures to prevent the errors from occurring again.

However, the Consent Judgment says Wal-Mart "expressly denies any liability for the allegations set forth in the Complaint, any wrongdoing and liability whatsoever under the FLSA or any other law, or that any of the facts that Plaintiff has alleged or could have alleged are true.  However, this does not preclude the Department of Labor from relying on this Judgment in any future enforcement action, including any action alleging repeat or willful violations of the FLSA."

In the Consent Judgment, Wal-Mart is further enjoined from using the judgment "as  defense to any action brought pursuant to 29 U.S.C. Subsection 216(b), except for any action, or a portion of any action, that seeks back wages or liquidated damages for any employee named in Amended Exhibit A."

The court finding says the unpaid overtime compensation due totals $33,484,499.65 for the period February 1, 2002 to January 5, 2007 and additional amounts yet to be calculated from January 6, 2007 to January 19, 2007 plus post judgment interest on such amounts for a period of 90 days from entry of the Judgment.  "...Defendant is restrained from withholding payment of this unpaid overtime compensation and pre- and post- judgment interest.  Within 45 days from the entry of this Judgment, Defendant will make an additional wage computation for eligible employees...Defendant will retain a third party administrator to disburse funds to eligible employees.  Within 45 days from the submission of amended Exhibit A to the Court, Defendant, by its administrator, will mail to the last known address of current and former living employees who are listed...the respective sums they are due."

The administrator must also disburse funds "to the estates of deceased employees."

Also, Wal-Mart says the department's review of its overtime calculations found it had overpaid about 215,000 hourly workers during the last five years. The company says it will not seek to recover any overpayments.

Wal-Mart operates more than 100 stores in Alabama.

Reported by:  Helen Hammons

Associated Press contributed to this report.