Wal-Mart Reaches Deal Over Back Pay

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By Amy Joyce and Ylan Q. Mui
Washington Post Staff Writers
Friday, January 26, 2007

Wal-Mart must pay nearly $34 million in back wages and interest to employees who were not paid for overtime hours under a settlement announced yesterday by the U.S. Labor Department.

The company said that because of errors in calculation, it underpaid about 87,000 employees nationwide by at least $20 during the past five years. But some are due much more, with one person to receive $39,775.

Wal-Mart approached the Labor Department in 2005 after errors were discovered in an internal audit, according to Steven Mandel, associate solicitor in the department's fair labor standards division. He said employees will receive their pay within 90 days.

"It's not particularly unusual for an employer to come to us to talk about potential payroll violations," said Mandel, who noted that the settlement is one of the largest overtime settlements ever reached. The settlement, filed in U.S. District Court in Arkansas, does not include any fines or penalties.

Wal-Mart rectified several problems in 2005 but was not in complete compliance until Jan. 19, he said.

"The issue has been resolved," said John Simley, a Wal-Mart spokesman. "We are committed to our associates, and we have apologized to them for this error."

About 75 employees are owed more than $10,000, according to Simley. The retailer also said it overpaid about 215,000 current and former workers $20 or more, which amounts to at least $4.3 million. The actual total was not disclosed. Wal-Mart said it would not seek to recover the overpayments.

Wal-Mart found the errors in 2004 during a routine internal review, Simley said. Problems stemmed from "calculation errors and procedural errors" at headquarters, he said, but he declined to say how they occurred. Wal-Mart reviewed data going back to Feb. 1, 2002, the first year for which it has "consistently reliable records," Simley said.

Wal-Mart said it found that some non-exempt salaried employees were expected to work 45 to 48 hours before they earned overtime pay. They did not receive the extra half-time they were owed for hours between 40 and 45 or 48. Other errors also occurred, Wal-Mart said.

The company will still face legal challenges from at least one state.

The California labor commissioner filed suit against Wal-Mart yesterday in Superior Court in Sacramento, alleging miscalculations of overtime pay. The retailer notified the state in December 2005 of payroll errors that resulted in underpayment of about 50,000 workers in the state. About 90 percent are owed less than $20, according to the state Department of Industrial Relations. It estimates that a settlement would exceed $2 million.

"While Wal-Mart has indicated its desire to pay all additional wages owed under California law, we will not agree to any settlement terms until state auditors have the opportunity to verify the accounting records relied upon by [U.S. Labor Department] officials and to examine additional records that relate to those issues that are subject to more stringent California statutes," said Robert Jones, acting state labor commissioner.

State and federal wage-and-hours laws require employers to pay time and a half to workers who put in more than 40 hours a week. Salaried managers and independent contractors are exempt unless their salaries fall below a certain threshold.

Wal-Mart has been involved in other overtime suits. In October, a Pennsylvania jury decided that Wal-Mart forced hourly employees to work through breaks and beyond their shifts without overtime pay. The plaintiffs were awarded $78.5 million. Wal-Mart is appealing.

In 2002, a federal jury in Oregon found that Wal-Mart employees were forced to work off the clock and awarded back pay to 83 workers. In 2004, Wal-Mart settled a similar lunch-break case in Colorado for $50 million.

At least 57 other wage-and-hours cases have been filed across the United States against the world's largest retailer, and many of them are awaiting class-action certification, according to company filings.

Wal-Mart's decision to report the problem is indicative of how visible it has become, according to Harley Shaiken, a labor professor at the University of California at Berkeley. "They realized there was a problem and didn't want to see it become a worse problem," he said. "I think Wal-Mart has really learned that putting it under the rug doesn't make it better."


© 2007 The Washington Post Company

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