Wal-Mart to Pay Up to $640 Million to Settle Wage Lawsuits

Wal-Mart will pay as much as $640 million to settle the federal and state lawsuits and will record an after-tax fourth-quarter expense of $250 million.
Wal-Mart will pay as much as $640 million to settle the federal and state lawsuits and will record an after-tax fourth-quarter expense of $250 million. (By Paul Sakuma -- Associated Press)
By Margaret Cronin Fisk
Bloomberg News
Wednesday, December 24, 2008

Wal-Mart Stores said yesterday it will pay as much as $640 million to settle 63 federal and state lawsuits claiming the company cheated hourly workers and forced them to work through breaks.

The settlement ends actions pending in most state courts and in federal court in Nevada, and comes two weeks after a similar agreement was reached in Minnesota. The company will record an after-tax fourth-quarter expense of $250 million, or about 6 cents a share.

The settlement is "fair and reasonable" for Wal-Mart and Sam's Club hourly workers, said attorney Frank Azar, who represents employees in 14 states. "Wal-Mart has made tremendous strides in wage-and-hour compliance."

Wal-Mart faced more than 70 wage-and-hour suits, including class actions claiming the company failed to pay for all hours worked or didn't properly compensate workers properly for overtime. The workers claim that Wal-Mart's own records show that hourly employees were cheated. Wal-Mart has denied the allegations.

"Resolving this litigation is in the best interest of our company, our shareholders and our associates," said Tom Mars, Wal-Mart executive vice president and general counsel, in a joint statement by the company and the plaintiffs. "Many of these lawsuits were filed years ago and the allegations are not representative of the company we are today."

Wal-Mart said its potential total payout ranges from $352 million to $640 million. The company reported $378.8 billion in revenue in fiscal 2008.

The company did not disclose what would determine the range of settlement amounts going to individual workers. These details will be covered in preliminary approval hearings.

"Our policy is to pay associates for every hour worked and to provide rest and meal breaks," Mars said. As part of the settlements, Wal-Mart said it agreed to continue to use electronic systems and other measures designed to maintain compliance with its wage-and-hour policies and applicable law.

Similar lawsuits in California, Massachusetts and Pennsylvania aren't on the list of cases settled that was provided by Wal-Mart. Dan Fogleman, a company spokesman, declined to comment on the status of those cases.

The agreement comes five weeks before Mike Duke takes over from outgoing chief executive H. Lee Scott, who has overseen a sales resurgence and sought to burnish Wal-Mart's image among environmentalists, politicians and labor groups.

The company two weeks ago agreed to pay $54.3 million to settle a class-action suit by Minnesota hourly workers claiming violations of wage-and-hour laws. The Minnesota judge found in July that the company broke wage-and-hour laws more than 2 million times and ordered Wal-Mart to give employees $6.5 million in back pay. In settling, Wal-Mart avoided a trial scheduled for next month in which a jury would have been asked to order the company to pay as much as $2 billion.

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