Appeals Judges Give Wal-Mart Second Chance in OT Case

February 2, 2005 ( - A federal appeals court has given Wal-Mart a second chance to argue to a federal judge why it shouldn't have to pay as much as $140 million in overtime to its pharmacists.

The US 10 th Circuit Court of Appeals threw out a ruling by lower court judge in Colorado that the giant retailer had violated the law by not paying overtime, saying the lower court needed to reconsider the evidence in new hearings on the matter.

The 10-year-old class action lawsuit, filed by three Colorado Wal-Mart pharmacists, argued that Wal-Mart had adjusted their salary and hours so often that they were actually hourly employees eligible for time-and-a-half pay for overtime. The latest ruling also covered two other similar lawsuits.

The lower court judge ruled in 1999 that Wal-Mart violated federal labor law by classifying pharmacists as salaried employees, finding that Wal-Mart “engaged in a practice or policy of reducing base hours and base pay for the company’s own interest.” For its part, the company had argued that the lower court judge should have heard more evidence about US Department of Labor rulings allowing companies to adjust salaried employees’ pay if economic conditions warrant.

In its ruling, the three-judge panel said those regulations allow employers to change salaries based on economic conditions but if those changes are made too frequently, the salary could be declared a “sham” and allow employees to be reclassified as hourly employees. “W e cannot conclude that Wal-Mart altered the salaries of full-time pharmacists with such frequency that the purported salary amounted to an hourly wage,” wrote the appeals judges. Estimates for the cost of unpaid overtime for the pharmacists have ranged up to $140 million.

When the first suit was originally filed, Wal-Mart employed over 6,000 pharmacists in some 2,000 pharmacies. Of these, nearly 4,000, including the plaintiffs, were full-time employees.

A copy of the rulng is here .