Wal-Mart Held down Plan Contributions with 'Time Shaving' Scheme

April 18, 2007 (PLANSPONSOR.com) - A Wal-Mart employee in Philadelphia has filed a lawsuit against the giant retailer seeking class-action status , alleging it engaged in "illegal underpayment and suppression of hourly employee wages" in order to also hold down the company's retirement plan contributions.

Robert J. King alleged that Wal-Mart’s deliberate intention was to hold down the amount of wages paid to the hourly workforce so that it could minimize its annual payments to the Wal-Mart Profit Sharing and 401(k) Plan that are typically based on a percentage of employee salary, according to the lawsuit filed in the U.S. District Court for the Eastern District of Pennsylvania.

Among other things, to hold down compensation to the hourly workers, the suit charged that the company:

  • deleted overtime hours from the employees’ records.
  • changed the records to make it look like the workers’ days ended immediately after a meal period so they would not be paid for the remaining several work hours until the day’s end.
  • changed the records to create unauthorized meal breaks for employees.

The suit charges that the “time shaving” practice ended up deleting hundreds of thousands of hours of time worked. It seeks to recover what it claims are the “tens or hundreds of millions of dollars in retirement savings” that the plaintiff alleges should have been paid as employer retirement plan contributions.    

The complaint alleges that the practice started as early as January 1, 1997 and requests that the class be certified as participants and beneficiaries in the plan from February 1, 1997 through the present.

The suit charged that the practice constitutes a violation of the company’s fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA).

While admitting that the company has a written policy against employees working off the clock, the suit charged that Wal-Mart professes to be ignorant of the practice.

“Wal-Mart knew or should have known that the employees were working off-the-clock by virtue of the fact that a) such work was recorded in its electronic databases; b) its managers directed, pressured and or encouraged employees to work off the clock; c) it systematically understaffed its stores to meet arbitrary corporate profitability objectives and d) it regularly tracked and studied employee hours worked and wages paid,” the plaintiff claimed in the court filing.

The suit was filed on behalf of the workers by four law firms including Berger & Montague in Philadelphia.The case is King versus Wal-Mart Stores, 2:07-CV-01486 WY (4/13/2007).