Wal-Mart to Fork over $34M in Voluntary OT Settlement

January 25, 2007 (PLANSPONSOR.com) - Retail giant Wal-Mart Stores revealed Thursday that it had agreed to pay about $34 million in back wages to thousands of workers underpaid for overtime hours over five years.

The extraordinary revelation came about 18 months after the Bentonville, Arkansas company brought the matter to federal officials asking US Department of Labor (DoL) regulators to review its overtime determinations over the five-year period, according to a Wal-Mart announcement and an Associated Press news report.     

According to the company, Wal-Mart also reported separately to the Division of Labor Standards Enforcement (DLSE) in California, where state law includes some additional requirements.

While the pact with the DoL includes no fines or penalties, Wal-Mart said it continued negotiating with the DLSE, which will include penalties. A DLSE state suit against Wal-Mart should be resolved shortly, the company said. The federal settlement was approved Thursday by a federal judge in the U.S. District Court for western Arkansas.

“The fact of the matter is we discovered this matter, we reported it to the Department of Labor and we resolved the issue,” Wal-Mart spokesman John Simley said, according to the Associated Press. “We are committed to our associates (employees) and we’ve apologized to them for this error.”

Working with the DoL, Wal-Mart determined that approximately 87,000 current and former hourly associates were underpaid by at least $20 including a limited number of cases where associates will be paid a much larger sum.

The highest award to an individual employee was about $39,000, according to the DoL.

However, Wal-Mart said the review of its overtime calculations also found it had overpaid about 215,000 hourly workers during the same five-year period. The company said it won’t ask for a return of any overpayments, which it said were at least $20 per worker.

According to the retailer’s statement, it did not include periodic bonuses and other earned income in determining some associates’ weekly average hourly pay rate, or “regular rate,” which is used to determine associates’ overtime pay.

The company also calculated the regular rate on a biweekly rather than weekly basis. Separately, some errors involved participants in the company’s manager and programmer in training programs, who were entitled to overtime pay while in training. Approximately 40% of the associates owed more than $20 were participants in these programs, according to the company.

Under federal law, the overtime pay rate is calculated as 1.5 times the “regular rate” of pay.

Wal-Mart began notifying associates Thursday through an in-store television broadcast and has established a Web site at  http://www.dol.settlement.wal-mart.com  for current and former associates to determine if they are entitled to any payment. .

Last October, Wal-Mart workers in Pennsylvania won a $78.5 million judgment for working off the clock and through rest breaks. Wal-Mart denied wrongdoing and is appealing the jury award (See  PA Jury Finds Wal-Mart Violated Labor Laws  ).