labor lawAdivision of labor law center

Wal-Mart must pay $33 million in back wages to more than 86,600 employees after failing to compensate them enough for their overtime work over roughly five years.

Paying the back wages will put Wal-Mart stores, Inc., in compliance with both federal and Nebraska overtime laws.

Noting that the settlement includes both the $33 million and interest to the Wal-Mart employees, Victoria A. Lipnic, Assistant Secretary of Labor for Employment Standards, said the company “has taken corrective action to prevent this from happening again.” The agreement covers pay for the employees during the period from February 1, 2002 to January 19, 2007.

The law requires that most employees be paid “time-and-a-half,” or 1.5 times their pay, for any time worked over 40 hours a week. That was not the issue in the Wal-Mart case. The issue was how Wal-Mart calculated the employees’ pay. The retail giant used the employees’ “base rate,” not their “average hourly compensation.”

The average compensation includes premiums and incentives, and so is a larger figure. For example, if the employee’s base rate is $6 an hour and his or her average hourly compensation is $7 an hour, the law requires that the overtime be calculated as 1.5 times the $7 an hour. Wal-Mart was using the base rate of $6 an hour instead.

The incentive behind the settlement may have been provided by a court judgment supporting the agreement. The Labor Department filed a complaint in U.S. District Court against Wal-Mart alleging violations of the FLSA overtime regulations and state minimum wage laws. The court issued a consent judgment ordering Wal-Mart to pay the back wages, and it directed the retailer against future violations. The consent decree includes not only payment of the back wages, but has Wal-Mart agreeing to pay interest on the amount.

 The Labor Department said the nationwide retailer had violated the Fair Labor Standards Act, or FLSA, when it calculated the overtime on base rate rather than average hourly compensation. It also violated states’ minimum wage laws, according to the Labor Department.

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