labor lawAdivision of labor law center

Wal-Mart computed overtime pay for workers in Wisconsin and throughout the U.S. in a way that underpaid them, and did not comply with federal and Wisconsin overtime laws. That’s according to the U.S. Department of Labor, in its announcement that Wal-Mart has agreed to pay more than $33 million in back wages to 86,680 workers nationwide.

Wal-Mart, said the Labor Department, calculated overtime according to the “base rate” rather than the “average hourly compensation,” a larger number. The “base rate” does not include incentives and premiums. The “average hourly compensation” does. The Fair Labor Standards Act, or FLSA, requires that employers calculate overtime based on the “average hourly compensation.”

“This settlement provides $33 million in back wages, plus interest, to Wal-Mart workers,” said Assistant secretary of Labor for Employment Standards Victoria A. Lipinic, who added that the company “has taken corrective action to prevent this from happening again.”

Employees are legally entitled to an overtime pay equaling 1.5 times their usual pay –usually called “time-and-a-half.” And according to the FLSA and the Labor Department, that figure should be the “average hourly compensation.” For example, if the base rate is $6, and the rate with incentives and premiums – the “average hourly compensation” – is $7 an hour, overtime must be calculated using $7 an hour. Overtime is any time exceeding 40 hours in a workweek.

The agreement between the Labor Department and Wal-Mart covers the back wages for 86,860 workers for a nearly five-year period, from February 1, 2002 to January 19, 2007.

To back up the agreement, the Labor Department obtained a consent judgment against Wal-Mart ordering it to pay the back wages and forbidding it from similar violations in the future. The consent judgment was obtained by filing a complaint against Wal-Mart Stores, Inc., in U.S. District court.  The court’s consent judgment required Wal-Mart to pay the back wages and interest on the $33 million. 

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