labor lawAdivision of labor law center

Is your company computing overtime properly? Retail giant Wal-Mart is paying out $33 million in back wages after being accused of underpaying more than 86,000 workers in overtime pay.

Wal-Mart’s agreement to pay the amount puts it in compliance with federal and Oklahoma Overtime laws, according to the U.S. Department of Labor. The Labor Department said the retailer used the wrong pay figures to calculate overtime in Oklahoma and throughout the U.S.

The U.S. Department of Labor says the retail giant calculated the employees’ overtime on their base pay alone, and not on their pay plus incentives and premium payments, which is called the “average hourly compensation.” Wal-Mart essentially violated the Fair Labor Standards Act (FLSA).

The FLSA requires, first, that employees be paid 1.5 times their normal pay (called “time-and-a-half”) for any time worked over 40 hours. Second, overtime must be calculated against their “average hourly compensation,” not their base pay. In other words, if employees get $6 an hour base pay but incentives and premiums amount to an average hour pay of $7 an hour, then the overtime must be calculated according to the $7 an hour figure.

The country’s largest retailer agreed to pay all back ages for the violations between February 1, 2002 and January 19, 2007, and it has agreed to pay interest on the amount. According to the Labor Department, that should act as a deterrent.

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

A consent judgment in U.S. District Court supported the agreement that the Labor Department obtained from Wal-Mart. After the Labor Department filed a complaint, the court promptly declared that Wal-Mart must pay all of the back wages for the violations – the $33 million, in other words – and pay interest on that amount, as a deterrent to similar future violations.

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