Wal-Mart computed overtime pay for workers in Alabama and throughout the U.S. in a way that underpaid them, and did not comply with federal and Alabama 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.
“This settlement provides $33 million in back wages, plus interest, to Wal-Mart Workers,” said Victoria A. Lipnic, Assistant Secretary of Labor for Employment Standards. She said the company has taken action “to prevent this from happening again.” The agreement covers the period between February 1, 2002, and January 19, 2007.
The Labor Department also obtained a consent judgment from U.S. District Court. In the complaint with that court against Wal-Mart Stores, Inc., the Labor Department alleged that the retailer violated the overtime provisions of the Fair Labor Standards Act, or FLSA as well as state minimum wage laws. The court issued a consent judgment ordering Wal-Mart to make the back payments and ordered it to abstain from any future violations. The agreement has Wal-Mart paying all back wages for the violations, plus interest on the amount as a deterrent.
Under the FLSA, employees must be paid at what is popularly called “time-and-a-half,” or 1.5 time their usual rate, for any time over 40 hours a week. At issue was not whether Wal-Mart paid overtime. It did. The question revolved around what the retailer used to calculate that overtime. Employees’ pay, before incentives and premiums, is called the “base rate.” With premiums and incentives it is called the “average hourly compensation.”
For example, an employee’s “base rate” may be $6 an hour, while his or her “average hourly compensation,” with those incentives and premiums, may be $7 an hour. The law says overtime must be calculated by using the “average hourly compensation,” or, in this example, $7 an hour. Wal-Mart was using the “base rate,” which in this example would have been $6 an hour.
When we talk about state overtime laws, many of these state laws are interesting because they have different statutes and exemptions that make them unique among their 49 other counterparts. With Alabama, though, its overtime laws are unique because the state doesn’t have any.
The only law that Alabama has regarding wages and hours for employees deals with paying wages. And this basically means that Alabama makes sure that employees get paid what they’re owed by their employers every week. As for overtime, and everything else that has to do with payments and employment, Alabama defers to the federal laws.
The main federal law on overtime—and thus the law that we need to know about for Alabama law—is the Fair Labor Standards Act, or FLSA for short. The gist of this law is that employers who have employees work overtime have to pay them for their time. They don’t have to just pay them. They have to pay them at least 1.5 times their standard pay for any time over 40 hours in week.
The federal overtime act doesn’t, though, limit the amount of time that employees age 16 or older can work, and the rules don’t mandate that employers have to pay their employees overtime for work on weekends or holidays.
All that the federal government is concerned about for the most part—and what we should know about—is that a workweek is defined as a set and recurring time period of 168 hours, or if we do the math, seven consecutive days of 24 hours. That doesn’t necessarily mean Sunday to Sunday or Monday to Monday, mind you.
There are also definitions that the federal rule puts in there that we could comment on, such as the one that states that an employee’s regular pay cannot be less than the minimum wage. The law also explains that payments can be in the form of piece-rate, commissions, salaries, but that whichever way you use, the payment for overtime is figured out by averaging out an hourly rate.
The Alabama Complete Labor Law poster will detail all of the most recent Alabama labor laws as well as the federal labor laws.