Wal-Mart Agrees to Pay Workers $33 Million in Back Wages

By Randy Hall | July 7, 2008 | 8:23 PM EDT

(CNSNews.com) - Wal-Mart Stores, Inc., entered into an agreement with the U.S. Department of Labor on Thursday to pay almost 87,000 employees over $33 million in back wages, an arrangement that was quickly criticized by a union-backed group as a "backroom sweetheart deal."

In announcing the settlement, the Department of Labor (DOL) said in a news release that the nation's largest retail chain agreed to the arrangement "to resolve issues that arose under the Fair Labor Standards Act (FLSA) concerning how the company computed overtime pay."

"The agreement covers 86,680 employees who worked for the company from Feb. 1, 2002, to Jan. 19, 2007," the statement added. "Back wage payments will go to current and former employees of the company's retail divisions in the U.S. and Puerto Rico, including Wal-Mart Discount Stores, Wal-Mart Supercenters, Neighborhood Markets and Sam's Club warehouses."

According to a new release on the Wal-Mart corporate website, the company "discovered the errors during an internal review and voluntarily reported them to the DOL."

"In the past, Wal-Mart failed to 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 statement noted.

Under federal law, the overtime pay rate is calculated as 1.5 times the "regular rate" of pay and includes all compensation earned in a work week divided by the total number of hours actually worked during that period, unless otherwise required by state law.

"The company also calculated the regular rate on a biweekly rather than weekly basis and did not properly account for overtime involving some managers in training and other associates," the release added. "The settlement includes no fines or penalties, and Wal-Mart has adopted measures to prevent these errors from occurring in the future."

"In addition, Wal-Mart determined that about 215,000 current and former hourly associates were overpaid" during the last five years, the statement noted. "The company will not seek to recover any overpayments due to this miscalculation, regardless of the amount."

The corporation has also agreed to set up a site on the World Wide Web (www.dol.settlement.wal-mart.com) and to staff a toll-free telephone number -- (888) 262-1559 or TTY (800) 318-7442 -- to answer questions regarding the back wages, which will be disbursed by a third-party administrator to all affected employees.

"We want our associates to know that the situation has been fixed, that overtime calculations now are being done correctly, and that we've added safeguards to our payroll processes to make sure these types of errors don't happen again," said Sue Oliver, senior vice president of the People Division at Wal-Mart.

"We are committed to our associates, and we apologize to them for this error," Oliver continued. "We work very hard to make sure associates are compensated correctly.

"That's why Wal-Mart volunteered to go back five years, instead of the two normally required by the Labor Department, and to go beyond the requirements of the settlement and address underpayments regardless of the amount," she added.

The company also is working to resolve a similar complaint filed by the state labor department in California, where state law includes some additional requirements.

Also on Thursday, Chris Kofinis, communications director for WakeUpWalMart.com, issued a statement of his own criticizing the arrangement.

"Today's settlement between Wal-Mart and the Bush Labor Department is not only an admission of wrongdoing by Wal-Mart but represents another 'backroom sweetheart deal' that potentially undermines the rights of millions of Wal-Mart workers and proves that Wal-Mart's cozy dealings with the Bush administration have no bounds," Kofinis said.

"Worse still, the notion that Wal-Mart, a company that faces over 57 wage and hour lawsuits, including the largest gender discrimination lawsuit in U.S. history, would negotiate in the best interests of its workers is ludicrous on its face," he added.

"And to top it off, it appears Wal-Mart and the most anti-worker administration in recent history negotiated this 'secret settlement' without any outside legal representation for the workers affected," Kofinis noted.

"Not surprisingly, the $33 million award is significantly below the amounts awarded to workers where the workers had legal representation of their own and the power of a courtroom," he stated.

Kofinis added: "All in all, this sad agreement between Wal-Mart and the Bush Department of Labor is not only a bad deal for Wal-Mart workers who have been treated unfairly by Wal-Mart but reminds one of how far Wal-Mart and the Bush administration are willing to go to prevent workers from receiving justice."

As Cybercast News Service previously reported, WakeUpWalMart.com is funded by the United Food and Commercial Workers International Union and has often been critical of the retail giant, which operates more than 3,900 outlets in the U.S.

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