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 Minnesota 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 Minnesota and throughout the U.S.
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.
The Labor Department also filed a complaint in U.S. District Court to support the agreement, alleging violations of both the FLSA and state Overtime laws. The court returned a consent judgment.
Under the consent decree, Wal-Mart is paying all of the back wages for the violations, as well as interest on the total.
