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Feb 2007
06
February 06, 2007

Wal-Mart Settlement Highlights Common Overtime Errors

On January 25 the Department of Labor announced that Wal-Mart had agreed to pay over $33 million to resolve alleged overtime violations of the Fair Labor Standards Act. The agreement with Wal-Mart is the largest overtime settlement in the division’s history and shows how common overtime errors can result in costly damages for employers.

According to its agreement with the Department of Labor, Wal-Mart made the following errors in computing overtime for its employees:

  • Wal-Mart failed to properly pay overtime to certain salaried, non-exempt, managers-in-training, programmers-in-training and interns who received a set salary for 45 or 48 hours of work each week. Wal-Mart did pay these individuals time and a half when they exceeded the 45 or 48 hour threshold, but failed to include a premium for the hours worked between 40 and 45/48 as part of the salary. As many employers may not be aware, an employer can pay a non-exempt employee a set salary which compensates him or her for more than 40 hours worked. The set salary, however, must include a time and a half premium for the hours over 40 built into the set salary. This is more a matter of proper paperwork than anything else.

     
  • Wal-Mart improperly calculated the employees’ regular rate of pay for overtime purposes on a bi-weekly basis rather than on a weekly basis, resulting in a lower overtime rate than the employees were due. The Fair Labor Standards Act requires all employers to calculate overtime on a weekly basis.

     
  • Wal-Mart failed to include the amounts of certain prizes, awards, premium payments and incentive bonuses when calculating employees’ regular rate of pay, resulting in a lower overtime rate than the employees were due. This is a common mistake. Many employers do not even think about including things like bonuses, shift premiums, lead pay or other incentives in an employee’s overtime calculation, but this is required under the Fair Labor Standards Act.

In the Wal-Mart settlement, the Department of Labor did not create any new legal precedents, but it did highlight some common errors under the often misapplied overtime provisions of the Fair Labor Standards Act. If you have questions about state or federal overtime rules, please contact me or any member of the Warner Norcross & Judd LLP Labor and Employment Group for assistance.
 

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