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BENTONVILLE, Ark. -- Wal-Mart Stores, Inc. said yesterday it will pay $34 million to certain current and former employees as part of a settlement agreement with the U.S. Department of Labor over the way in which the company calculates overtime pay. The agreement has been filed in federal district court and is subject to the court's approval.
Wal-Mart said that in the past it 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 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.
Wal-Mart said it discovered the errors during an internal review and voluntarily reported them to the DOL. Working closely with the DOL, the retailer determined that approximately 87,000 current and former hourly associates were underpaid by at least $20 during the last five years. There are a limited number of cases where associates will be paid a much larger sum, it noted.
Under the terms of the settlement, Wal-Mart will pay these associates the amount of their underpayments -- plus interest -- totaling about $34 million. Wal-Mart said it will also voluntarily pay all associates who were underpaid as little as one cent over the same period.
In addition, the company determined that about 215,000 current and former hourly associates were overpaid by at least $20 during the last five years. The company will not seek to recover any overpayments due to this miscalculation, regardless of the amount. Approximately 20,000 of these associates also were among those who were underpaid.
"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, s.v.p. of the people division at Wal-Mart, in a statement. "The overtime issues relate to our payroll processes at the home office rather than any individual's actions at our stores or clubs."
The settlement involves hourly associates who worked at Wal-Mart stores, Sam's Clubs, Neighborhood Markets, logistics, and the home office. The settlement payment was accrued over previous quarters and is not material to the company's earnings.
The company also said it is working to resolve a similar complaint filed by the state labor department in California, where state law includes some additional requirements. Unlike the federal government, California has not reached a settlement, Robert Jones, acting state labor commissioner, told the Associated Press.
In other Wal-Mart legal news, Julie Roehm, the company's former head of marketing communications who was abruptly fired on Dec. 4 after less than a year on the job, has sued the retailer, claiming breach of contract and fraud. In her complaint, Roehm claims she was told by Wal-Mart that she was being fired because she had not been "fulfilling the expectations of an officer of the company."
In court papers, Wal-Mart admits that Roehm was informed on Dec. 4 that her employment was being terminated, but it denies the other allegations.