Settlement Involves No Fines or Penalties
BENTONVILLE, Ark., Jan. 25, 2007 – Wal-Mart Stores, Inc. today announced it has entered into a settlement agreement with the U.S. Department of Labor (DOL) regarding the manner in which the company calculates overtime pay. The agreement has been filed in federal district court and is subject to the court’s approval. 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 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 settlement includes no fines or penalties, and Wal-Mart has adopted measures to prevent these errors from occurring in the future.
Wal-Mart discovered the errors during an internal review and voluntarily reported them to the DOL. Working closely with the DOL, Wal-Mart 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.
Under the terms of the settlement, Wal-Mart will pay these associates the amount of their underpayments -- plus interest -- totaling about $34 million. Although not required by the settlement to do so, Wal-Mart voluntarily will pay all associates who were underpaid as little as one cent over the same period.
In addition, Wal-Mart 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, senior vice president of the People Division at Wal-Mart. “The overtime issues relate to our payroll processes at the Home Office rather than any individual’s actions at our stores or clubs.”
“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.”
Under Federal Law, the overtime pay rate is calculated as 1.5 times the “regular rate” of pay. The regular rate can be higher than the basic hourly rate because it includes all compensation earned in a work week divided by the total number of hours actually worked in that same work week, unless otherwise required by state law. That additional compensation may include prizes, awards, premiums, shift and geographical differentials, and some incentives. Regular rate errors affected only associates who received additional compensation for the same week in which they worked overtime.
Another cause of miscalculation was that some overtime payments were based on a regular rate calculated for each two-week payroll period, when they should have been calculated weekly. If either of those weeks included overtime hours, it may have resulted in an overpayment or an underpayment in overtime pay.
Separately, some errors involved participants in the company’s manager and programmer in training programs, who were entitled to overtime pay while in training. Approximately 40 percent of the associates owed more than $20 were participants in these programs.
Wal-Mart began notifying associates today through an in-store television broadcast and has established a website at www.dol.settlement.wal-mart.com for current and former associates to determine if they are entitled to any payment. Associates also can have questions answered by calling 888-262-1559 toll-free (800-318-7442 for hearing impaired).
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 is working to resolve a similar complaint filed by the state labor department in California, where state law includes some additional requirements.
About Wal-Mart Stores, Inc.
Wal-Mart Stores, Inc. operates Wal-Mart Stores, Supercenters, Neighborhood Markets and Sam’s Club locations in the United States. The Company also operates in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. The Company’s securities are listed on the New York Stock Exchange under the symbol WMT. More information about Wal-Mart can be found by visiting www.walmartfacts.com.
