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Wal-Mart To Pay Nearly $5M in Back Wages, Damages for Employee Misclassification

May 25, 2012

Wal-Mart Stores, Inc. continues to make top headlines in employment news--this time for agreeing to pay nearly $5 million to over 4,500 employees across the country, after a U.S. Department of Labor (DOL) investigation discovered that the retail giant violated the overtime provisions of the Fair Labor Standards Act (FLSA) and engaged in employee misclassification.

According to the DOL's Wage and Hour Division press release, Wal-Mart Stores, headquartered in Bentonville, Arkansas, engaged in employee misclassification by classifying former and current asset protection coordinators and vision center store managers at nationwide Wal-Mart Supercenters, Neighborhood Markets, Wal-Mart Discount Stores, and Sam's Club warehouses as exempt from the overtime requirements of the FLSA. The WHD found that these misclassified employees were actually nonexempt, and therefore owed proper overtime compensation for any hours worked beyond forty hours in a workweek.

As Vincent Howard regularly reports in Howard Law's employment lawyers blog, the misclassification of employees continues to plague the workplace on a state and federal level--adversely affecting employees and employers alike. When an employee is misclassified as exempt from the FLSA they are often denied access to important employee protections under the act, such as minimum wage payment, overtime compensation, and unemployment insurance, among other benefits. Employee misclassification also poses a threat to law-abiding employers who play by the rules--as dishonest employers gain an unfair advantage by violating the FLSA. According to the DOL, the act of misclassifying employees also creates a great loss for the state workers' compensation funds, along with unemployment insurance.

The FLSA does provide an exemption from both the overtime payment and minimum wage requirements for workers who are employed in administrative, executive, professional and outside sales position roles, as well as certain computer employee roles. To qualify for an FLSA exemption, an individual must meet specific tests and requirements in regard to their employment duties, and be paid on a salary basis of no less than $455 a week. An employee's job title does not determine whether the employee should have exempt or nonexempt status.

Labor Secretary Hilda L. Solis stated that this Wal-Mart wage and hour settlement should serve as a sign to other companies--that the DOL will not hesitate to take action when FLSA violations are found, in order to ensure that employees receive their hard-earned wages.

Vincent Howard frequently discusses the federal the FLSA requirements--that all nonexempt employees covered by the act are paid a federal minimum wage of $7.25 for all hours worked, with one and one-half their normal payment rates for any hours worked over forty hours per week, including bonuses, incentive payment and commissions. The FLSA also requires that employers keep accurate payroll and time records.

Under the employee misclassification settlement, Wal-Mart has agreed to pay $4,828,442 in back wages and damages, along with an additional $463,815 in civil money penalties. Wal-Mart reportedly corrected its classification practices for these employees in 2007, and since that time, the department has been negotiating over the back payment issues. According to the DOL, a third-part administrator will give out the payments to the employees affected in this settlement.

If you, or someone you know in Orange County, California have suffered employee misclassification in the workplace, contact Vincent Howard at Howard Law, PC today for a free consultation about your California and federal rights.

Department of Labor (DOL): Wage and Hour Division (WHD)

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