Misclassification of Nonexempt Employees Leads to Nearly $5.3 Million in Damages
The U.S. Department of Labor (DOL) announced on May 1, 2012, that in accordance with a settlement agreement, Wal-Mart Stores Inc. has agreed to pay $4,828,442 in back wages and damages to more than 4,500 employees nationwide and $463,815 in civil money penalties for misclassifying employees and associated violations of the overtime provisions of the Fair Labor Standards Act (FLSA), the federal wage and hour law.
DOL’s investigation had found that current and former vision center managers and asset protection coordinators at Wal-Mart Discount Stores, Wal-Mart Supercenters, Neighborhood Markets and Sam's Club warehouses are nonexempt under the FLSA and consequently due overtime pay for hours worked beyond 40 in a week. Wal-Mart had classified these employees as exempt from the FLSA overtime requirements.
The FLSA provides that employers who violate the law are, as a general rule, liable to employees for back wages and an equal amount in liquidated damages. Accordingly, Wal-Mart agreed to pay back wages owed in the amount determined by DOL plus an equal amount in liquidated damages. The civil money penalties assessed resulted from the repeat nature of the violations. In 2007, Wal-Mart, which operates more than 3,900 establishments in the United States, had corrected its classification practices for these workers. The delay in reaching settlement was due to negotiations over the back pay issues since that time. A third-party administrator will disburse the payments to the affected employees.
Wal-Mart has paid larger settlement amounts for FLSA violations in the past. In 2007, Wal-Mart agreed to pay $33.48 million to resolve overtime violations affecting 86,680 employees. In 2008, Wal-Mart announced that it would pay between $352 million and $640 million to settle 63 wage and hour suits pending against the company in numerous courts involving state and federal law claims for off-the-clock work, failure to provide required meal and rest breaks, and failure to pay overtime.
Exemptions from the FLSA, generally
The FLSA exempts employees in bona fide executive, administrative, professional and outside sales positions and certain computer employees from minimum wage and overtime pay requirements. To qualify for an exemption, employees must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. It is the specific job duties and salary that determine whether the employee is exempt, not the job title. In addition, employers are required to maintain accurate time and payroll records to show that they have paid their employees correctly.