Huge Wal-Mart settlement spotlights OT, breaks — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Huge Wal-Mart settlement spotlights OT, breaks

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In what’s being described as the largest settlement ever for wage-related lawsuits, Wal-Mart recently agreed to pay as much as $640 million to settle 63 pending lawsuits over wage-and-hour violations.

Most of the cases involved hourly employees’ Fair Labor Standards Act (FLSA) claims that they weren’t paid for overtime or off-the-clock work, and that Wal-Mart violated state law by preventing workers from taking legally mandated rest breaks (see box for link to state laws).

The cases were spread over 42 states and will cost Wal-Mart at least $352 million. The amount could reach $640 million, depending on the amount of claims submitted by class members. As part of the settlements, Wal-Mart agreed to use various electronic systems to help comply with wage laws.

Expect the highly publicized settlements to inspire more workers to sniff out possible wage violations in their own workplaces.

A BusinessWeek report says overtime litigation “has exploded nationwide” in recent years, adding that, “because wage and hour laws have been so widely violated, undetonated legal land mines remain buried in countless companies.”

President Obama has indicated he will make wage-and-hour enforcement a priority in his administration. In July 2008, Obama, then a U.S. senator, sent a letter expressing concern that the U.S. Department of Labor (DOL) wasn’t doing enough to prevent overtime violations and punish violators.

In 2004, the DOL tried to simplify the rules defining which white-collar workers are exempt from overtime pay. But rather than calming the waters, the new rules actually churned up more disputes and lawsuits. Two other new examples:

  • Macy’s and Bloomingdale’s stores in California agreed to pay $25 million to 200,000 employees to settle charges that the stores denied state-mandated meal and rest breaks to retail workers.
  • A Massachusetts-based temp agency, TAC Worldwide, paid $1.8 million to settle claims that it misclassified 973 workers as exempt from overtime.

Bottom line: It’s cheaper to review compliance on your own before a plaintiff’s attorney forces you to.

The biggest mistake: classifying nonexempt employees as exempt. To help determine the classification of your employees, use our free, easy-to-use “Exempt vs. Nonexempt” checklist, available at

Regarding breaks, federal law does not require you to offer meal or rest breaks. However, if you do provide breaks, you must compensate employees for breaks if they last less than 20 minutes. If the break extends beyond 20 minutes, you don’t need to pay as long as the worker is completely relieved of his or her duties.

About half the states do require you to offer meal or rest breaks in certain situations.

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