Wal-Mart Pays the Cost of Misclassifying Employees
The Department of Labor announced today that it has settled a nationwide overtime claim with Wal-Mart. Prior to 2007, the large retail chain misclassified certain vision center managers and security personnel as exempt, which meant these individuals were not paid overtime. After years of negotiation, Wal-Mart has agreed to pay $4,828,442 to approximately 4,500 employees and pay a civil penalty of $463,815. Although most companies are not as large as Wal-Mart, two important lessons can be learned from this settlement. First, an employer must look beyond job titles. Calling an employee a “manager” does not make an employee exempt if job duties do not meet FLSA standards. Second, misclassifications usually impact a group of employees, exponentially increasing the cost of a later wage claim. In Wal-Mart’s case, the average individual share of the overall settlement is less than $1,000 but the aggregate damages and penalties (not to mention legal costs) is enormous.