Wal-Mart will pay pay $54.25M to settle Minn. lawsuit

Any message Wal-Mart's big price tag — a proposed $54 million settlement of a 7-year-old Minnesota employee lawsuit — sends to other employers may be muted.

The settlement, announced Tuesday, ends one of many lawsuits around the country charging that for years Wal-Mart cut corners on meal and rest breaks for its store employees.

For some employers operating in an economy of crisis, the risk of paying millions in back wages and penalties down the road pales in comparison to the immediate need to slash costs.

"I do not think it will have a huge impact," said David Allen Larson, an employment and labor law professor at Hamline University School of Law. "It will nevertheless remind employers that there is the possibility that they could be sanctioned for wage-and-hour violations."

And while Wal-Mart agreed to maintain electronic systems, surveys and notices to comply with wage-and-hour policies and Minnesota laws, it's unlikely other employers will take it as a sign to be vigilant and make sure their practices are in line.

While some employers learning of eye-popping multimillion-dollar settlements may be prompted to at least re-examine their practices, that may be where it ends.

"There are millions of employers," Larson said after the Wal-Mart settlement was announced. "There are not millions of wage-and-hour inspectors. An employer may say that even though they got Wal-Mart, they're never going to come down and get little me.

A Dakota County judge ruled in July that Wal-Mart violated state wage-and-hour laws 2 million times by not giving employees of Wal-Mart and Sam's Club stores in Minnesota rest or meal breaks in many instances.

Tuesday's settlement allows the Bentonville, Ark.-based retailer to avoid a jury verdict on damages; it was facing potential damages of more than $2 billion. A judge on Jan. 14 will consider whether to approve the settlement.

Wal-Mart spokesman David Tovar said the company's policies are to pay its workers for every hour and to make meal and rest breaks available. Managers who violate its policies are subject to discipline, including firing, he said.

Part of the settlement will go to the state of Minnesota, but that figure was not disclosed. About 100,000 current and former employees who worked for the retailer from September 1998 through Nov. 14 this year are eligible to receive some amount of the settlement, but the amount given to each will vary.

Wage-and-hour lawsuits have become a hot area of employment law. One reason is because of the recent large class-action settlements. Wal-Mart, with 1.5 million U.S. workers, has faced several such lawsuits across the country. It was hit with a $188 million judgment in a similar case in Pennsylvania several years ago and a $172 million verdict in 2005 in California. Wal-Mart is appealing both cases.

There also is ambiguity about who is eligible for overtime. The U.S. Labor Department issued new overtime regulations in 2004, while Minnesota kept its regulations the same, adding to the confusion. Courts have interpreted the state law on required meal breaks different ways. And state wage-and-hour laws and federal law also differ, leaving employers to figure out which law applies. Some employers may be in compliance with state law, but not federal, or vice versa.

"Oftentimes, employers make mistakes with paying employees or following the law," said Penny Phillips, an attorney with Felhaber Larson who advises employers. "If you do not know what the law is, it's easy to break the law. Some employers break it intentionally and some unintentionally."

The wage-and-hour division of the Labor Department wrapped up 30,467 investigations in 2007, recovering a record $220 million in back wages for more than 341,000 employees. The back wages collected in 2007 represent a 67 percent increase over back wages collected in 2001, and the number of workers receiving back wages increased 58 percent since 2001, according to the department.

Wage-and-hour cases run the gamut — from not recording an employee's full pay, failing to pay proper overtime, misclassifying positions to inappropriately exempt employees from overtime pay, not clocking in employees correctly and shorting meal breaks.

In the current economic environment, employers may be more willing to take the risk of getting caught breaking the law.

"The reality is that the enforcement is so spotty on these cases," said Susan Stabile, a University of St. Thomas law professor specializing in employee benefits. "They are willing to take the risk that they are not going to get nailed — and if they get nailed, they pay."

Wal-Mart's high-profile settlements reach back years, with little impact, she agreed.