Wal-Mart Will Pay Up to $640 Million in Settlement

Bloomberg.com - Margaret Cronin Fisk
December 23, 2008

Wal-Mart Stores Inc., the world’s largest retailer, will pay as much as $640 million to settle 63 federal and state class actions claiming the company cheated hourly workers and forced them to work through breaks.

Today’s settlement ends actions pending in most state courts and in federal court in Nevada, and occurs two weeks after a Dec. 9 agreement in Minnesota. The company will record an after-tax fourth-quarter expense of $250 million, or about 6 cents a share.

The agreement comes five weeks before Mike Duke takes over from outgoing Chief Executive Officer H. Lee Scott, who has overseen a sales resurgence and sought to burnish Wal-Mart’s image among environmentalists, politicians and labor groups. Wal-Mart may pay from $352 million to $640 million, potentially less than 0.1 percent of its $378.8 billion in revenue in 2008.

Similar lawsuits in California, Massachusetts and Pennsylvania aren’t on the list of cases settled that was provided by Wal-Mart. Dan Fogleman, a company spokesman, declined to comment on the status of those lawsuits.

Settlement Amounts

The company didn’t disclose what would determine the range of settlement amounts going to the workers. These details will be covered in preliminary approval hearings for the settlements. These hearings haven’t been scheduled.

The settlements include three cases that were scheduled for trial in 2009, on behalf of workers in Missouri, Washington and New Mexico.

The Washington-based group has pressed the retailer to raise wages and benefits and supports the Employee Free Choice Act, which would allow unions to side-step secret ballots that employers can require when workers vote on union representation.

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Wal-Mart, based in Bentonville, Arkansas, faced more than 70 wage-and-hour suits, including class actions claiming the company failed to pay for all hours worked or didn’t properly compensate workers properly for overtime. The workers claim that Wal-Mart’s own records show that hourly employees were cheated. Wal-Mart has denied the allegations.

Wal-Mart Dec. 9 agreed to pay $54.3 million to settle a class-action, or group, suit by Minnesota hourly workers claiming violations of wage and hour laws.

The Minnesota judge found in July that the company broke wage-and-hour laws more than 2 million times and ordered Wal- Mart to give employees $6.5 million in back pay. Wal-Mart settled the case this month, avoiding a trial scheduled for January, in which a jury would have been asked to order the company to pay as much as $2 billion.

Wal-Mart had won decisions denying class certification of wage cases in more than 20 states including New York, Illinois and Maryland. The company had lost such decisions in states including New Jersey, Washington and Missouri.

Other cases haven’t been settled. The retailer lost a $78 million jury verdict in Pennsylvania in 2006 over rest breaks and unpaid work and a $172 million verdict in California in 2005 over meal breaks. Wal-Mart appealed both verdicts.

The Massachusetts Supreme Court in September reinstated a lawsuit against the company brought on behalf of about 67,000 current and former Wal-Mart workers.