Wal-Mart Raises Manager Salaries Ahead of Overtime Rule

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By Ben Penn

Oct. 11 — Wal-Mart raised manager salaries to a minimum of $48,500 to get a head start on compliance with the Labor Department’s overtime rule, a company spokesman told Bloomberg BNA.

Under the rule, which takes effect Dec. 1—the first week of the post-Thanksgiving holiday shopping season—workers earning below $47,476 are eligible for time-and-a-half pay when exceeding 40 hours in a workweek. Wal-Mart Stores Inc., the nation’s largest employer, decided it would rather incur higher payroll costs now than begin to track hours and potentially pay time-and-a-half to managers during such a busy time of year.

The DOL rule more than doubles the overtime salary threshold from its current level of $23,660.

The Wal-Mart strategy, which began last month, could offer a window into how other big-box retailers plan to deal with the controversial DOL regulation.

But raising salaries above the new threshold for overtime exemption won’t necessarily be feasible for certain smaller businesses or companies located in lower cost-of-living regions.

Enforcement Begins During Holiday Rush

“These changes align with our commitment to invest in our associates,” Kory Lundberg, a Wal-Mart spokesman, said in an e-mail. “The new pay structure went into effect in early September because we wanted to make these changes before the very busy holiday season.”

Previously, entry-level salaried managers earned a starting rate of $45,000 per year, he said.

The Wal-Mart move affected salaried workers at all of its nearly 5,000 units. Sam’s Club, which is owned by Wal-Mart, will lift manager minimum salaries to $47,500 at the end of November, Lundberg said.

Wal-Mart didn’t provide an estimate of the total number of employees receiving raises. Job classifications subject to the salary increase included assistant mangers, auto care center managers, asset protection managers, training academy managers and HR managers, Lundberg said.

Retail Heavily Affected by Rule

Retail, the industry with perhaps the most total workers affected by the DOL rule, has lobbied heavily against it. The National Retail Federation, which includes Wal-Mart as a member, supports pending litigation and legislation opposing the rule.

Two lawsuits filed last month in federal court in Texas are seeking an injunction to stop the regulation, and several bills introduced in Congress would either delay the rule’s effective date or end it altogether.

Both those strategies face long odds, and Wal-Mart decided it’s not waiting to see how they shake out before instituting changes.

Wal-Mart previously urged the Obama administration to phase in the new salary threshold over a five-year period. The retailer’s CEO discussed his concerns with the rule with the White House in the weeks before the DOL finalized it in May.

To appease employers, the DOL revised downward a proposed salary threshold of $50,440 and also allowed a longer period before enforcement begins.

Salary Not the Only Factor

By earning more than the $47,476 level, Wal-Mart employees aren’t automatically excluded from overtime eligibility. Workers must also perform managerial duties to satisfy the Fair Labor Standards Act’s test for overtime exemption.

Plaintiffs’ attorneys have said that they’ll be keeping an eye out for companies that classify workers paid at least $47,476 as exempt managers yet still task them with nonmanagerial duties.

Other Retailers Won’t Follow Suit

The DOL has said that the regulation will boost worker paychecks either by making them newly eligible for overtime wages or by employers raising their pay up to the new threshold.

However, employers bringing in less profits than Wal-Mart are searching for other solutions.

For instance, retailers with many managers in rural areas are choosing instead to convert them to hourly status, Tammy McCutchen, a principal at Littler Mendelson P.C. in Washington, told Bloomberg BNA.

Wal-Mart’s big-box competitors weren’t as forthcoming in divulging details of their plans to respond to the overtime rule.

“Target typically doesn’t disclose specifics around compensation,” spokeswoman Molly Snyder told Bloomberg BNA via e-mail. “However, we will be in full compliance with the rule in advance of the deadline.”

“The Department of Labor’s new overtime rules will not have a significant impact on Costco’s operations,” Patrick Callans, the company's senior vice president of HR and risk management, told Bloomberg BNA in an e-mail. “Our compensation ranges for salaried managers in our warehouse (retail), distribution and manufacturing locations, which are consistent across the country, are and have been well above the standard salary levels established in the DOL’s new rules.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bna.com

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