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November 04, 2005
Inspector General Criticizes Wal-Mart Agreement

The inspector general of the Department of Labor has issued a report criticizing the department's agreement to give Wal-Mart 15 days' notice before an investigation.

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The report said no law or regulation was broken, but it raised questions about the process for negotiating, developing, and approving such agreements. The report concluded that a significant breakdown occurred in the review and approval of the Wal-Mart agreement.

The report contended the breakdown resulted in the department entering into an agreement that gave significant concessions to Wal-Mart.

Specifically, the agreement provided the department's Wage and Hour Division (WHD) must notify Wal-Mart 15 days prior to investigations, and gave Wal-Mart the ability to avoid civil money penalties under certain conditions.

In exchange, the agreement primarily committed Wal-Mart to continue measures that were already in place or required by law, according to the report. Also, the report faulted the department for failing to consult with the Office of the Solicitor (SOL) in developing and approving the agreement.

"The provision in the Wal-Mart agreement requiring WHD to notify Wal-Mart 15 days prior to any WHD audit or investigation is inconsistent with WHD policy," according to the Inspector General's report.

The WHD and Wal-Mart entered the agreement to settle allegations that Wal-Mart violated child-labor law by allowing young workers in New Hampshire, Connecticut, and Arkansas to operate hazardous equipment. The New York Times first reported the agreement, and Democrats and labor groups quickly criticized it. Rep. George Miller of California requested the inspector general's review.

The inspector general's report said Wal-Mart attorneys authored key provisions of the agreement. The Department of Labor said the agreement applies to only child labor audits, but the inspector general's report said Wal-Mart's attorneys edited language in the agreement that may expand the scope.

"The effect of this change, on its face, is that Wal-Mart must receive a 15-day notice prior to WHD initiating an audit or investigation that relates to any law enforced or administered by WHD, not just child labor violations." the report said.

The report added: "Although we agree this is a 'child labor' agreement stemming from child labor violations, it does not mean that every clause is relevant only to child labor, no matter how it is worded. There is no other interpretation of the explicit replacement of the words 'child labor' with 'any' WHD audit or investigation."

The Department of Labor defended its position by saying that since the start of the agreement, it has never given the company notification before investigations involving rules other than child labor.

In addition, the department said it disagrees with the report's characterization of the effectiveness of the Wal-Mart agreement.

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