Imagine a world in which criminals were able to determine their own penalties.  Undoubtedly, this would create an incentive to break the law and then provide oneself with rewards for doing so.  If you think this scenario sounds absolutely perverse, think again.

Between 1998 and 2002, there were two dozen allegations that Wal-Mart had violated federal child labor laws by requiring teenagers to use hazardous equipment, such as chain saws and loading paper bales.  Considering that the retail giant has been accused of discriminating against women, violating wage and hour laws, and, as David wrote last week, pushing the limits of legality with its new health care policy, the image of a child, donned in a blue apron  with a smiley-face logo, flailing around a Wal-Mart store with a chain saw might not be surprising.

What is more appalling than the alleged acts is the way the Labor Department handled the case.  The agency went behind closed doors and entered into a secret agreement with Wal-Mart on January 6, the details of which were not made available to the public until the NY Times uncovered them in mid-February.  

The substance of the agreement was questionable at best.  Wal-Mart agreed to pay a fine of $135,000 (the equivalent of 15 seconds worth of sales for the corporation).  In exchange, the company received a guaranteed 15 days' notice before DOL would initiate future investigations.  

The substance of the agreement, or lack thereof, led to justified outrage among workers' advocates in Congress who immediately called for an investigation into the process by which it was formed.  How could it possibly be that Wal-Mart was accused of violating the law and yet ended up with a "penalty" providing it the benefit of advanced notice whenever complaints were made against it?  If anything, the alleged violation seemed to have put Wal-Mart in a better position relative to federal law enforcement than it was previously.

Yesterday, the Labor Department's Inspector General issued a report summarizing the findings of his investigation.  The IG concluded that "serious breakdowns" in the settlement process led to "significant concessions" to Wal-Mart.  In fact "significant provisions were authored by Wal-Mart attorneys and never questioned by" Labor Department investigators. Moreover, the Solicitor of Labor's office was not asked to review the settlement or participate in negotiations.

It is difficult to determine whether it should be comforting or horrifying that the settlement appears to be more the result of the Labor Department's incompetence than Wal-Mart's malice.  In any event, the settlement, both in substance and process, seriously undermines important legal protections that are meant to achieve a balance of power between working and corporate America.  

That the Labor Department was asleep at the wheel, essentially allowing Wal-Mart to drive, puts the retailer's 1.5 million employees in a  vulnerable position by creating an incentive for continued wrongdoing.