WASHINGTON (By Steven Greenhouse, NYTimes) November 1, 2005 — The Labor Department's inspector general strongly criticized department officials yesterday for "serious breakdowns" in procedures involving an agreement promising Wal-Mart Stores 15 days' notice before labor investigators would inspect its stores for child labor violations.

The report by the inspector general faulted department officials for making "significant concessions" to Wal-Mart, the nation's largest retailer, without obtaining anything in return. The report also criticized department officials for letting Wal-Mart lawyers write substantial parts of the settlement and for leaving the department's own legal division out of the settlement process.

The report said that in granting Wal-Mart the 15-day notice, the Wage and Hour Division violated its own handbook. It added that agreeing to let Wal-Mart jointly develop news releases about the settlement with the department violated Labor Department policies.

The inspector general, Gordon S. Heddell, said the agreement did not violate federal laws or regulations.

The Labor Department reached the settlement in January after finding 85 child labor violations at Wal-Mart stores in Connecticut, New Hampshire and Arkansas, involving workers under 18 who operated dangerous machinery, including cardboard balers and chain saws.

Wal-Mart settled the investigation by agreeing to pay $135,540, but it continued to deny any wrongdoing.

In addition to allowing the 15-day notice, the agreement lets Wal-Mart avoid civil citations and fines if it brings a store into compliance within 10 days of when the department notifies it of a violation.

In exchange for these concessions, the inspector general wrote, there was "little commitment from the employer beyond what it was already doing or required to do by law."

"In our view," the inspector general's office wrote about the Wage and Hour Division, "the Wal-Mart agreement may adversely impact W.H.D.'s authority to conduct future investigations and issue citations or penalty assessments, and potentially restrict information to the public."

Responding to its inspector general, the Labor Department said it "strongly disagrees with the report's overall characterization of the effectiveness of the Wal-Mart child labor settlement agreement."

The department said the inspector general had wrongly given the impression that Wal-Mart had been permitted to avoid all penalties for violations of wage and hour laws by bringing its stores into compliance.

Even though department officials asserted that the agreement was much like that with other companies, Mr. Heddell found that the agreement between Wal-Mart and the Wage and Hour Division "was significantly different from other agreements entered into by W.H.D." and "had the most far-reaching restriction on W.H.D.'s authority to conduct investigations and assess" fines.

Representative George Miller, the California Democrat who asked the inspector general to investigate the settlement, said the report showed that the Bush administration was seeking to do favors for a powerful friend and a major Republican contributor in Wal-Mart.

"The Bush Labor Department chose to do an unprecedented favor for Wal-Mart, despite the fact it is well known for violating labor laws, including child labor laws," Mr. Miller said. "The sweetheart deal put Wal-Mart employees at risk, undermined government effectiveness, and further undermined public confidence that the government is acting on its behalf."

Mr. Heddell said he did not find that the agreement resulted from improper pressures. "Nothing came to our attention indicating evidence of influence or pressure from internal or external sources," he wrote.

Martin Heires, a Wal-Mart spokesman, said, "We think it's important to note that the inspector general's office found that the agreement is in compliance with federal law."

"We continue to believe the agreement was the appropriate course of action," he added. "Our goal remains to make sure that our stores are in full compliance in that our associates are fully informed of all policies, regulations and laws that apply to the employment of workers who are 16 and 17 years of age."

The inspector general recommended that the Wage and Hour Division develop procedures for developing and approving agreements and require that all future settlements be developed in coordination with the department's legal division.

The department said that it had developed a new policy on reaching settlements that, it was confident, would carry out the inspector general's recommendations.

The Labor Department said that the advance notification provisions applied only to child labor matters. But the inspector general voiced concern that "the plain language of the advance notification clause applies to any potential violations, not just child labor violations." Department officials say that giving 15 days' notice helps to ensure that Wal-Mart will come into compliance.

The department denied the inspector general's suggestion that it had consulted with Wal-Mart before issuing a news release on the settlement. The department took the unusual action of announcing the agreement a month after it was signed, doing so only after some details were leaked to a newspaper.

The report said: "The inspector general has specific concerns with the Wal-Mart agreement because it contained significant provisions that were principally authored by Wal-Mart attorneys and never challenged by W.H.D., and because it did not receive adequate W.H.D. review and approval."