ETHICAL ISSUES INVOLVING
WAL-MART STAKEHOLDERS
Employee Stakeholders
DISCRIMINATION The U.S. Equal Employment Opportunity Commission (EEOC) has filed fifteen lawsuits against Wal-Mart since 1994. Of these, ten are still pending, and five have been resolved.
FEMALE EMPLOYEES Although women account for more than 67 percent of all
Wal-Mart employees, women make up less than 10 percent of top-store managers.
Wal-Mart insists that it adequately trains and promotes women, but in 2001 a Wal-Mart executive conducted an internal study that showed the company paid female store managers less than men in the same position.
In June 2004, a federal judge in San Francisco granted class-action status to a sexdiscrimination lawsuit against Wal-Mart. It is the largest class-action lawsuit and involves
1.6 million current and former female employees at Wal-Mart. It claims that Wal-Mart discriminated against women in promotions, pay, training, and job assignments. Even
Wal-Mart concludes in its annual report that if the company is not successful in its appeal of the class-action certification of the case, the resulting liability could be material to the company.
DISABLED EMPLOYEES In January 2000, Wal-Mart agreed to pay two deaf applicants
$132,500. The two applied to work at a Wal-Mart in Tucson, Arizona, but were denied employment because of their disabilities. Wal-Mart agreed to hire the two men as part of the settlement and to make corporate-wide changes in the hiring and training of new employees who are deaf or hearing impaired. However, in June 2001, for failure to comply with the original court order, Wal-Mart was fined $750,200, ordered to produce and air a TV ad stating that it had violated the Americans with Disabilities Act
(ADA), reinstate William Darnell (one of the disabled workers), and create computerbased learning modules in American Sign Language and provide ADA training.
Another EEOC case took place in December 2001. The lawsuit alleged that Wal-
Mart’s preemployment questionnaire “Matrix of Essential Job Functions” violated the
ADA, and the EEOC resolved the suit with a $6.8 million consent decree. In 2002 Wal-
Mart agreed to pay $220,000 for rejecting a pregnant applicant. In February 2005,
Wal-Mart paid a $7.5-million jury-verdict fine to a disabled former employee in a classaction lawsuit. SWEATSHOP WORKERS Another class-action lawsuit accuses Wal-Mart Stores Inc. of failing to monitor labor conditions at overseas factories that allegedly maintained sweatshop conditions. The plaintiffs are fifteen workers in Bangladesh, Swaziland, Indonesia,
China, and Nicaragua who claim they were paid below minimum wage in their country, forced to work unpaid overtime, and in some cases even endured beatings by supervisors. It also includes four California workers who claim that Wal-Mart’s entry into southern California forced their employers to reduce pay and benefits. The lawsuit could cover a class of anywhere from one hundred thousand to five hundred thousand workers.
ILLEGAL IMMIGRANTS In October 2003, federal officials raided Wal-Mart stores across the United States and arrested 250 illegal immigrants working on cleaning crews at sixty-one stores in twenty-one states. The undocumented workers were from Mexico, eastern Europe, and other countries and were employed by several contactors used by Wal-Mart.
The investigation by the U.S. Immigration and Customs Enforcement evolved out of two earlier immigration probes in 1988 and 2001 and ended in March 2005 with a landmark $11 million civil settlement. Twelve corporations that provided janitorial services to Wal-Mart stores agreed to forfeit an additional $4 million and to enter corporate guilty pleas to criminal immigration charges.
However, according to a Wall Street Journal article in November 2005, three top
Wal-Mart executives knew that its cleaning contractors used illegal immigrants who worked as many as seven days a week for less than the minimum wage. The executives allegedly encouraged the cleaning contractor to make “shells” of the company so that they could continue to hire the contractor if one of the companies was closed for hiring illegal workers. (Shell companies are created for either hiding something illegal or unethical. The company is called a shell because outsiders see it as a company, but in reality, many are just mail drops.)
Even after agreeing to make sure that no people working for Wal-Mart were illegal immigrants, another raid by federal, state, and local authorities in November 2005 netted 125 illegal immigrants. The illegal immigrants were arrested at a Wal-Mart construction site. The workers had been building a 1 million-square-foot distribution center in eastern Pennsylvania. In December 2005, another 14 illegal immigrants were arrested while installing shelves at one of Wal-Mart’s distribution centers in Nebraska.
LOW BENEFITS To work full time at Wal-Mart, an employee works a minimum of just 28 hours. Although wages tend to be higher than minimum wage, the few hours that employees are allowed to work ensures that associates can barely cover living expenses.
This means that the taxpayer has to pay the difference. According to “The
Case Against Wal-Mart,” a typical Wal-Mart store with two hundred employees costs federal taxpayers $420,750 per year—about $2103 per employee. This pays for free and reduced lunches for Wal-Mart families, housing assistance, federal tax credits and deductions for low-income families, additional child tax credits, federal health-care costs of moving into state children’s health insurance programs, and low-income energy assistance
(electric and gas bills).
Wal-Mart fails to provide health insurance to more than 60 percent of its employees.
Part-time employees are excluded from Wal-Mart’s health program, and the company has an extra-long waiting period before employees become eligible for its health-care program. Even then, many are not eligible if they work part time, and those who are covered are underinsured. For employees who can get coverage, the deductibles can be prohibitively high for such low-income families, who then have to pay for most of the expenses themselves.
In a leaked Wal-Mart memo to the board of directors, Susan Chambers, Wal-
Mart’s executive vice president for benefits, described how 46 percent of Wal-Mart employees are uninsured or on Medicaid. The memo detailed how Wal-Mart’s health plan requires such high out-of-pocket payments that the small number of employees hit by a very costly illness “almost certainly end up declaring personal bankruptcy.” The memo also proposed that Wal-Mart rewrite job descriptions to involve more physical activity, in part to “dissuade unhealthy people from coming to work at Wal-Mart.”
Another influence of Wal-Mart is the downward pressure on wages and benefits in towns when Wal-Mart enters the area. To compete against the retail giant, other stores in the area reduce their wages by about 3.5 percent. Overall payroll wages including
Wal-Mart wages are reduced by 5 percent. But even with the decrease in wages, many stores still go out of business, causing many local residents to lose their jobs.
According to the advocacy group Good Jobs First, Wal-Mart has received more than
$1 billion in public subsidies just for building its stores (not counting the cost to state and local governments of picking up health-care costs of Wal-Mart employees).
WORKING CONDITIONS In December 2005, Wal-Mart was ordered to pay $172 million to more than one hundred thousand California employees in a class-action lawsuit that claimed that Wal-Mart routinely denied workers meal breaks. California has a law that requires a thirty-minute meal break within the first five hours of a shift or an extra hour’s pay. The employees also allege that they were denied rest breaks and that Wal-Mart managers deliberately altered timecards to keep people from earning overtime. Hours were regularly deleted from time records, and employees were reprimanded for claiming overtime. Another similar case in New Mexico and Colorado in 2000 ended with Wal-Mart reportedly paying $50 million to sixty-seven thousand employees. According to www.WalMartFacts.com, forty pending wage-and-hour cases are currently seeking class certification. Wal-Mart states that any manager who requires or even tolerates “off-the-clock” work would be violating policy and labor laws.
UNIONS Germany is the only place where Wal-Mart employees currently are unionized.
Employees in German Wal-Mart stores have thirty-six days vacation a year and are paid overtime. Wal-Mart has, according to some sources, spent a considerable amount of money and resources on ensuring that Wal-Mart employees in the United
States and the other fifteen countries in which it does business do not unionize. It has been alleged that when the word union surfaces in a Wal-Mart, the top dogs in Bentonville are called and action is taken immediately to thwart any union movements:
◆ In a Wal-Mart store in Loveland, Colorado, some employees in the Tire and Lube
Express wanted to unionize. Wal-Mart found ways, according to some workers, to intimidate and brainwash its employees to pressure the few pro-union employees.
Wal-Mart also hired more workers for the Tire and Lube Express to dilute the
298 PART 5 ◆ CASES
9781111219697, Business numbers who would vote for the union. The pressure ensured that once again
Wal-Mart did not become unionized.
◆ In 2000 when seven of ten butchers in a store in Jacksonville, Texas, voted to join the United Food Workers Union, Wal-Mart responded by announcing that henceforth it would sell only precut meat in all of its supercenters, fired four of the union supporters, and transferred the rest into other divisions.
◆ In Canada, the United Food and Commercial Workers organized at Jonquiere,
Quebec, Wal-Mart in 2004. In 2005 the retailer closed the store, claiming it was losing money and that union demands would prevent it from becoming profitable.
Wal-Mart is now facing a tough decision in China. If it wants to continue its growth into China, it might have to accept a union. According to some reports, employees in Chinese Wal-Marts were warned against speaking with trade-union officials during working hours. Poor working conditions in China and low wages are generating social unrest, and the government it trying to craft a new set of labor laws that give workers greater protection. These laws are likely to give greater power to the All-China
Federation of Trade Unions. Whether Wal-Mart is forced to accept a union remains to be seen. As for Sam Walton, Wal-Mart’s founder, he believed that unions were a divisive force and would make the company uncompetitive.
