The Issues Surrounding the Violations of Labor Laws and Inequitable Practices by Wal-Mart

Wal-Mart originated with humble beginnings, a single store in Bentonville, Arkansas and forty-four years later has become the largest retailer in the world, with estimated annual sales of nearly $300 billion. While many customers polled in surveys agree that it is a great place to shop, in recent years it has become apparent that it may not be the best place to work; due in part to several violations of labor laws and inequitable practices impacting its employees.

In recent years, there have been a number of class-action lawsuits filed against Wal-Mart for forcing employees to work through rest breaks and after their normal working hours without due compensation. A shared philosophy among store managers was that employees worked until the job was complete; if unsuccessful in completing their daily duties during their eight-hour shift, they would have to work off the clock to finish a job. Common practices included after hours lock-ins, where employees were locked in the store after closing, off the clock, and were not able to quit until all work had been completed. There are documented cases where employees sustained injury at work and still were not permitted to leave during the lock-in time frame.

Corporate headquarters also strongly encouraged store managers to reduce labor costs using questionable means. Yet another practice involved the use of the “one-minute clock-out.” Managers would clock employees out one minute after their lunch break began; meaning employees wouldn’t get paid for four plus hours of work. Employees were explicitly told that “overtime pay could not show up on the store reports” (Stanwick & Stanwick, 2009, p. 410).

In a deposition by a senior payroll executive at Wal-Mart, it was revealed that the corporate headquarters allows store managers a total target monthly payroll expense and each store must stay below that limit. Managers would literally delete overtime hours from employees’ timecards, so they wouldn’t be properly compensated; in violation of federal law. According to (Stanwick & Stanwick, 2009) it was revealed that a specific corporate objective of Wal-Mart was to keep labor costs at eight percent of sales; the industry average is nine to 10 percent.

A number of state class-action lawsuits have been settled for more than 150,000 employees resulting in over $150 million dollars in payouts. During the last decade or so, widespread reports of sex discrimination with regard to pay disparities, promotion policies, and general employee relations practices were uncovered. In June 2004, a San Francisco sex discrimination lawsuit achieved class-action status, covering 1.6 million current and former Wal-Mart employees – “the largest class-action sex discrimination lawsuit ever to be filed in the United States” (Stanwick & Stanwick, 2009, p. 412).

Wal-Mart officials have made stereotypical assumptions that women aren’t interested in management positions within the company. There are plenty of companies who have women in leadership roles within their respective industries. I believe that these actions are clearly discriminatory in nature towards women. For this reason, in my opinion Wal-Mart can be considered a type of “good old boys club.” However, their approach to diversity is expressed legitimately on the company website. “We are committed to nurturing an inclusive culture to retain our talent and help them reach their potential. Once we hire the right people, with varied perspectives and ideas, it’s essential to develop them and their careers so they can deliver on our mission to help people save money and live better”. (Wal-Mart, 2014).

A precedent has been set in recent years in the ruling of the Supreme Court with regard to the rising number of class-action lawsuits. Due to the financial impact upon companies, along with the long term competitive disadvantage these suits can contribute, they don’t typically accomplish as much as targeting the individuals responsible for their losses instead. Focusing on those most at fault could realign the incentives of these suits, especially considering that many high-level employees make millions in salaries and bonuses every year. In my opinion, it makes sense to hold only a few, rather than the company as a whole, financially accountable for their actions to discourage bad behavior by their peers in the future.

On June 20, 2011 the Supreme Court handed down its most anticipated employment law ruling of the year. It said a huge lawsuit on behalf of 1.5 million female Wal-Mart employees cannot proceed as a single class-action case. (The HR Specialist, 2011, p. 1)

According to the site Work Place Fairness (2014), a 2004 internal audit revealed that Wal-Mart executives have been aware of state and child labor law violations since 2001. Time cards recording a one-week period exposed over 1,300 specific violations where employees under the age of eighteen worked past midnight, during school hours, and more than eight hours a day. Additional practices included not allowing under-age workers to take meal or rest breaks; in addition allowing them operation of dangerous machinery, which could result in serious injury or even death, violations of state laws. Through settlements and class action lawsuit damages awarded, Wal-Mart has paid tens of millions of dollars for its numerous labor law violations against under-age employees.

Nancy Delogu, a Washington, D.C.-based attorney says: “In essence, it’s no longer enough for a group of plaintiffs to say, ‘We were discriminated against based on our gender,’ or age, or race, or other protected classification.” Now, in order for the claims to proceed as a class, they must allege that each was discriminated against in the same way-meaning that the discrimination to each resulted from the same policy, decision, or set of facts.” (The HR Specialist, 2011, p.2)

Furthermore, in September 2005 a labor advocacy group, The International Labor Rights Fund, filed a lawsuit against Wal-Mart for neglecting to enforce the company code of conduct with Wal-Mart suppliers. (Stanwick & Stanwick, 2009, p. 419). Specifically, the lawsuit alleged that Wal-Mart failed to verify whether suppliers were in compliance with fair labor practices, to include forced labor without due compensation, a clear violation of federal statutes. “Everyday Low Prices,” but at what cost? In the advent of these recent rulings, it likely is a relief for the corporate powers and stockholders. However, large retailers face a host of ethical issues one way or another. The Wal-Mart Corporation has established business ethics policies and practices, but these codes are only as reliable as the manager who exercises ethical and moral judgment in executing the various elements within their personal code of conduct, as well as their corporate code of conduct. A great extent of future legal battles may be diminished, yet the issues remain still requiring meaningful resolution.