ano Issue Identification and Analysis and Evaluation should be used to define final Recommendations step. Guidelines for Analyzing Cases Problem and Issue Identification 1. What is the major overriding ethical issue in the case? (This is not a 2-sentence answer.). 2. What are the central facts of the case? The facts related to what you describe as unethical behavior should be included in this section. 1. 3. What sub-issues or related issues are present in the case that merit consideration now? Analysis and Evaluation Who are the stakeholders in the case and what are their stakes? What challenges, threats or opportunities are posed by these stakeholders? 2. What economic, legal, ethical, and philanthropic responsibilities does the company have, and what is the nature and extent of these responsibilities? 3. If the case involves company actions, evaluate what the company did or did not do in handling the issue affecting it. Recommendations 1. What recommendations do you have for this case that address the different issues? What action should the company take now? Why? Be as specific as possible. List 3 options as well as the pros and cons of each option. Mention and discuss any important implementation considerations. This is NOT a short 2-paragraph answer. 27, 2016), BI. Road for the American and Global Economies." Time (November 2, 2015), 28. 69. Krantz, 134. CASE 2 Walmart's Labor Practices Historically, the primary criticism of Walmart, the world's largest company, has been its impact on communities and small merchants. Anti sprawl acti- vists and small-town merchants, in particular, have communities. In Case 1 - Walmart: The Main Street taken issue with the company moving into their Merchant of Doom, these issues were presented in some detail. In the past decade or so, however, other issues concerning the company have become important as well and have begun dominating the news. In partic- wlar. Walmart's labor practices and treatment of its employees have raised many issues in public and busi- es discussions. Paradoxically, Walmart refers to its employees as "associates," a term intended to bestow more lofty status on its human resources than the term "employees." Many consumers and citizens do view Walmart as an excellent provider of jobs in communities, and in spite of criticisms that have been raised, people con- tinue to seek out employment with Walmart. Though it has high turnover, it is viewed by countless job seekers as a stable place to work, and some individuals have sought to establish careers at the company. In 2013, Walmart was ranked #27 in the top fifty of "World's Most Admired Companies" in the annual Fortune magazine rankings. By 2016, it had fallen to position #42. In spite of Walmart being ranked highly for years, Fortune writer Jerry Useem asked, "Should we admire Walmart?" He goes on say, "Some say it's evil. Others insist it's a model of all that's right with America. Who are we to believe? For information about Walmart, review Figure 1 in Case 1 Many different employee-related issues with respect to Walmart have been the focus of a great deal of news coverage in the past few years, and it is the purpose of Case 2 to explore those issues in more detail. The company has been accused of hiring too many part-time workers; offering jobs that are actu- ally dead-end; paying low wages and poor benefits; forcing workers to work "off-the-clock," that is, to work overtime without overtime pay; and taking advantage of undocumented immigrants. Over the years, the company has also been accused of gender discrimination against women, who occupy most jobs at the company. Coupled with these allegations of employee treatment, the company, which currently is not unionized, has fought unions and unionization everywhere it locates. Figure 1 presents some basic information about Walmart and its associates Over the past several years, income inequality has become an important issue in the United States and worldwide and this has exacerbated the low-wage accu- sations against all merchants, especially the big box stores. In addition, the minimum wage debate in the United States has been percolating to the top of news stories and a number of different cities and several states have been striving to move to a $15 minimum wage level. The "living wage movement has continued to argue for minimum wage increases and this move- ment seems to be gaining some momentum even in the face of a sour economy and some companies having to lay off workers because they cannot afford higher min- imum wages. These national trends have created a backdrop against which Walmart and other stores that rely on many entry-level jobs have had to deal in recent years. However, most of Walmart's employee challenges began years ago. to "This case was Georgia. Revised and Updated in 2016. prepared by Archie B. Carroll, University of 634 Case 2: Walmart's Labor Practices FIGURE 1 Recent Facts (2016) About Walmart's Employees/Associates Walmart employs more than 1.3 million "associates in the United States. Walmart promotes about 170.000 people every year to jobs with higher pay and more responsibility, . Women make up more than 57 percent of the U.S. Walmart workforce Walmart employs 784,000 female assochates Forty-two percent of the women are in management positions. Thirty-two percent of the women are corporate Walmart USA employs more than 279,000 African-American associates, more than 185,000 Hispanic associates and more than 1,000 Asian associates . Over the period 2012-2014, over 50 percent of the new hires at Walmart were women. Over the same three-year pericol, 15.1 percent of the new hires were people of color. (More recent data available.) In May 2015 Walmart announced it would guarantee a job offer to any eligible U.S. veteran honorably discharged In February 2016, the minimum wage at Walmart was at least 10 per hour and the average wage of full-time employees was $13 per hour . In terms of health care benefits, benefits for qualified associates at Walmart amount to $22 per pay period. In terms of 401k plan, associates at Walmart can begin contributing on their first day of employment and the company will match this amount up to 6 percent after one year on the job. The company also offers paid sick leave Walmart gives eligible employees a 10 percent discount on general merchandise and select groceries purchased at a Walmart store Source Walmart. "Our people. http://careers.walmart.com/our-people/. Accessed May 18, 2016: "Diversity and Inclusion httpledn.corporate walmart.com/01/b/4c0a18a4530131c8 196c2cbe/2015-diversity and inclusion-report.pdf. Accessed May IR 2016 "Walmart Facts." http:/ews.walmart.com/walmart-facts. Accessed May 18, 2016 "Working at Walmart." http://www. therealwalmart.com/people associates.html. Accessed May 18, 2016 LOW PAY, HARD WORK, QUESTIONABLE TREATMENT Walmart is the nation's largest employer. It employs 2.2 million worldwide-13 million in the United States alone. As such, it is not surprising that it has a large number of interactions with employees, and these interactions will be both positive and negative. Walmart claims to offer "good jobs. (and) good careers," but a number of employees have become vocal in recent years about their working conditions at the company. As with many retailers and service industries, Walmart is accused of offering low pay and few benefits. Many of these employees have been angered by the disparity between their low wages and the company's profits. With the current economic malaise, however, the company's profits have not been high and the company has been strug- gling just as all retailers have Walmart's treatment of employees was true." Ehrenreich claimed she'd heard stories about Walmart workers being mistreated and being asked to work extra hours without overtime pay. During her three weeks there, she said she saw one facet of the mega-retailer that most people who shop there never get to see! Ehrenreich observed that many of the store's cheap- est items were often unaffordable to the workers who sold them because of their low pay. She observed: "when you work for a company who you can't afford to buy their product, you're in trouble." She went on "Here is this store that's oriented toward the lower end of the economic spectrum, but not low enough for its own workers)." She said on one occasion she had to go to the local food bank and she was mistaken for another Walmart worker who had just been there! Of course, some people would say that there is nothing wrong with low pay and few benefits if a business can still find workers willing to work there. After all, in a free market, this is the way the eco nomic system works. And, indeed, one reason Wal- mart has been so efficient and has contributed to nationwide productivity increases is precisely because of its tight controls on labor costs. The McKinsey One Person's Experience Journalist Barbara Ehrenreich, author of the best-seller Nickel and Dimed: On (Not) Getting by in America," spent three weeks working at a Walmart to get insights into whether many of the claims she had heard about 16 consulting group has said that Walmart was respon- sible for roughly 25 percent of the nation's productiv- LABOR UNION RESISTANCE ily gains in the 1990s. Their low prices have also contributed significantly to low inflation. Financial Because of employee complaints and desires to have guru Warren Buffett expressed the opinion that Wal- higher wages and more generous benefits, Walmart employees have been targeted by union organizers mart has contributed more than any other for decades. Walmart's huge size and number of to the economic vigor that is found in America iz employees allows the firm to increasingly set the standard for wages and benefits throughout the U.S. Working Off-The-Clock and Without Breaks economy Across the country, workers in many states have ment reported by some Walmart employees is that of One of the most troubling allegations of unfair treat- tried to get unions organized, but so far they have being asked to work "off-the-clock. This means that not had much success. According to one report, employees are pressured to do overtime work for employees at more than 100 stores in 25 states have which they do not get paid. One employee reported been trying to get union representation. Walmart has that he was asked to work off-the-clock by both the tried in various ways to fight the union organizing store manager and the assistant manager. The allega- efforts. The company has engaged in actions some of which have been judged to be in violation of federal tion is that managers would wait until an employee had cocked out and then say something like, "Do me labor laws. Walmart has been held to be in violation of the law in ten separate cases in which the National stay here?" Before you knew it, four to five hours a favor. I don't have anyone coming in-could you Labor Relations Board has ruled that it has engaged in illegal activities such as confiscating union literature, passed before you got away. According to Walmart's 2015 Annual Report, the company had, indeed, been interrogating workers, and discharging union sym- the defendant in several cases pertaining to wage- pathizers." According to one management consultant Walmart will go to great lengths to keep unions out. and-hour class action since 2002. Settlement was The United Food and Commercial Workers reached on these charges but Walmart has continued (UFCW) union has been most aggressively trying to unionize Walmart across the country. Several full- time union organizers have traveled the country trying to convince employees to agree to a union vote in their The company blamed individual store and depart- store. The UFCW, which represents 1.4 million work- ment managers for any unpaid overtime. They claim ers in the grocery and retail industry, has representa- it is against company policy to not pay for overtime. tives in many different cities attempting to convince However, there is some evidence that managers have workers to sign a card indicating they want a union been under significant pressure from corporate head- vote held at their store. According to the National Labor Relations Board, a workplace needs 30 percent of its workers to sign cards calling for a union election with the number of employees allowed. One attorney to have one held. Unions often try to get 50 percent of for an employee said that headquarters collect reams the employees to sign a card, because they want to of data on every store and every employee and use increase their chances of winning. sales figures to determine how many hours of labor it wants to allocate to each store. Then, the store man- There are several reasons why the unions have not allotted and their store performance is closely moni- been successful in unionizing Walmart. First, many tored on a daily basis. The store managers, in turn, to appeal them." The Pressure Is On quarters to get more work done than can be done Success in Union Resistance agers were required to schedule fewer hours than put pressure on lower managers, and employees start feeling the pressure to work hours without pay. In another case, a former Walmart manager claimed that supervisors had been known to regularly delete hours from time records and even to reprimand employees who claimed overtime hours so the store could keep its labor costs under control. 15 employees feel intimidated by the company and fear signing on with a union. They fear retaliation of some kind, and many of the employees cannot afford to lose their jobs. Second, Walmart has mastered the art and science of fighting unionization. At one point, the company had a "union avoidance program. In this program, the company, with its 626 Case 2: Walmart's Labor Practices Walmart knew contractors were using undocumented workers in their cleaning crews." Walmart claims that it did what it could to ensure that its contractors were hiring legal workers, both before and vast resources, would wear people down and even destroy their spirit One consultant said that each Walmart manager is taught to take attempts at union organizing personally and to consider that supporting a union is like slapping the supervisor in the face." Walmart is considered to be a very sophisticated adversary when it comes to fighting unionization. At one point managers had been asked to call a 24-hour hotline if they ever see hint of unionization taking place, and a labor team can be dispatched to a store under threat at a moment's notice Third, many Walmarts are located in south- er states that do not have a history and tradition of unionization. Regardless, unions in cities in the north continue most recently in Chicago, ferociously fighting the company's plans to locate in historically union ter- ritory, but they have not had great success. These cities are hungry for jobs and cheap products, and these fac- tors seem to win out. In 2014, Anonymous, a network of hacker activists leaked two internal Walmart PowerPoint slideshows. One was a Labor Relations Training presentation for store managers on which it was suggested that labor unions were money grubbing outfits that cared little about the workers welfare." Walmart confirmed the slides authenticity. One slide went on to say the unions just want the associates' money and that they spend the dues money on other things than representing them. After the slideshow episode, one of Walmart's orientation videos was leaked and it revealed more of Walmart's anti-union efforts. Walmart stated that it showed the videos to new hires between 2009 and 2014.25 position, a Walmart spokesman says that the company is not anti-union, it is pro-associate. According to writer Karen Olsson, "Walmart has made it clear that keeping its stores union-free is as much a part of the culture as door greeters and blue aprons." 27 after the raid. Antidiscrimination provisions of the immi gration code limit an employer's ability to investigate an employee's legal status, the company claimed. The com pany claimed that as far back as in 1996, the Immigration and Naturalization Service (INS) filed a complaint against Walmart for requiring prospective hires who were not U.S. citizens to show more verification than that required by law. The company paid $1 million to settle this case." Walmart admitted that it unwittingly may have been doing business with some of the contrac tors that were in violation and that their own investiga tions revealed they were dealing with companies with different corporate identities and names that made it dir ficult to eliminate suspected violators. SEX DISCRIMINATION CHARGES The most serious employee issues Walmart has faced in the past decade or so have been accusations of gender discrimination against women. In 2001, six women filed a gender bias lawsuit against Walmart, claiming they were discriminated against . The case, Dukes v. Walmart, started as an EEOC complaint by Betty Dukes, the lead plaintiff, who claimed she had been trying to get promoted from the cashier ranks nine years." In a landmark decision in June of 2004, a federal judge in San Francisco ruled that the sex discrimination lawsuit could proceed as a class- action lawsuit, affecting as many as 1.6 million cur- rent and former female employees who have worked for the company since December 26, 1998." In Feb- ruary 2007, a federal appeals court upheld the 2004 decision that Walmart must face the class-action bias claim. Walmart appealed the decision but lost. It was said that the company could lose billions of dollars should it be found guilty of sex discrimination in a class action lawsuit. The lawsuit, which has been called the "largest private civil rights case ever," had the potential to go on for years and doubtless will have significant repercussions for Walmart and other companies in the retail and other industries. A summary of the major allegations against Wal- mart included three major areas. First, women claimed they had been denied equal promotions. Sec- ond, women claimed they had been paid less for the same jobs, even when they have more experience. With respect to 14 USE OF UNDOCUMENTED IMMIGRANTS Several years ago, a series of predawn raids by federal agents were conducted in which they rounded up 250 illegal immigrants working as cleaning crews in 61 Walmarts across 21 states. Although technically they were not employees of the company, the company was accused by federal officials of knowing that its contractors were using the illegal immigrants as employees. The Immigration and Customs Enforce- ment program claimed it has wiretaps revealing that Case 2: Wolmart's Labor Practices 627 response The Company's Defense reaching effects Third, women claimed they were subjected to sexist actions and gender stereotyping Lawyers for the plaintiffs argued that top managers a class action. It was estimated that if the company at Walmart knew about the sex bias that was taking lost this lawsuit, it could cost Walmart upward of S1 billion. In addition, a loss would be a terrible blow to pilace in the company. The lawyers argued that its reputation and much improved corporate image." women complained to corporate executives, including Walmart appealed this case and it went to the U.S. then CEO Lee Scott, about pay disparities or sexism and received very little response. They also argued Supreme Court. In 2011, the court rendered its deci sion in a "5-4 decision" in favor of Walmart. The that information was shared with board members and that outsiders complained and got little or no court ruled that the class action suit could not move forward and that each woman would have to file her corporate offices claim individually. The ruling did not decide whether Walmart was guilty of discrimination or not, but the Supreme Court decision will have far Walmart has long argued that it treats its female on the future of class action lawsuits." employees fairly. The company has said that women Changes Made After Sex Discrimination Case do not apply for promotion as often as men, and this Partially as a result of criticism and bad publicity accounts for the underrepresentation of women 37 Walmart had been receiving the company announced The main argument by the company was its opposi- some changes that were planned to improve condi- tion to the lawsuit being categorized as a class-action tions for its workers. In 2004, then CEO Lee Scott Lawsuit. The company argued that decisions about outlined the changes that would be made but indi- employees are made at the individual store level and cated it may take several years before the true impact that a class-action lawsuit is too unwieldy because it of the take place and are felt throughout the thinks it should be able to present evidence defending company. Iself against each individual plaintiff's claims and that One change would include the creation of a compli- This would not be possible in a class-action trial ance group to oversee workers' pay, hours, and breaks. Walmart claimed that in a class-action lawsuit of The company also began testing a new program that this size, it means that store managers will not be would alert cashiers when it is time for them to take a given the opportunity to explain how they made meal break. Another change was the implementation of individual compensation and promotion decisions. a new system that would require employees to sign off The company argued in its appeal of the class-action on any changes that are made to their time cards. The company also planned to implement software that judgment that the class was certified under laws intended would force managers adhere to state employment to provide injunctive relief, that is, to stop a particular rules regarding areas such as how late teenagers can work. While announcing these new policies, Scott men- tioned several times that he was tired of the adverse come changes practice, but that the judge ruled that the class can also seck monetary damages that the company does not think applies to the case. Part of the monetary relief could be punitive damages, but for these to apply, it has to be proven that Walmart management "fostered or recklessly ignored discriminatory practices. The judge concluded that whereas the individual decisions were made at spe- cific store locations, there was some evidence of a corpo- Fale culture of gender stereotyping that may have affected the decisions made at the store level.98 Judge Martin publicity that the company was getting." WALMART STRIVES TO IMPROVE ITS IMAGE AND POLICIES Beginning in about 2005, the company ratcheted up its charm offensive by trying to enhance its public image. Then-CEO Lee Scott admitted that the com- pany was trying to improve its image by being more open to its critics and trying to take specific steps to improve the way the world perceived the company. He admitted that when growth was easier, they could ignore their critics, but as the share price slowed its growth, the company had to start reaching out and being more responsive to the concerns raised.** Jenkins was not ruling on the merits of the case but was simply saying there was some evidence of a corporate culture permeating the organization that may be related to the discrimination, and thus he allowed the case to move forward as a class action. In April 2010, a federal appeals court ruled that the gender discrimination lawsuit could move forward as 625 Case : Walmarts Labor Practices feeding their families resume of 200 workers. The company denied any wrongdoing The labor board dismissed some of the allegations but Walmart sought to improve its image with stake- holders on four fronts. First, in the area of outreach, the continued to investigate others, including a retaliation company opened offices in eight major cities in an case. A resolution to these cases in expected late in 2016. OUR Walmart said it planned to stage attempt to improve conmunity relations and be respon she to local critics. Second, the company met with several 15-day fast leading up to Black Friday, 2016. Thelt hun activist groups seeking to improve its environmental ger strike as in support of a $15 an hour minimum wage impact. Third, the company hired Business for Social and to highlight problems the employees have will Responsibility (BSR), a nonprofit organization, to help it establish better relations with anti-sweatshop advocates In 2015, led by new CEO Doug McMillon, Walman and to strengthen its global labor monitoring program decided to upgrade its investments in its employees Fourth, the company set up quick-response teams in over a two-year period, a criticism that had been hang- Washington and at its Arkansas headquarters, with the ing over the company for several years. The company help of a public relations firm, so that it could be more committed $2.7 billion in wage increases, scheduling responsive to public criticism." It appeared that Walmart After years had finally realized the legitimacy of the "stakeholder improvements, and employee training of complaints about low wages and poor employee effect" "As companies grow and develop, some stake holders become more important than others, and new treatment, Walmart increased its minimum wage to $9 an hour in 2015 and then to $10 per hour in 201655 stakeholders sometimes emerge. *** In 2009, one writer In 2016, Walmart announced that it was closing was exclaiming how Walmart's image had moved from demonto darling, but in the world of public relations more than 150 stores. This will require laying off thou retaining a solid corporate image is a challenging task. sands of workers. The company said it would try to Walmart's struggles with labor and labor unions in place its laid off workers at other Walmart stores. particular, continued in 2011 and 2012 when the com- Those who are not hired by nearby stores will get pany heard rumors about the possibility of a strike on 60 days of pay and severance if eligible as well as Black Friday, the day after Thanksgiving, 2012. Sens and interview skills training. CEO Doug MeMillon ing that billions in sales might be at stake on Black said that the decision to close stores is difficult and Friday, the company was duly concerned. Walmart we care about the associates who will be impacted." learned about a new group, called OUR Walmart, He went on to say "we invested considerable time asses which stood for Organization United for Respect at sing our stores and clubs and don't take this lightly." 58 Walmart. OUR Walmart was a group of employees that had spun off from the United Food and Commer- QUESTIONS FOR DISCUSSION cial Workers International (UFCW) union. OUR 1. Identify and describe the major labor relations Walmart was asking for more full-time jobs with higher issues facing Walmart and the likely stakeholders wages and predictable schedules. Executives at Walmart thought the group to be a serious threat, to be affected however, and hired an intelligence-gathering service 2. Walmart has been said to have excessive power in from Lockheed Martin, contacted the FBI, increased its its relationship with communities. How is its staffing of its labor hotline, and started to manifestation of power with employees similar to prominent employees and activists in the group. Warted to monitor the or different than with communities? Which is the In testimony that later came out, Walmart estimated most serious issue? Why? that about 100 werkers did go on strike on Black Friday, 3. Are many of the allegations by employees at but OUR Walmart claimed it was closer to 400 employ- Walmart just reflections of the changing social ees spread over 1.200 stores. Walmart filed an unfair contract between companies and their workers? labor practice charge against the UFCW in November Are many of the so-called problems just the free- 2012 arguing that the one-day strikes were not legally enterprise system at work? Discuss. protected. In January 2013, the UFCW and OUR 4. Is the practice of being required to work "off- Walmart agreed to refrain from picketing or other con- the-clock" an unethical practice or just to be frontational conduct for 60 days. Later, OUR Walmart charged Walmart with unfair labor practices on behalf expected" in the modern world of work? After all, many salaried employees are expected to work until the job is done" no matter how many hours it takes