The National Law Review recently announced a winner in our Law Student Legal Writing Contest. We are pleased to publish the winning article regarding Wal-Mart’s Employment Practices by Courtney Anne Chicvak with St. John’s University School of Law:
“We know nothing of what will happen in future, but by the analogy of experience.” – Abraham Lincoln
I. INTRODUCTION
Wal-Mart is pioneer of the “Big-Box” store business model, which now dominates the American arena of the corporate retail industry. Built upon the bedrock principle of offering “every day low prices,” the retail giant strives to offer the highest quality product for a lower price then competitors, and to do so, reduces input costs by relying upon frugal and efficient business practices. Wal-Mart has minimized labor input costs in their in-store operations by strategically opening stores in rural areas and saturating markets, utilizing distribution networks, relying upon in-store technology and providing minimal in-store customer service. Because of these reduced labor costs, Wal-Mart is able to pass these savings on and can offer lower prices than other retailers. As a result, corporate competitors are forced to adopt a similar business model, while small-town stores are pushed out of business. As competitors begin to adopt the Big-Box business model of replacing labor with capital, thus reducing labor costs, and simultaneously small town stores cannot keep up and close, the result has been a decrease in job opportunities for workers in the surrounding area. In effect, fewer employment opportunities for workers has allowed Wal-Mart, and other similar big box retailers, to retain a greater control over working conditions, including, but not limited to the size of the workforce, wages, and working conditions.
The big-box business model, paired with external economic factors such as high unemployment rates and fewer job opportunities to select from, has left some in-store retail workers dissatisfied with working conditions. Foreseeing the possibility of a dissatisfied workforce, Wal-Mart has animatedly implemented aggressive union avoidance strategies to prevent the organization of in-store workforces. The size and economic power of Wal-Mart has resulted in a massive disparity in bargaining power. As a result, workers have consistently failed in making changes to in-store working conditions.
On November 22 and 23, in-store workers orchestrated and executed a nationwide protest against the working conditions at Wal-Mart stores.[i] Relying upon the internet and a blend of traditional organizing methods, Wal-Mart employees, supported by Alternative Worker Organizations and coalition groups, protested work conditions at 26 Wal-Mart stores in 12 states on Black Thursday and Friday, the biggest day of the year for the nation’s retailers. Distinguishable from the silver bullet strategy relied upon in past protests, where workers organized on a small scale and efficiently targeting individual employment practices, the Black Friday attack on Wal-Mart labor relations relied upon a bazooka strategy, by increasing the scale and scope of the protest. Because both prevalent and relevant nationwide, the protests received enormous attention from the media.
As a result of these recent events, both Wal-Mart and OUR Walmart, a worker’s organization involved in coordinating the employee protests, filed Unfair Labor Practice charges with the National Labor Relations Board. In response to these charges, on January 30, 2013, the NLRB issued an Advice Memorandum offering a temporary resolution to the dispute and a News Release summarizing a settlement reached between OUR Walmart and Wal-Mart.[ii] Although firing allegations of ULP’s at each other may provide short-term relief, it is unlikely that the resolution of these allegations will result in peace between labor and management in big-box retailers such as Wal-Mart. Underlying these claims are the conflicting cultural views of consumerism and solidarity, as well as the policy issues of the increasing disparity of income and the disappearance of the middle class. Vaguely reminiscent of the Pre-New Deal conflict in labor relations, as seen during the 1920’s, the recent events in the retail industry could potentially lead to a public reemergence of the labor union, thus reviving the labor movement and modernize organizing strategies in the 21st century.
II. WAL-MART AND THE BIG-BOX BUSINESS STRATEGY
Wal-Mart is more than the world’s largest retailer: In recent years it has morphed into an economic powerhouse and cultural phenomenon. Wal-Mart is the largest corporation in the world, employs over 1.4 million workers in the United States in 4,602 stores throughout the United States, and had a total revenue of $464 billion in 2012 fiscal year.[iii] Not only has Wal-Mart dominated in the retail arena, it is also the nation’s largest grocer. Super Wal-Mart consumes 19 percent of the grocery sector market-share. Today, Wal-Mart employees represent one percent of total employment and ten percent of retail employment.[iv]
Since the first Wal-Mart opened in Bentonville, AR in 1968, the store has expanded rapidly throughout the United States.[v] While this expansion may appear to bring jobs to these areas, local communities have opposed the opening of Wal-Mart for a variety of reasons. Citizens in these areas argue that Wal-Mart should stay out of their communities to prevent urban sprawl, preserve historical culture, protect the environment and avoid road congestion. But two of the main arguments these locals use are that Wal-Mart does not create as many retail jobs as it eliminates, and consequently, it results in lower wages for workers in their community, particularly in the grocery sector. Wal-Mart executives have denied these claims by reassuring communities that store openings can create more jobs in communities, not just at Wal-Mart, because their low prices will draw more shoppers to the area.[vi] Another argument that Wal-Mart advocates assert is that the store provides the lowest prices possible for consumers, allowing people in the community to save money on their shopping.
A.Wal-Mart Corporate Culture and Philosophy: Everyday Low Prices
Wal-Mart, a new “invention” in the retail sector, is rooted in the philosophy of providing the lowest priced items of the same quality as competitors are offering to shoppers. The origin of this philosophy can be traced back to founder Sam Walton, a man who believed in offering value to customers. By fixating on the numerical aspect of the business, Walton was able to offer products for lower costs then competitors, no matter how slight the cost may be. As to labor, Walton believed workers wages to be an additional operating expense, which increased the cost of production and subsequently the cost of labor would be passed onto the customer.[vii]
Emerging from the philosophy of Walton, the Wal-Mart corporate culture continues to concentrate on offering a value product for customers. This core principle is manifested in the Wal-Mart company motto of offering “Everyday Prices. Everyday” for customers. Deeply embedded in company practices, this philosophy still appears to control most of Wal-Mart’s business decisions.
B. Wal-Mart’s Saturation of Rural Areas
When Walmart stores first opened, one of the primary factors to be considered was the location of the store in relation to the first store in Bentonville, Arkansas. Walton used a saturation method of store openings, where the company used a “spreading out, filling in” strategy. The reasoning behind this method was to connect stores with access to both warehouses, to stock the shelves, and management, to ensure the store was managed properly. Five years after the first opening in 1968, Wal-Mart had 18 additional stores in surrounding states and totaled revenue of $9 million. Wal-Mart continued this opening pattern and “saturated” surrounding areas, depending on the control of store openings and word-of-mouth advertising. Studies have shown that Wal-Mart tends to enter small towns where population growth is expected and projected retail growth was high. Sam Walton described the control and distribution motive as follows:
“[Our growth strategy] was to saturate a market area by spreading out, then filling in. In the early growth years of discounting, a lot of national companies with distribution systems already in place—Kmart, for example—were growing by sticking stores all over the country. Obviously, we couldn’t support anything like that. … We figured we had to build our stores so that our distribution centers, or warehouses, could take care of them, but also so those stores could be controlled. We wanted them within reach of our district managers, and of ourselves here in Bentonville, so we could get out there and look after them. Each store had to be within a day’s drive of a distribution center. So we would go as far as we could from a warehouse and put in a store. Then we would fill in the map of that territory, state-by-state, county seat by county seat, until we had saturated that market area. … So for the most part, we just started repeating what worked, stamping out stores cookie-cutter style” [viii]
C. Wal-Mart’s Supplier Relations
In order to successfully provide high-quality yet low-priced products to customers, Wal-Mart relies on cutting deals with large suppliers by guaranteeing massive orders for lower prices. Surrounding Bentonville, AR, the area “Vendorville” developed containing hundreds of satellite offices of huge suppliers because these companies wanted to develop a relationship with Wal-Mart.[ix] An example of this is Wal-Mart’s relationship with the company Rubbermaid, who is known for high quality plastic goods. In the 1980’s, Rubbermaid’s CEO recognized the potential success for the company and began selling them huge quantities for lower prices than they would usually offer. After a few years though, Rubbermaid began demanding higher prices for their products, but Wal-Mart refused. Wal-Mart realized the power they held over the suppliers because they were able to provide so much business for the companies, and could essentially charge these companies any price, despite how low, and they would have to pay.[x] By buying their products in bulk for much lower costs, Wal-Mart can slash prices lower than their competitors.
Not only has Wal-Mart made deals with suppliers in the United States, they have also began to depend on international suppliers to keep their prices the lowest on the market. By seeking out retailer’s over-seas, they can make deals with companies located in places with lower labor costs and again buy their products from the supplier for lower costs than any other business.[xi]
C. The Consumer Appeal of Wal-Mart
For consumers, shopping at Wal-Mart is appealing for a variety of reasons.[xii] First, these single stores house thousands of products ranging from clothing to produce under one roof. The diverse range of products makes shopping convenient for consumers, because they do not have to go to multiple stores for different products. Second, Super Wal-Mart’s advertisements are based around the idea of “roll-backs,” which are discounted prices. This makes shoppers feel thrifty because they are buying items for the lowest price on the market. Third, the multitude of stores and standardized design breeds familiarity for consumers. If a shopper lives in Williamsport, PA but goes on vacation to Santa Fe, NM, the Super Wal-Mart they go to at home will closely resemble the store they visit thousands of miles away. Each store has a similar layout and sells almost the exact products, which draws shoppers because it is something they normally encounter. Finally, the creators have turned shopping at Super Wal-Mart into an “experience,” where everything from the plastic bags to the oversized neon sign outside makes people easily recognize the store.
D. Pressure on Competitors
The combination of these unique traits has built the Super Wal-Mart brand, and it has created a cult-like following among customers. However, the increase in Wal-Mart sales poses a threat to the competition. Although a smaller family-owned store can offer more personalized and custom-tailored services, most people do not require this. When a shopper is posed with the choice of paying lower prices to go to a large and familiar place or to go to a small local business and pay more money for the same product but get unique service, majority would choose lower prices. Other large retailers are also under pressure to reduce prices to compete with Wal-Mart. In order to stay in business, nation-wide retailers such as K-Mart and Sears also began to adopt Wal-Mart’s distribution center method.[xiii] [xiv]
E. How Wal-Mart Reduces Labor Costs
This new “invention” has implications for employment rates and the number of stores throughout the United States. Shopping at Wal-Mart means buying in bulk versus buying individual items, and getting consumers more of a given product for a lower price. But by opting to shop at a large store, the consumer must forfeit personal help for lower prices. Wal-Mart expects people to do their own searching while shopping. Although they can buy products in bulk for lower prices, they give up the personalized assistance and service while shopping.[xv]
Wal-Mart was the first retailer to use the barcode system in order to determine when to order or replace items on store shelves. Traditionally, retailers relied upon in-store employees to manually count the number of items on shelves and place orders when the item was almost out of stock. Wal-Mart recognized the value in connecting the barcode number to stocking shelves, and developed a system to alert distribution centers when certain items were running low on shelves.[xvi]
III. WAL-MART’S LABOR RELATIONS POLICY
Wal-Mart has taken advantage of the high unemployment rate and the reduction in the number of job opportunities in rural areas. By maintaining control over a significant portion of the labor market in rural areas, Wal-Mart has retained discretion over in-store working conditions by publically announcing a “pro-associate” culture, yet by deviating from this culture on a case-by-case basis with retaliation and anti-unionization techniques.
A. Pro-Associate Culture
Wal-Mart has created a “pro-associate” culture, in which management uses different techniques to empower workers and create the illusion of solidarity in stores. These techniques include, but are not limited to “coaching” workers when they make mistakes instead of citing or writing them up[xvii], daily cheers and chants to boost employee morale, and the creation of an “open door policy,” which allows anyone to state a problem or concern without fear of retaliation. Consequently, Wal-Mart’s company policy states that because the company has an “open door policy,” there is no need for third-party representation.[xviii] To rebut negative publicity received, Wal-Mart advertises and publically boasts of in-store worker satisfaction. For example, on November 30, 2012, an executive publically claimed that eighty-six percent of Walmart hourly workers said in a survey “they agree with the statement ‘I really love my job.’”[xix]
B. Union Avoidance Techniques
Although Wal-Mart’s “pro-associate” culture has proven useful to control the majority of the workforce, Wal-Mart’s company policies are not always adhered to and not always strictly enforced. In order to prevent the unionization of a store location, management will use a variety of union avoidance techniques, some more militant than others. Examples of these techniques include, but are not limited to the threatening, harassment, and termination of outspoken workers. Workers have attempted to report these acts taken against them by the employer through filing Unfair Labor Practice charges. Yet because of the sporadic nature of these incidents, usually contained to one store location, paired with employee fear of retaliation for doing so, Wal-Mart has not yet changed its labor relation techniques.[xx]
C. The Walmart Store Associate
The current economy has also left some workers hesitant to speak out against Wal-Mart’s employment practices. High unemployment rates have made it more difficult to organize a union because workers are even more fearful of their jobs. Half of the people who lose their jobs qualify for unemployment insurance. Big-box workers rarely qualify for unemployment because they have not been on the job long enough or they are only part-time. This makes the risk of job loss even greater.
The composition of Wal-Mart’s in-store workforce reflects the company’s strategy of opening stores in rural areas. The typical Wal-Mart employee is about 30 years old. The average Wal-Mart worker nationwide earns $8.81 per hour. A third of Wal-Mart’s employee’s work less than 28 hours per week, therefore not qualifying for benefits. The composition of the Wal-Mart workforce is startling. The majority of Wal-Mart’s employees are over thirty years old. Two-third’s of the Wal-Mart in-store workforce are women. Wal-Mart’s in-store jobs cannot be outsourced abroad, nor is it likely to be replaced completely with automated computers or other machinery. These are jobs that are personal and direct, and typically involve helping customers locate items and checkout at the register. [xxi]
IV. FAILURE OF TRADITIONAL METHODS OF ORGANIZING
Thus far, Wal-Mart employees have had little success using traditional methods for improving working conditions and wages. Attempts to organize have consistently failed, and currently, there are no Wal-Mart stores in the United States where workers are represented by a union. Legal challenges, although some successful and others not, have not made a significant impact upon or have significantly changed the working conditions of Wal-Mart employees.[xxii] The traditional methods of unionizing were successful in different industries during a different era. The size of Wal-Mart and the enormity of the corporation’s economic power have proven challenging in union organizing among workers in retail stores.
Prior to Black Friday, each of these challenges had relied on traditional methods of union organizing. First, challenges tend to be isolated and contained to one store at a time. Generally, there has been little coordination between organizing events at Wal-Mart stores. When workers at one store location at a time seek to change the working conditions, it is easy for management to intervene and prevent the store from unionizing. Second, workers’ tended to focus on certain employment practices rather then the generalized proposition of “working conditions.” Third, challenges to employment practices were targeted at one link of the Wal-Mart distribution chain – either in store or warehouse. Fourth, challenges were either legal challenges or through organizing attempts.
V. SIGNIFICANCE OF BLACK FRIDAY
Black Friday’s organizing technique varied significantly. The use of the Internet during the organizing process allowed workers to coordinate protests throughout the country. First, the protests were widely coordinated. Protests took place at about 28 stores throughout 12 cities in the United States. By relying upon social media programs such as Twitter, Facebook and Instagram, as well as e-mail, websites, and blogs, protesters were able to communicate before, during and after Black Friday. Additionally, these Internet platforms were used as a source of support, encouragement and a constant reminder of worker solidarity. While some of the benefits of online organizing include the ability to communicate instantly and anywhere, the disadvantages of online organizing include the public availability information, which is more accessible to management. Online organizing requires forfeiting secrecy, but the size of the movement may be a greater advantage. Third, Wal-Mart employees challenged “working conditions,” including but not limited to, wages, hours, health care insurance, and other benefits. Fourth, Wal-Mart employees relied upon support from multiple Alternative Worker Organizations and coalition groups. Although these Alternative Worker Organizations had received funding from unions in the past, thus union subsidiaries, they continuously state that they are not affiliated with any union organizations. Fifth, those who worked in both the distribution centers and warehouses supported workers protesting in-store conditions.
VI. ALLEGATIONS OF UNFAIR LABOR PRACTICES
A. Prior to Black Friday – Week of November 16, 2012
The NLRB had been caught in crossfire of Unfair Labor Practice charges between Wal-Mart and workforce. Once Wal-Mart learned of workers’ plans to protest wages and working conditions on Black Thursday and Friday, Wal-Mart anticipated the effect such protests may have upon sales. On November 16, 2012, a week before the planned protests, Wal-Mart filed an unfair labor practice charge against the United Food and Commercial Workers International Union (UFCW) with the National Labor Relations Board (NLRB).[xxiii] Wal-Mart alleged that the UFCW violated § 8(b)(7)(C) of the NLRA, which prohibits the picketing of any employer by a labor organization for more than thirty days without filing a petition with the NLRB, where the object of the picketing is to force the employer to bargain with the labor organization. [xxiv]
According to Wal-Mart, the UFCW is responsible for these demonstrations “through its subsidiaries, affiliated organizations, and agents, including that labor organization known as ‘OUR Walmart.’” Wal-Mart alleges that UFCW, a labor organization under the Act, had provided funding to the alternative workers organizations to allow them to orchestrate and execute the Black Friday protests. In a 2011 filing with the Labor Department, OUR Walmart was listed as a subsidiary of the UFCW, but contends that it no longer receives such support.
Even if it is found that OUR Walmart is a subsidiary of the UFCW, § 8(b)(7)(C) also requires that the object of the demonstration must have been to force Wal-Mart to bargain with the UFCW. Wal-Mart claimed that the protests were for the purpose of organizing in-store workforces, while OUR Walmart argued that the Black Friday protests were planned to pressure management into adopting the terms and conditions in their “Workers Declaration of Rights.”[xxv]
On November 20, 2012, the Tuesday prior to Black Friday, OUR Walmart filed an unfair labor charge with the Board asserting that Wal-Mart was making illegal threats to deter its employees from participating in protests scheduled for Black Friday. Exposed in a leaked memo[xxvi] addressed to salaried Wal-Mart employees, management advocated the use of boilerplate union avoidance tactics to handle any employee unrest on Black Friday.[xxvii] The complaint said that a statement alerting Wal-Mart employees that “there would be consequences” if they did not report for work, made by Wal-Mart Vice President David Tovar on the CBS Evening News constituted an illegal threat meant to discourage workers from exercising their § 7 right to protest working conditions.[xxviii]
B. Post-Black Friday – Week of January 30, 2013
Months after the events that occurred on Black Friday, on January 30, 2013, the NLRB issued an Advice Memorandum[xxix] and published a News Release[xxx] relating to the Black Friday charges. In the memorandum, OUR Walmart states that the group is not an affiliate of a labor organization and agrees not to picket for 60 days. Significantly, OUR Walmart does not denounce the group’s purpose of improving working conditions or its intention of doing so.
VII. CONCLUSION
It is unlikely that the agreement outlined in the NLRB’s Advice Memorandum, even if adhered to, will resolve the on-going conflict between workers and management over the working conditions in Wal-Mart stores. After the Black Friday protests, it is clear that Wal-Mart will be forced to address the complaints made by workers.[xxxi] If Wal-Mart must address these issues, the question then becomes whether management will choose to meet some of the workers’ demands in order to retain some control over their business practices. Slight concessions, such as raising hourly workers from a minimum wage to a living wage standard, may be wise.[xxxii]
Underlying both of these allegations are greater issues of unresolved issues of conflicting public policies and ideologies. First, the recent events of worker protest are a reminder of dramatic and increasing disparity of income among the American population. While workers protested their job conditions and wages, other Americans leisurely attended Black Friday shopping events nationwide, either blind to or ignorant of the protests. Second, by forcing employees to work on Thanksgiving Day, Wal-Mart in effect cancelled Thanksgiving for millions of Americans. Protests of working conditions on Thanksgiving Day symbolically reject modern consumerism. Ironically, Wal-Mart boasted of a greater number of shoppers this year compared to last, as well as over 10 million purchases made. Finally, history is cyclical. Nearly one hundred years ago, although in a different era and form, similar conditions lead to workers challenging work conditions. During the 1930’s, workers challenged big business for wage increases and changes in working conditions. Now, although finding success with alternative methods, workers still seek the similar reforms.
[i]See Walmart Workers Plan Black Friday Protests, http://www.cbsnews.com/8301-18563_162-57552153/walmart-workers-plan-black-friday-protests/(last visited Mar. 4, 2013).
[ii]See NLRB Charge Alleging Illegal Picketing at Wal-Mart Held in Abeyance,http://www.nlrb.gov/news-outreach/news-releases/nlrb-charge-alleging-illegal-picketing-wal-mart-held-abeyance(last visited Mar. 4, 2013).
[iii]See Walmart vs. Union-Backed OUR Walmart, http://www.businessweek.com/articles/2012-12-13/walmart-vs-dot-union-backed-our-walmart(last visited Mar. 4, 2013).
[iv]See Walmart Facts, http://corporate.walmart.com/(last visited Mar. 4, 2013).
[v]See Walmart Growth Chart,http://money.cnn.com/magazines/fortune/storysupplement/walmart_spread/index.html(last visited Mar. 4, 2013).
[vi]An example of this can be seen in a letter written by Wal-Mart CEO Lee Scott to the New York Times in 2005 saying, “This year, we plan to create more than 100,000 new jobs in the United States.”
[vii]See generally, B Ortega In Sam We Trust: The Untold Story of Sam Walton.
By Bob Ortega = page 87 “no matter which way you slice it”
[viii]See Store wars http://www.pbs.org/itvs/storewars/stores3_2.html(last visited Mar. 4, 2013).
[ix]See generally, A Bianco, The Bully of Bentonville.
[x]See generally http://www.pbs.org/wgbh/pages/frontline/shows/walmart/interviews/lehman.html(last visited Mar. 4, 2013).
[xi]See Store wars http://www.pbs.org/itvs/storewars/stores3_2.html(last visited Mar. 4, 2013).
[xii]See generally, C Fishman The Wal-Mart Effect: How the World’s Most Powerful Company Really Works.
[xiii]Id.
[xiv]See N Lichtenstein, Wal-Mart: The Face of Twenty-First-Century Capitalism.
[xv]See generally, N Copeland Walmart and the American Dream.
[xvi]See Generally http://www.pbs.org/wgbh/pages/frontline/shows/walmart/secrets/barcode.html(last visited Mar. 4, 2013).
[xvii]See generally J Dicker, The United States of Wal-Mart.
[xviii]See Store wars, http://www.pbs.org/itvs/storewars/stores3.html(last visited Mar. 4, 2013).
[xix]See Walmart Wants You to Know That Their Workers ‘Love Their Jobs’http://www.huffingtonpost.com/2012/11/30/walmart-workers_n_2218746.html(last visited Mar. 4, 2013).
[xx]See Walmart Employees to Stage Black Friday Protest http://fox6now.com/2012/11/23/wal-mart-employees-to-stage-black-friday-protest/(last visited Mar. 4, 2013).
[xxi]See Organizing McDonalds and Walmart, and Why Austerity Economics Hurts Low-Wage Workers the Most http://robertreich.org/post/36892075499(last visited Mar. 4, 2013).
[xxiii]See Wal-Mart filed unfair labor charge against UFCWhttp://www.reuters.com/article/2012/11/16/walmart-union-idUSL1E8MGBV920121116(last visited Mar. 4, 2013).
[xxiv]See http://static.reuters.com/resources/media/editorial/20121116/Wal-Mart-UFCW-NLRB-charge-document.pdf(last visited Mar. 4, 2013).
[xxv]See Worker Declaration of Rights http://forrespect.org/our-walmart-declaration-for-respect/(last visited Mar. 4, 2013).
[xxvi]See Internal Walmart Memo http://big.assets.huffingtonpost.com/Walmart-2.pdf(last visited Mar. 4, 2013).
[xxvii]See Walmart Strike Memo Reveals Confidential Management Planshttp://www.huffingtonpost.com/2012/10/13/walmart-strike-memo_n_1962039.html(last visited Mar. 4, 2013).
[xxviii]See Walmart Workers Plan Black Friday Protests http://www.cbsnews.com/8301-18563_162-57552153/walmart-workers-plan-black-friday-protests/(last visited Mar. 4, 2013).
[xxix]See https://www.nlrb.gov/case/26-CP-093377(last visited Mar. 4, 2013).
[xxx]See NLRB Charge alleging illegal picketing Wal-Mart held abeyance http://www.nlrb.gov/news-outreach/news-releases/nlrb-charge-alleging-illegal-picketing-wal-mart-held-abeyance(last visited Mar. 4, 2013).
[xxxi]See Labor Union Agrees to Stop Picketing Walmarthttp://www.nytimes.com/2013/02/01/business/labor-union-agrees-to-stop-picketing-walmart.html?_r=0(last visited Mar. 4, 2013).
[xxxii]See Living Wages http://laborcenter.berkeley.edu/retail/bigbox_livingwage_policies11.pdf(last visited Mar. 4, 2013).
