Walmart's labor practices and employee rights violations

Wal-Mart and Employee Rights

Labor cost is always considered as the main issue, mostly in case of employees' unionization at Wal-Mart. This was noticed when Wal-Mart showed a remarkable earning at the rate of 44% per annum for its labor working on hourly basis. Another point which brought this issue ahead was when the sales clerk of Wal-Mart in 2001 earned wages below Federal Poverty Scale. According to an issue of Fortune released on 3rd March 2003, the approximate share of Wal-Mart in the Gross National Product (GNP) of U.S. market was about 2.3% in 2002. Thus, Wal-Mart was expected to show further boom by sharing the U.S. economy at the largest scale ever estimated in 2006, considering the phenomenal growth rate stated in Fortune. However, other companies like U.S. Steel Corporation shared the U.S. GNP by 2.8% in 1917 and also the highest GNP share of General Motors Corporation was 3% in 1955. Both were on the top of other companies during their time periods (Cramer, 2005).

Wal-Mart however enjoyed the top position in U.S. economy but on the other side it also faced great criticism and lots of disapprovals from the other side comprising of its own labor as well as journalist, marketers, researchers etc. So to deal with these harsh social attacks Wal-Mart launched a PR offensive in 2003. A thunderous stream of complaints was under Wal-Mart's consideration which involved discrimination among male and female labor. According to women workers, they were underestimated in offering promotions and salaries which comprise almost 1.5 million lady workers employed engaged with the company. General labor complained about late sessions without planned breaks. One more crucial issue of employing illegal immigrants by hiring teams was under federal enquiry commission in 2003 (Cramer, 2005).

Wal-Mart Stores, Inc. In spite of facing all the above discussed hardships never backed off towards the strategy of further enhancing and growing the size of the company and spread it all over the U.S. No other company would ever increase its size at the rate of 90 units but Wal-Mart did and opened about 220 new super stores all over the state. Thus the overall number of Wal-Mart super stores surpassed the discount store for the first time ever all over the country. However other stores like Neighborhood Market chain opened about 25 to 30 stores at a time, Sam's Club started 15 new units and the chain of International Store showed growth of about 100 stores. This proved that Wal-Mart never let its market down and always maintained its top position among the competitors (Cramer, 2005).

Company background:

Among the world's largest sellers and top ranking companies comes the name of Wal-Mart Stores, Inc. It competed against all the adjacent competitors and showed remarkable distinction among them by giving a profit three times higher than France's Carrefour SA, which is on the second position in the world's top retailers (Wal-Mart Stores, Inc. Company Profile, 2005).

The number of workers at Wal-Mart exceeds the number of 1.2 million. With this huge number, it becomes the largest employer in private sector in USA. It has 1,478 stores spread over the 50 states. There are 1,471 Supercenters where grocery stores and discount outlets are located together. Wal-Mart is the biggest food retailer in USA. It also has membership of the second top warehouse club chain known as Sam's Clubs. They are 538 Clubs spread in the U.S. Wal-Mart has 64 Neighborhood Markets while many small drug and food outlets offer varieties in general merchandise (Wal-Mart Stores, Inc. Company Profile, 2005).

Wal-Mart started international expansion in 1991 with stores established in Puerto Rico and Canada. It also opened stores in United Kingdom, South Korea, Mexico, Germany, China and Brazil. Almost half of the stores of Wal-Mart are operational in other countries besides the United States. The Sam's Clubs were established in Puerto Rico, Mexico, China and Brazil. In Brazil, Wal-Mart operates Todo Dias supermarkets. In China, there are Neighborhood Markets supermarkets run by Wal-Mart. Vips restaurants, Superamas supermarkets, and department stores with specialty in Suburbias and Bodegas discount stores are present in Mexico. In UK, combined apparel and grocery stores are established. In Puerto Rico, Amigo supermarkets are formed. The total revenue from international operations is 18.5% out of total revenues of Wal-Mart. It has 36% stakes of a giant Japanese retailer named as The Seiyu, Ltd. The successors of the owner, Samuel Walton enjoys the significant percentage of 38% in the organizational profits (Wal-Mart Stores, Inc. Company Profile, 2005).

Problem statement and background

Wal-Mart does not have a good reputation in the industry. Many of its business sectors whether they are run at small towns or green washing environment, it has failed to win the goodwill of employees, customers and partners (McClenahen, 2005).

The biggest issue of Wal-Mart is related to its employees. Employees are not happy with the management on grounds of unfair practices in overtime disbursement and calculation. On the other hand, unions are also active against the management of Wal-Mart. The management strongly denies the validity of these claims made by employees and unions. It rather considers it a conspiracy to let the company down. During the previous two years National Labor Relations Board (NLRB) won against Wal-Mart to receive six times more compensation in the result of union activities. Millions of dollars are paid to court settlements lost by Wal-Mart still Wal-Mart is not fair in paying fair overtime to employees (McClenahen, 2005).

Wal-Mart started its business in 1962. It emerged rapidly and now it is the largest employer for U.S. citizens in private sector. Almost 1.4 million people are employed domestically and the number of workforce serving worldwide is 2.1 million. It has 3,800 stores spread in the cities of United States and 2,800 stores are located worldwide. Every week, more than 100 million customers are served at its retail stores (McClenahen, 2005).

Analysis of the problem statement with appropriate data

Income Discrepancy

In 2003, Lee Scott, the CEO of Wal-Mart earned $29.8 million for a year.

On the other hand, in the same year, a family with three members had earned wages below the poverty line at $14,630. The average income of an employee is $8.23/hour which when multiplied over 52 weeks over a year, gives the figure of $13,861. Many employees are engaged in job activities for around 24 hours in a week. Their annual income reaches the figure of $10, 271. In 2003, the value of each Wal-Mart store was $204 billion. Two years later, the combined net worth of all the owners of Wal-Mart was around $100 billion (Lindeman, 2005).

Violation of Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) of 1938 is also known as Wages and Hours Bill. It is the main document protecting workers' rights irrespective of any prejudice of their gender, age and race etc. It ensures equal rights for the workers, their overtime, minimum wage and other rights. The document has gone through certain changes numerous times and enjoys the status of high dominance in the practices (Lindeman, 2005).

In organizational settings, the most offensive task on part of organizational management is not to pay the overtime allowance of the employees. Many organizations are found guilty in this regard. A perfect example is Wal-Mart, which manipulated the working hours of their employees so that it is not liable to pay overtime. In 2002, the Wal-Mart managers deputed the workforce at store cleaning and deleted the extra work hours from the system. The employees filed suit against the organization upon this unfair practice. Some of the companies claim that they don't force their employees to work after the designated shift. But if we analyze the other side of the picture, we will notice that employees are assigned certain on-the-job tasks from their employers that demand extra working hours. The same situation was observed in case of Wal-Mart. 50 lawsuits were entered against the company in both federal and state courts. In case of New Mexico in 2000, $500,000 was paid by the organization to 120 employees. And in case of Colorado, 69,000 employees were paid $50 million by Wal-Mart during 2000. In both of these two cases, the sum was paid to resolve the "off-the-clock lawsuit" (Lindeman, 2005). During the following years, Wal-Mart was charged again for breaching the law regarding overtime and this time, the company was required to pay $33 million as back wages plus the interest cost to the victims (Cramer, 2005).

Wal-Mart was also found accused of violating the law regarding work breaks. An internal audit of the 128 stores of the company revealed that 127 stores were breaching the company laws. It was found that during the period of 1 week, workers did not take the break for 76,472 times. As a result of all these violations, the company is currently accused of 80 plus lawsuits (Cramer, 2005).

The Family Medical Leave Act Violations

Another breach of law regarding Medical and Family Leave Act was observed on the part of Wal-Mart, when the company did not allow a female employee to join the company again, once the maternity leave was over. As a result of this, Wal-Mart was charged $188,000 by California Fair Employment and Housing Commission (Kalra, 2005).

Deplorable Health Insurance Coverage

Wal-Mart, according to the employees, has refused to provide any medical, insurance facility as they cannot afford to do so. Therefore, its employees turn towards governmental facilities like Medicaid, welfare, and WIC. Some employees even claimed that it's their employers who urge them to go for these programs. Health Insurance cost premiums evolved a lot in the years of 2000 till 2005. Wal-Mart health insurance coverage plan for single employee raised 169% and for family of employee coverage it extended to 117%. The deductions ranges for the family coverage also changed a lot. It rose from $350 to the higher level of $3,000. This is an extremely high ratio as every worker in Wal-Mart is paying one-third to one-fifth of his pay check for health insurance coverage (Cramer, 2005).

Reports indicate that Wal-Mart is in the top list of enterprises whose employees and their families depend on state to take care of their health bills. This list showed that Wal-Mart has thrown the ball to state. Burden is shifted towards taxpayer instead of companies in case of government funded programs.

a) Tennessee: There are approximately 10,000 employees of Wal-Mart who rely on Medical expansion program of state.

b) California: Almost $32 million provided by the taxpayer to the government is spent for health services on the employees.

c) Gorgia: PeachCare program that is offered by the state is serving 10,262 children of employees who are working in Wal-Mart. PeachCare is health insurance program for families who lie under federal poverty level (Cramer, 2005).

Discrimination

There is a group, known as Wal-Mart vs. Women, dedicated for opposing gender inequality in the corporation. It is said that 66% of Wal-Mart hourly workers are female but in the management positions this percentage reduces to 33%. Moreover, this percentage reduces to 15% when it comes to store management posts. Corporate executives have a general impression that female employees do not deserve promotion but actually the performance review for females is higher and they have very low turnover rate. The history's biggest lawsuit for civil rights comes at Wal-Mart in a classic action suit (e.g. The case Dukes vs. Wal-Mart Stoes, Inc.). Kathleen McDonald, an employee at Wal-Mart conveyed her manager her point-of-view regarding her disappointment on the fact that male coworkers earned more than female ones. Moreover, she has not been promoted as well for the past 15 years. To her disappointment, the manager replied that God created Adam first, thus men will always be prioritized higher as compared to women (McClenahen, 2005).

Part 3: Solution, Analysis of the new solution for its advantages

Strengths: Wal-Mart is the most popular and large company in the United States catering people with a decent job without the need of college education. It possesses a number of strengths which are the fruits of its commendable success. Wal-Mart has an incredible amount of sales and is thus honored as the second largest company in the world with respect to net sales. This admirable position attributes to the aggressive growth strategy adopted by it. According to the statistics of 2003, the company launched 425 new stores round the world. The company added 4000 more stores which amount to a total of 48 million square feet of retail space in order to keep pace with the customer demand for SuperCenters. Their large network of stores is the core driving factor behind their success. Their existence around the globe becomes apparent from the network of approximately 1700 SuperCenters, 1350 Wal-Mart Discount Stores, 550 Sam's Clubs and 85 Neighborhood Markets within United States. Moreover, the company's network keeps on growing consistently with 1300 locations present in the UK, Mexico, Asia, Canada, South America and Germany (SWOT Analysis Wal-Mart, 2005).

Wal-Mart lends a hand in working for the welfare of people having low incomes, although much of the criticism has been made on the low wages paid by the company. The annual saving amounts to $1,000 per family. The aggressive pricing strategy acts as a nice tool for Wal-Mart in beating out the competitors. They offer cut prices up to thirty percent on products like toys, which helps stimulate the sales on a large scale. Wal-Mart is quite popular among people belonging to every walk of life due to the reasonable prices offered by it. It is working on more upscale appearance of the stores in order to appeal more customers and due to this it has acquired the status of nation's largest food retailer. Moreover, it's friendly and comfortable environment and constant price rollback attracts customers to shop frequently. Wal-Mart works on the psyche of understanding the customers' needs and attitudes and their expectation from a retailer, which is also a major contribution towards its success (SWOT Analysis Wal-Mart, 2005).

Weaknesses: Wal-Mart encompasses some weaknesses affecting its image and the lives of the people as well. Wal-Mart has engulfed the entire market as a giant retailer by offering low prices to the customers. The incredible reputation and name of Wal-Mart has attracted enormous customers and has made it quite difficult for the small retailers to survive and compete in the market. Wal-Mart has attained a retail monopolizing power over the past few decades which has made the ethical shoppers quite angry upon the practices of Wal-Mart, as they are concerned about the welfare of small retailers. It has compelled most of the people to close their small shops. Due to this, people tend to refrain from shopping in Wal-Mart stores, eventually building up the poor image of Wal-Mart. This serves as a big hurdle for Wal-Mart and has affected its stock price too (SWOT Analysis Wal-Mart, 2005).

The high rise buildings of the surroundings are creating a nuisance for the citizens. These buildings not only lead to traffic pollutions but are also damaging the small communities. There are a number of employees who are not getting proper amount of wage and have inadequate medical facilities available to them. Due to insufficient wages and lack of medical incentives, the employees head towards medical aid. This act of employees, seeking medical aid, seems like the tax collected by the citizens is being utilized to cover up the medical of these employees. The self-esteem of the Wal-Mart employees have declined drastically, just because of the bias behavior towards them, especially towards the female employees. Wal-Mart is also accused of breaching child labor laws (SWOT Analysis Wal-Mart, 2005).

Opportunities: There is a great opportunity given to Wal-Mart to learn from its mistakes and take steps to cover up the flaws it has made. Now Wal-Mart is giving particular attention towards the rules and regulations related to child labor, it is considering the wages of its employees, and is also putting notice on the efforts of overseas suppliers. Wal-Mart has had an iconic image previously, and whatever work or scheme it started, it possessed the capability of producing excellent outcomes. Therefore, Wal-Mart must work hard and win back the support of his workforce, in order to lift up its reputation in the market and to upraise its market share (SWOT Analysis Wal-Mart, 2005).

Threats: Wal-Mart's activities have affected the economy of the country adversely. With the intention of keeping the prices low, Wal-Mart started cutting down its costs in various areas of activity. Those areas included the wages of employees, and even the suppliers of Wal-Mart were forced to sell merchandize at a fairly cheaper price. This compelled the competitors to drop down their prices as well, thus, leading to a drastic drop in profits. A major risk that Wal-Mart faced after the opening of its new store was the decline in the wage rate of the country by three to five percent. The increasing series of Dollar General discount stores in regions where there were very few customers present to support Wal-Mart was another menace that Wal-Mart faced. The discounts offered by Dollar stores placed great competition for Wal-Mart (SWOT Analysis Wal-Mart, 2005).

Recommendations: Wal-Mart has had a wonderful past history and has potential of flourishing in future as well. Wal-Mart is currently going through a difficult period where it is greatly being criticized, but this is pretty normal, because one has to go through the ups and downs on the path of success. But the fact cannot be ignored that Wal-Mart still has the talent as well as the competence to provide a major rivalry to the retail industries. Wal-Mart has extensive resources, which makes it a target for many employees and small stores.

To uplift its reputation, Wal-Mart needs to take a few giant steps. It has already taken a few strides, like the boost in the remuneration of employees and the start of a more environmentally pleasant approach towards its work. It is advisable that Wal-Mart should try and make efforts to continue its appraisal activity on a larger scale, which should be greater than the other retail industries. They should even think of starting a movement to support the "little guy." Everybody knows that Wal-Mart is recognized internationally; therefore whatever issue would be raised by them it would most definitely attract attention of the whole world. Via this campaign, Wal-Mart can promote the small specialty stores in their community. It could even assist in the promotion and advertising of the local shops that are dealing in complementary products. It is worthwhile, for Wal-Mart to change its approach and rather than captivating all the sales for themselves, they could portray a special reflection of themselves by showing that Wal-Mart is worried and particularly concerned about the community.

In addition to this, Wal-Mart should consider improving its employees' morale by giving rewards and benefits publicly and focusing on them in a more positive manner. After investing in the improvement of its image in America, the company should also start focusing on its image internationally and start getting involved in markets they have not previously explored. Wal-Mart can explore tremendous potential in some other countries as well.

Part 4: Conclusion

Wal-Mart has greatly benefited from the advancements in technology. By implementing technologically advanced distribution houses, the company has greatly slashed its shipping costs and delivery time. Installation of high-end computer systems for tracking inventory has cut down reordering and check-out time. Moreover, customer service is also being improved through wireless in-store computer systems. After starting out in the beginning of 1990s, the company has done much to increase its market share. This includes the introduction of a complete line of groceries into their stores, diversifying their market by appealing to different ethnicities by using bilingual ads and taking steps in the direction of improving the environment (Wal-Mart Stores, Inc. Company Profile, 2005).

The company's net sales have been $256.3 billion after a growth of about 11.6% as compared to the similar period the previous year. Prudently tackling with the company's strategic decisions like the expansion or closure of a business operation depending on customer and market situation have contributed immensely to the company's spectacular success. Nevertheless, there have been negative sentiments about the company as well, which include but are not limited to lower wages and employee working condition, etc. In order to sustain its growth issues like these need to be tackled well (Wal-Mart Stores, Inc. Company Profile, 2005).