Wal-Mart and Employee Rights Labor Cost Is Essay

Excerpt from Essay :

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…

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