Archive for the ‘Retail’ Category

Business Crime Simple and Complex

Thursday, August 13th, 2015

thumbonscaleMuch of the corporate misconduct of the past decade has involved complicated schemes involving the likes of mortgage-backed securities and credit default swaps. A recent announcement by the Consumer Financial Protection Bureau is a reminder that old-fashioned business thievery is still very much with us.

Citizens Bank will pay $18.5 million to settle CFPB allegations that it routinely pocketed the difference when customers mistakenly filled out deposit slips for amounts lower than the sums actually transferred. Taking advantage of the carelessness of others added up for the bank: $11 million of the payment by Citizens will consist of refunds, with the rest representing penalties imposed by the CFPB under its powers granted by the industry-vilified Dodd-Frank Act.

The under-crediting attributed to Citizens is the flip side of the overcharging that is surprisingly common among large retailers. Whole Foods is facing a shareholder lawsuit and sinking sales in the wake of allegations by the New York City Department of Consumer Affairs that its local stores were systematically and egregiously overcharging customers for pre-packaged foods. The agency found that: “89 percent of the packages tested did not meet the federal standard for the maximum amount that an individual package can deviate from the actual weight, which is set by the U.S. Department of Commerce. The overcharges ranged from $0.80 for a package of pecan panko to $14.84 for a package of coconut shrimp.” The company admitted it had made “mistakes.”

In February, Target paid $3.9 million to settle allegations by half a dozen district attorneys in California that prices charged at the register were higher than those posted in the aisles.

In April, Wal-Mart was hit with a proposed class action lawsuit alleging that the company overcharged customers at its vision centers by inflating insurance co-pay amounts.

Earlier this month, Genuine Parts agreed to pay $338,000 to settle allegations by the San Diego District Attorney that its several of its NAPA Auto Parts stores were overcharging customers.

Cases such as these belie the notion that “thumb on the scale” types of simple cheating are mainly to be found among small businesses. Large companies are apparently inclined to engage in both simple and complex misdeeds.

Citizens Bank symbolizes the link between the different types of misconduct. The company is a subsidiary of the Royal Bank of Scotland, which has been deeply involved in a variety of complex financial scandals.

Earlier this year, it pleaded guilty to criminal charges of conspiring to fix foreign currency rates, along with three other major banks. RBS was fined $395 million (and another $274 million by the Federal Reserve) and put on probation for three years. The SEC gave it a waiver from a rule that would have barred it from remaining in the securities business.

In 2013 RBS had to pay $153 million to settle charges that it misled investors in a 2007 offering of subprime residential mortgage-back securities. That same year, it paid $612 million to settle civil and criminal charges that it was involved in the manipulation of the LIBOR interest rate index.

Whether simple or complex, corporate wrongdoing needs to be prosecuted aggressively.

Redistributing Work Hours

Thursday, July 2nd, 2015

punching inThe Obama Administration’s new overtime proposal is an important and long overdue reform, but those who see it primarily as a way to address stagnant wages are missing the point. If the rule works properly, the main benefit will come in the form of time rather than money.

Noam Scheiber, the new labor reporter for the New York Times, exhibited the misconception in a news analysis arguing that the proposal “falls well short of helping substantially increase middle-class wages.” The piece compounded the problem by quoting Sen. Chuck Schumer calling the step “the middle-class equivalent of raising the minimum wage.”

Enacted in 1938, the overtime provision of the Fair Labor Standards Act (FLSA) is designed to discourage employers from compelling workers to work excessive hours. The time-and-a-half provision is meant not as a wage bonus but rather as a penalty for firms that overwork their staffs rather than increasing the headcount.

Under pressure from business interests, Congress wrote language into the FLSA providing an exemption from the overtime provisions for executive, administrative and professional employees. The rationale was that such persons would be paid a salary rather than a hourly wage, and their compensation would be high enough to make some extra hours tolerable.

It was left to the Labor Department to define exactly which employees would be covered by the exemption. It chose to set criteria that referred mainly to job content but also set a compensation level below which overtime had to be paid regardless of the nature of the job.

That latter provision turned out to be essential. It would be all too easy for an employer to give a position superficial managerial or administrative responsibilities with the aim of making it exempt from overtime. The problem was that the wage cutoff was set too low, and revisions tended to be slow in coming. After the cutoff was raised to $155 a week in 1975, it took another 29 years before it was increased again.

In the meantime, employers did everything possible to shrink the portion of the workforce eligible for overtime pay. This was perhaps most common in the retail sector, where workers were given bogus titles such as assistant store manager while most of their responsibilities were not managerial or administrative in nature. Once they were off the overtime clock, it was profitable for the real bosses to work them long hours.

Obama’s proposal, which would raise the cutoff to $970 a week, did not come out of the blue. Groups such as the Economic Policy Institute and the National Employment Law Project have been campaigning on the issue for years.

There’s also been a battle going on in the courts. A slew of lawsuits have been brought against major retail companies for misclassifying people as overtime exempt. Earlier this year, for example, a federal judge approved a $30 million settlement of overtime claims brought by so-called managers at Publix Super Markets. Payless Shoesource has agreed to a $2.9 million settlement of similar allegations.

Dollar stores, which are obsessive in their cost-cutting efforts, have been the target of numerous overtime suits brought by purported managers. Dollar General paid $8.3 million to settle one such case.

The employer class is, of course, up in arms over the proposed new standard, making the usual foolish claims about job cuts and loss of freedom. The Washington Post quoted one chief executive as saying: “Everything in this proposed rule is anti-American work ethic and culture.”

That in a sense is true, if one acknowledges that our work culture is now one in which some people are forced to work excessive hours and others, especially in the sprawling retail and restaurant sectors, are kept in involuntary part-time status with unpredictable schedules and not enough hours to piece together a decent living.

A measure of the success of the new overtime rule will be the extent to which it rectifies this lopsided distribution of working hours.

A Crowded Corporate Hall of Shame

Thursday, January 29th, 2015

2015_PublicEye_KeyVisual_550x275Over the past year, Chevron has had success in getting a U.S. federal judge to block enforcement of a multi-billion-dollar judgment imposed by a court in Ecuador, and the oil giant managed to pressure the U.S. law firm representing the plaintiffs to drop out of the case and pay the company $15 million in damages. Chevron has just had another significant win but of a less desirable kind.

The Berne Declaration and Greenpeace Switzerland recently announced that Chevron had received the most votes in a competition to determine the world’s most irresponsible corporation and thus was the “winner” of the Public Eye Lifetime Award.

For the past ten years, the two groups have countered the elite mutual admiration society taking place at the annual World Economic Forum in Davos, Switzerland by highlighting the misdeeds of large corporations. The previous awardees ranged from banks such as Citigroup to drug companies such as Novartis to Walt Disney, which was chosen because of its use of foreign sweatshop labor to produce its toys.

A few months ago, Public Eye sponsors decided to bring the project to a close but do so with a splash by naming the company that stood out as the worst. Activists from around the world promoted their choices from among six nominees: Dow Chemical, Gazprom, Glencore, Goldman Sachs and Wal-Mart Stores, along with Chevron. Amazon Watch, which led the Chevron effort, prevailed. Glencore and Wal-Mart were the runners-up.

Public Eye’s award ceremony featured the Yes Men satirical group, which in one of its rare un-ironic pronouncements stated: “Corporate Social Responsibility is like putting a bandage on a severed head – it doesn’t help”. This sentiment is especially appropriate in relation to Chevron, which has long sought to portray itself, through ads headlined WILL YOU JOIN US, as not only mindful of environmental issues but as a leader of the sustainability movement.

Given the prevalence of business misconduct, choosing the most irresponsible corporation is no easy matter. Even within the petroleum industry, Chevron’s environmental sins in Ecuador and the rest of its rap sheet must be weighed against the record of a company such as BP, infamous for the Gulf of Mexico oil spill disaster as well as safety deficiencies at its refineries that resulted in explosions such as one in Texas that killed 15 workers in 2005. Also worthy of consideration are Royal Dutch Shell, with its human rights abuses in Nigeria, and Exxon Mobil, with its own record of oil spills as well as climate change denial.

And what about the mining giants and their notorious treatment of indigenous communities around the world. A prominent activist once called Rio Tinto “a poster child for corporate malfeasance.” Then there is Big Pharma, made up of corporations that tend toward price-gouging and product safety lapses. And we shouldn’t leave out the auto industry, which in the past year has been shown to be a lot sloppier about safety matters than we could have imagined. Also not to be forgotten are the weapon makers, whose products are inherently anti-social.

Yet perhaps the biggest disappointment for corporate critics in the United States may be the fact that the Lifetime Award did not go to Wal-Mart. For the past two decades, the Behemoth of Bentonville has epitomized corporate misbehavior in a wide variety of areas — most notably in the labor relations sphere, but also promotion of foreign sweatshops, gender discrimination, destruction of small business, tax dodging, bribery (especially in Mexico) and the spread of suburban sprawl with its attendant impact on climate change. Yet perhaps the most infuriating thing about Wal-Mart has been its refusal to abandon its retrograde labor practices while working so hard, like Chevron, to paint itself as a sustainability pioneer.

It’s too bad that we will no longer have the annual Public Eye awards, but corporate misconduct will apparently be with us for a long time to come.

Business Success and Economic Failure

Thursday, September 11th, 2014

familydollarWhat does it say that an all-out takeover battle is being waged for a chain of no-frills stores selling cheap merchandise at outlets typically located in the most downscale parts of town? The answer is that deep-discount retailing, which entered the mainstream during the recession of the late 2000s, remains a lucrative business as much of the country struggles with stagnating income levels.

The focus of the current bidding war is Family Dollar Stores, the second largest chain of deep discounters, also known as dollar stores. A couple of months ago, Dollar Tree, the third largest chain, announced plans for an $8.5 billion purchase of Family Dollar, which had been targeted by several corporate raiders such as Carl Icahn, who bought a 9 percent stake in the firm.

Family Dollar’s management seemed willing to throw in its lot with Dollar Tree and create a combined company with about 13,000 stores that could not only neutralize Icahn but also challenge the current leviathan of the industry, Dollar General with its 11,000 stores.

Dollar General, which long had its eye on Family Dollar, did not take kindly to the prospect of being relegated to second place. It launched its own fatter bid for Family Dollar, and after being rebuffed, it is now going hostile. It has announced a tender offer under which Family Dollar investors could sell their shares for $80 each, well above the $74.50 that Dollar Tree said it would pay.

As interesting as this may be to analysts of mergers & acquisitions, the takeover battle is not the most significant story here. First, there is the alarming fact that it is taken for granted that the marriage of two giant dollar-store chains can receive antitrust approval. The original Dollar Tree-Family Dollar deal has been promoted by the two companies with the argument that it was likely to be blessed by the Federal Trade Commission. Dollar General argues that its promise to sell off 1,500 outlets would make its deal palatable to the federal regulators. Why shouldn’t any combination among the three chains be considered unacceptable? And what about the even more controversial possibility, as has been widely rumored, that Wal-Mart might try to take over one of the dollar chains to shore up its faltering small-store strategy? Are we to assume that would get approved as well?

At the same time, there has been surprisingly little discussion of how these companies operate. For example, there’s the matter of their labor practices. Dollar General, Family Dollar and Dollar Tree are not often mentioned alongside Wal-Mart, yet they are also low-paying, non-union employers that have been involved in numerous wage & hour controversies. The dollar stores, whose outlets have much smaller staffs than those at Supercenters, have mainly been accused of improperly denying overtime pay to so-called store managers and assistant managers who spend most of their time on non-managerial tasks such as stocking shelves and unloading trucks. Family Dollar, for instance, fought one such case all the way to the U.S. Supreme Court, where it lost and finally had to pay a $33 million judgment.

And then there’s the issue of the basic business model of the dollar stores. This is a sector that to a great extent profits from economic desperation. Although a small portion of its customers are middle-class people looking for a bargain, most are lower-income individuals who cannot afford to shop at the likes of Wal-Mart, much less non-discount chains.

The deep-discount chains were supposed to have shrunk once the economy was in recovery. Their continued growth is a symptom of ongoing wage stagnation, and their business success is a sign of a broader economic failure.

Ikea’s Double-Edged Living Wage Initiative

Thursday, June 26th, 2014

ikea2In an era of rising inequality, the announcement by Ikea that it will adopt a living wage policy for employees at its stores in the United States is good news for those who will enjoy a fuller paycheck. Yet the news is not as good as it could be.

Ikea’s move, like a similar action by Gap Inc. earlier this year, is a voluntary initiative, not a legislated or negotiated policy that can be enforced. Just as Ikea adopted the wage policy on its own, it could rescind or modify that policy in the future.

It’s significant that in its announcement Ikea noted that the new wage structure, which will raise the average hourly minimum to $10.76, does not apply to those working at its U.S. distribution centers and manufacturing facilities. That’s because, the company says, those facilities “have hourly wage jobs that are already paying minimum wages above the local living wage.”

What Ikea fails to mention is that some of those workers are represented by collective bargaining agreements that brought pay rates to their current levels. Also omitted is the fact that those unions were organized because of poor conditions, including inadequate wages.

For example, in 2010 the Machinists union (IAM) and the Building and Wood Workers International labor federation organized a campaign to pressure Ikea over dangerous working conditions and discriminatory employment practices, as well as pay and benefit issues, at the company’s Swedwood furniture plant in Danville, Virginia.

That campaign served as a springboard for a successful union organizing effort at the plant, where IAM members ratified their first contract with the company in December 2011. A month later, workers at the Ikea distribution center in Perryville, Maryland voted in favor of representation by the IAM. In May 2014 Teamster members  at an Ikea distribution facility in Washington State approved their initial contract.

It’s quite possible that Ikea’s new wage policy for its stores is an effort to undermine any union organizing at those outlets. For if there is one thing large companies hate more than paying higher wages, it is paying those higher wages and having to negotiate on other conditions of work.

The desire by management to retain control is the shortcoming of both voluntary wage increases and other initiatives undertaken under the rubric of corporate social responsibility. What proponents of CSR rarely acknowledge is that these supposedly enlightened corporate policies really amount to an effort to avoid stricter, enforceable regulations. Companies would prefer to congratulate themselves for deciding to cut greenhouse gas emissions or eliminate toxics rather than being compelled to take such actions under government mandate. A management-designed wage increase is more palatable than a union contract.

Corporate apologists would have us believe that CSR is preferable to tough regulations and collective bargaining, but what they fail to acknowledge is that major corporations have a long history of engaging in abusive practices.

In the case of Ikea, taking advantage of weak labor laws in the United States is far from the whole story. Two years ago, Ikea was forced to apologize after an investigation showed that it had benefitted from forced prison labor in East Germany in the 1980s. There were similar reports concerning Cuba. And now the company is facing allegations that during the same period it channeled funds to a firm run by the secret police in Romania.

Earlier, Ikea was embroiled in controversies over the use of child labor in countries such as Pakistan, India, Vietnam and the Philippines. One way the company sought to overcome that stigma was through philanthropic initiatives such as a partnership the Ikea Foundation created in 2013 with Save the Children and UNICEF to help children in Pakistan “find a route out of child labor.” Unaddressed, of course, was the issue of how companies such as Ikea got them into child labor in the first place through their use of exploitative contractors.

The same issue applies to the wages of Ikea’s U.S. store employees. There would be no need for a living wage initiative if the company had not been paying too little to begin with. That’s the problem with much of CSR and voluntary corporate reforms: they are all too often initiatives designed to address problems that companies created themselves and are structured in a way that does not prevent them from reverting to those bad practices again in the future.

Challenging Wal-Mart’s Freeloading Ways

Thursday, November 21st, 2013
from Cleveland.com

from Cleveland.com

Countless words have been published about the retrograde labor practices of Wal-Mart, but none of that writing conveyed as much as the short message recently reported to have been taped to a bin in an employees-only area at one of the company’s stores in Ohio: “Please donate food items here so Associates in Need can enjoy Thanksgiving Dinner.”

My first reaction was that this was a stunt staged by the Yes Men to embarrass the giant retailer. Yet it was all too real. In fact, a corporate spokesperson saw nothing amiss, saying it showed how much the company’s employees care about each other. No doubt they do, but the problem is that Wal-Mart is so deliberately obtuse about its obligation to provide a decent living to those on its payroll.

Leaving it to hard-pressed workers to support their colleagues is just one of the ways Wal-Mart shifts its costs to others. The company puts a much bigger burden on taxpayers, who end up paying for the healthcare coverage that so many of its employees must get from public programs such as Medicaid.

In the early 2000s some states began to disclose which employers accounted for the most low-wage workers and their dependents in these programs. Wal-Mart was invariably at or near the top of these lists. (See the Good Jobs First compilation here.)

Unfortunately, fewer of these lists are being released (and the Affordable Care Act will apparently do nothing to help). Yet the few recent disclosures show Wal-Mart is still creating more of these hidden taxpayer costs than any other company. For example, in July the Dayton Daily News obtained data from the Ohio Department of Job and Family Services indicating that Wal-Mart had more employees or household members on Medicaid or food stamps than any other employer in the state. The most recent compilation of employers accounting for the largest number of recipients in Connecticut’s Husky program (its version of Medicaid) also had Wal-Mart as number one.

Another approach was taken in a recent report by the Democratic staff of the U.S. House Committee on Education and the Workforce, which estimates that the workforce of a typical Wal-Mart Supercenter costs taxpayers some $250,000 a year for Medicaid services (as part of at least $904,000 a year in overall federal safety net costs per store).

These hidden costs are not the only way Wal-Mart sticks taxpayers with the bill. The company has traditionally also been shameless in demanding special tax breaks and other forms of financial assistance when it opens a new store or distribution center. My colleagues and I at Good Jobs First have been tracking this practice since 2004, when we published a report estimating that the company had collected some $1 billion in such subsidies. We later updated the report, finding that the total had risen to $1.2 billion, and we assembled all the data in a website called Walmart Subsidy Watch.

In many of its more controversial urban siting efforts in recent years, Wal-Mart has put less emphasis on special subsidies, which we like to think is because we made the practice more radioactive. Yet the company cannot resist its giveaway demands entirely.

Recently, for example, the company sought tax breaks totaling some $5.4 million for a Supercenter and Sam’s Club it is proposing to build in the Chicago suburb of Tinley Park. Thankfully, the plan was shot down by the board of the Summit Hill School District, which took its vote after a hearing in which one resident described Wal-Mart as a “corporate monster.”

In Texas, however, Wal-Mart seems to be on track to receive a property tax abatement worth $3 million in connection with its plan to build an e-commerce distribution center near Fort Worth Alliance Airport. (For other recent awards, see the company’s entries in the Good Jobs First Subsidy Tracker database, which covers all companies; be sure to search under the official corporate name Wal-Mart as well as the brand name Walmart).

The spirit of the Summit Hill School District is reflected in the activism of rank and file workers, who with the assistance of OUR Walmart are planning to resume protests at company stores on Black Friday. Their efforts will help replace food drives with a living wage and eventually get Wal-Mart to change all its freeloading ways.

Job Actions Have Wal-Mart Running Scared

Thursday, June 27th, 2013

Walmart_strikeIt’s déjà vu all over again at Wal-Mart. Returning to its customary practice of using intimidation to respond to demands for improved working conditions, the company recently began firing some of the “associates” who participated in strikes at its stores. Other workers are being disciplined under the pretext of violating Wal-Mart’s attendance policy.

While this is bad news for the workers affected, the use of heavy-handed tactics is a sign that the company is worried about the historic job actions that have been spreading through its U.S. operations. If Wal-Mart really believed its claims that the OUR Walmart group spearheading the protests has limited support among the company’s massive workforce, then it would be ignoring the movement rather than desperately trying to squelch it.

The current wave of firings is actually an escalation of repressive policies that the company has been implementing since OUR Walmart began ramping up its campaign in 2011. A report released in May by American Rights at Work found that the company has been responding to the activism by disguising acts of retaliation as legitimate discipline or routine enforcement of company policy. Accusing Wal-Mart of fostering a “climate of fear,” the report also documented ways in which the company violated federal labor law by denying OUR Walmart members and organizers access for protected concerted activity.

Such actions continue a tradition of anti-union animus that has characterized Wal-Mart since its earliest years. While some have sought to romanticize founder Sam Walton and pin the blame for the company’s notorious labor policies on his successors, it was Sam himself who first brought in union-busting consultants when some members of his then much smaller workforce began to talk about organizing in the 1970s. The investment paid off for management. For example, after about half of the workers at a Wal-Mart warehouse in Searcy, Arkansas signed cards in support of Teamsters representation in the early 1980s, the consultants used the run-up to the election to scare the workforce into ultimately voting more than three-to-one against the union.

This scenario would play out again and again, both in the United States and Canada. For example, in 1997 the Ontario Labor Relations Board ruled that Wal-Mart had violated Canadian law by intimidating workers in the period preceding a representation election involving the United Steelworkers union. As a result, the board certified the Steelworkers, even though a majority of workers had voted against the union. The company, however, simply refused to bargain with the union.

In 2000 a small group of courageous meatcutters at a Wal-Mart Supercenter in Jacksonville, Texas voted for representation by the United Food and Commercial Workers (UFCW). Within two weeks, the company announced that it was shutting down the meatcutting operations at that store and at more than 175 more in six states. The NLRB later ruled that the company had violated federal labor law by refusing to discuss the closing with the workers who had chosen union representation, but the issue was by then moot.

In 2001 the UFCW said it was launching a national organizing drive at Wal-Mart, but it focused on a few areas such as Las Vegas, where it engaged in a fierce battle with a slew of anti-union specialists flown in from corporate headquarters in Bentonville, Arkansas. Years later, the NLRB found that the company had engaged in various unfair labor practices, but by then the organizing effort had fizzled out. Looking back on the situation, the Las Vegas Sun published an article headlined WAL-MART BREAKS THE LAW, GETS PUNISHED, WINS ANYWAY.

Wal-Mart’s labor relations practices have been so egregious that they go beyond regulatory infractions and enter the realm of human rights abuses. It’s thus no surprise that Human Rights Watch, which typically analyzes atrocities in dictatorial governments, once published a report concluding Wal-Mart violated the right of its workers to freedom of association.

The problem for current Wal-Mart management is that its workers are more difficult to intimidate than they were in the past. Organizing efforts used to be limited to single locations; now OUR Walmart, using non-traditional tactics, is operating in many places and can mobilize large numbers of people, as seen in last year’s Black Friday job actions as well as the recent strikes and the protests at the company’s annual meeting.

One way Wal-Mart management is responding to the growing solidarity is by increasing its use of a category of worker it believes it can more readily control: temps. The company traditionally used such contingent workers only during the holiday season. Recently there have been reports that some Wal-Mart stores are hiring only temps.

So much for those TV ads that sought to portray a job at Wal-Mart as the stepping-stone to a career.

Amazon Gets Its Way

Thursday, April 25th, 2013

amazonWhen companies get subsidies from state and local governments, it usually means that they have to pay less in taxes. Internet retailing behemoth Amazon.com built its business on making sure it could avoid collecting sales taxes from many of its customers, thus allowing it to undercut its brick and mortar rivals.

It now looks like that indirect subsidy is finally coming to an end. Congress seems poised to pass legislation that would require all online merchants with $1 million or more in revenue (Amazon’s annual sales are 60,000 times larger at $61 billion) to collect state and municipal sales taxes from customers anywhere in the country. This will be a godsend to struggling governments that need the revenue to pay for education, healthcare and other vital services.

Amazon has already come to terms with this policy change and in fact has been taking steps to exploit it. As has been widely reported, Amazon recognizes that the next stage in internet retailing is same-day delivery, at least in selected areas. To make that service possible, Amazon needs to greatly expand its network of huge distribution centers from which all those Kindles and toys and kitchen gadgets can be quickly transported to impatient customers. The company just reported a 37 percent drop in its first quarter profits that has been attributed in part to the cost of expanding that distribution network.

Don’t shed any tears for Amazon. That drop is probably just a blip. The company has already taken steps to radically reduce the cost of building those new facilities.

It has done this by using its sales tax collection practices as leverage in negotiating with state governments. For several years, the company negotiated special exemptions from the requirement to collect taxes in those states where it had a physical presence such as a warehouse. In some states, such as South Carolina in 2011, it used the promise of job creation linked to new distribution centers as bait to get the exemptions.

When necessary, the company also tried to use those promises to evade obligations to make good on judgments concerning uncollected past taxes. For example, last year the company reached a deal with Texas that allowed it to skate on a $269 million assessment for uncollected taxes. In exchange, the company agreed to invest $200 million on facilities it would have had to build anyway.

The company is also shifting its demands to traditional economic development subsidies such as income tax credits, property tax abatements and cash grants. For example, the company got a $7.5 million state grant and a $1 million local abatement for a distribution center it agreed to build in Delaware, and it agreed to build two such facilities in New Jersey on the condition that it receive a subsidy package, the value of which has not yet been announced

Amazon has also received a $2 million tax credit and up to $300,000 in training grants from the Indiana Economic Development Corporation for a fulfillment center it agreed to build in Jeffersonville. That agency — whose website lures companies with the pitch “Looking for a right-to-work state with all the right resources, business incentives, low corporate tax rates and AAA credit rating in place to reach your full potential?  – is in tune with Amazon’s sensibilities. For in addition to seeking financial assistance, Amazon takes advantage of the implicit subsidy created by weak labor laws.

The fact that its U.S. operations have remained entirely non-union has made it easier for the company to impose inhuman working conditions in its facilities, which have been the target of criticism by groups such as Working Washington. The controversy has also emerged at Amazon’s operations in Germany, where the company was accused of using neo-Nazi thugs to intimidate immigrant workers at the facilities.

Amazon, it appears, will stop at nothing in its quest to dominate online commerce.

Wal-Mart’s Other Sins

Thursday, October 25th, 2012

The job actions taking place at many Wal-Mart locations around the United States have brought new attention to the abysmal labor practices of the country’s largest private employer. More than any other company, Wal-Mart depends on low wages, meager benefits, overtime abuses and gender discrimination to keep its labor costs artificially low while quashing any efforts by workers to rectify those conditions.

Two weeks ago, I used this blog to recount Wal-Mart’s labor and employment track record. Here I want to remind readers of some of the company’s many sins outside the workplace, using information I assembled for the new 5,000-word Wal-Mart entry in my Corporate Rap Sheets series.

Corruption. Wal-Mart doesn’t seem to mind its hardline reputation on personnel matters, but it has tried to otherwise paint itself as a squeaky-clean operation. That image was shattered last spring, when the New York Times published an 8,000-word front-page exposé about moves by top management to thwart and ultimately shelve an investigation of Foreign Corrupt Practices Act violations, focusing on extensive bribes paid by lower-level company officials as part of an effort to increase Wal-Mart’s market share in Mexico.

That story made a huge splash and reportedly undermined the company’s urban expansion efforts. A major public pension fund, the California State Teachers’ Retirement System, sued the company for breach of fiduciary duty in connection with the bribery scandal. It and other institutional investors showed their discontent with top management by opposing the official slate of directors at Wal-Mart’s annual meeting. About 12 percent of the shares outstanding were voted against the slate, an unprecedented level of dissent by the company’s previously quiescent shareholders. The company, apparently still trying to deal with the fallout, has just announced an overhaul of its compliance department.

State income tax avoidance. In 2007 the Wall Street Journal published a front-page story revealing that Wal-Mart was using a real estate gimmick to avoid paying many millions of dollars in state corporate income taxes each year. It was doing this by putting many of its stores under the ownership of a real estate investment trust (REIT) controlled by the company. The stores would pay rent to the captive REIT and deduct those payments as a business expense.

This trick, essentially paying rent to itself, reduced the company’s taxable income and thus lowered its state tax bill (the REIT was structured so its income wasn’t taxed by any state). A report by Citizens for Tax Justice estimated that Wal-Mart had thereby avoided some $2.3 billion in state income tax payments between 1999 and 2005–an average of more than $300 million a year.

Local property tax avoidance.  A 2007 report by my colleagues and me at Good Jobs First found that Wal-Mart has sought to reduce its property tax payments by frequently and aggressively challenging the assessed value attached to its U.S. stores and distribution centers by local officials.  The report examined a 10 percent random sample of the stores and found that such challenges had been filed for about one-third of them; an examination of all of the distribution centers found challenges at 40 percent, even though many of the latter had been granted property tax abatements when they were built.

Sales tax “skimming.” In a 2008 report by Good Jobs First entitled Skimming the Sales Tax, we found that Wal-Mart was receiving an estimated $60 million a year as a result of the little-known practice in some states of compensating retailers for collecting sales taxes and calculating the amount of that compensation based on total sales. This, in addition to the estimated $130 million in sales-tax-based economic development subsidies, means that Wal-Mart is depriving hard-pressed state and local governments of at least $73 million each year. This is just a small part of the more than $1.2 billion in state and local subsidies that Good Jobs First has documented on our website Wal-Mart Subsidy Watch.

Environmental violations. Wal-Mart has tried very hard in recent years to depict itself as a pioneer of sustainability by wide-ranging initiatives with regard to energy efficiency and the addition of organic foods and other green products to its shelves. Wal-Mart is largely silent about the environmental impact of the millions of customers who in most cases must still drive to the company’s retail outlets. It also wants us to forget that the company itself has had its share of environmental violations. For example, in 2004 the U.S. Department of Justice and the Environmental Protection Agency announced that Wal-Mart would pay a $3.1 million civil penalty and take remedial action to resolve alleged violations of the Clean Water Act in connection with storm water runoff from two dozen company construction sites in nine states. The following year, the company agreed to pay $1.15 million to the state of Connecticut to settle a suit alleging that it had allowed rain water to carry fertilizer, pesticides and other harmful substances stored outside its retail outlets into rivers and streams. It also signed a consent decree with the EPA to resolve charges relating to diesel truck idling at its facilities.

Undocumented Workers. When talking about Wal-Mart it is difficult to avoid the workplace entirely. Aside from its mistreatment of its own employees, the company takes advantage of exploited contract workers. For example, in 2003 a federal racketeering suit was filed against Wal-Mart by lawyers seeking to represent thousands of janitors who cleaned company stores and were reported to be working seven days a week and not receiving overtime pay. The filing took place 18 days after federal agents raided 60 Wal-Mart stores in 21 states to round up about 250 janitors described as undocumented aliens. In 2005 Wal-Mart agreed to pay $11 million to settle federal immigration charges. Documents later emerged suggesting that Wal-Mart executives knew that the company’s cleaning contractors were using undocumented immigrants.

“Dead Peasant” Insurance. Wal-Mart has not only worked people to death but also continued exploiting them after their demise. The mega-retailer is one of the large companies that engaged in the repugnant practice of secretly taking out life insurance on low-paid employees and making itself the beneficiary. The polite term for this is corporate-owned life insurance, though critics have labeled it “janitor’s insurance” or “dead peasant insurance.” In 2004 Wal-Mart settled one case brought in Houston for an undisclosed amount. Two years later it agreed to pay $5.1 million for a class action brought by the estates of former employees in Oklahoma, and in 2011 the company agreed to pay just over $2 million in a class-action suit filed in Florida.

The list could go on. In fact, it is difficult to find a form of corporate misconduct Wal-Mart has not exhibited. Yet it is probably the labor arena that counts the most in determining whether the company will be reined in. Support your local Wal-Mart “associates” in their efforts to stand up to the bully of Bentonville.

Standing Up to the Bully of Bentonville

Friday, October 12th, 2012

The spreading job actions by Wal-Mart workers around the country, while still involving modest numbers, come across as a kind of catharsis. They inspire the same uplifting emotion as those movie scenes in which a long-suffering victim of bullying finally fights back against the tormentor.

Wal-Mart, probably more than any other large corporation, deserves the title of bully. For decades it has demonstrated utter contempt for the rights of its employees to act in concert to improve their conditions of work, which are in serious need of amelioration. It rules over a vast army of underpaid “associates” who in many cases are involuntarily limited to part-time status and thus denied even the meager benefits provided to full-timers, forcing them, with the cynical encouragement of management, to apply for taxpayer funded health coverage such as Medicaid that is not meant for employees of a $460 billion corporation.

Such impacts are not limited to those actually on Wal-Mart’s payroll. Since it is by far the largest U.S. private-sector employer, Wal-Mart’s abominable labor practices have set an example that makes it easier for many other employers to commit similar sins.

In the hope that we are indeed seeing a major turning point in the relationship between the giant retailers and its workforce, it is worth looking back at the company’s record to recall just how bad its behavior has been.

While some have sought to romanticize founder Sam Walton and pin the blame for the company’s retrograde policies on his successors, the exploitative approach was there from the start. As Bob Ortega points out in his 1998 book In Sam We Trust, Wal-Mart Sam Walton deliberately used superficial forms of paternalism to gain the loyalty of his workers while keeping labor costs at rock bottom. “We really didn’t do much for the clerks except pay them an hourly wage,” Walton wrote in his autobiography, “and I guess that wage was as little as we could get by with at the time.”

When Walton learned in the 1970s that some of his workers were talking about unionization, he did not try to address their concerns. Instead, he brought in a union-busting consultant named John E. Tate, who devised the policy of uncompromising resistance that would characterize Wal-Mart’s labor relations posture for decades to follow. That applied not only at the company’s stores, but also at its large network of distribution centers. For example, after nearly 50 percent of workers at a warehouse in Searcy, Arkansas signed cards in support of Teamsters representation in the early 1980s, Tate and his staff used the run-up to the election to scare the workforce into ultimately voting more than three-to-one against the union.

This scenario would play out again and again, both in the United States and Canada. For example, in 1997 the Ontario Labor Relations Board ruled that Wal-Mart had violated Canadian law by intimidating workers in the period preceding a representation election involving the United Steelworkers union. As a result, the board certified the Steelworkers, even though a majority of workers had voted against the union. The company, however, simply refused to bargain with the union.

When Wal-Mart used the same intimidation tactics during a 1997 election at one of its stores in Wisconsin, the National Labor Relations Board criticized the company but did not take the same sort of action as its Ontario counterpart. Later in 1997, exasperated United Mine Workers officials decided to call off an organizing drive at a Wal-Mart in Fairfield, Alabama less than 24 hours before the representation was scheduled to take place.

In 2000 a small group of courageous meatcutters at a Wal-Mart Supercenter in Jacksonville, Texas voted for representation by the United Food and Commercial Workers (UFCW). Within two weeks, the company announced that it was shutting down the meatcutting operations at that store and at more than 175 more in six states. The NLRB later ruled that the company had violated federal labor law by refusing to discuss the closing with the workers who had chosen union representation.

In 2001 the UFCW said it was launching a national organizing drive at Wal-Mart, but it focused on a few areas such as Las Vegas, where it engaged in a fierce battle with a slew of anti-union specialists flown in from corporate headquarters in Bentonville, Arkansas. Years later, the NLRB found that the company had engaged in various unfair labor practices, but by then the organizing effort had fizzled out. Looking back on the situation, the Las Vegas Sun published an article headlined WAL-MART BREAKS THE LAW, GETS PUNISHED, WINS ANYWAY.

While the UFCW largely turned away from individual store organizing in the United States, it continued the effort in Canada, on the assumption that the legal environment would be more conducive there. Yet Wal-Mart continued to run roughshod over Canadian law as well.

When workers at a store voted for representation, Wal-Mart simply refused to bargain with the union. If it was forced to do so, it turned to the same tactic it employed in Texas: shutting down the store or department where workers had asserted their desire for collective bargaining, pretending that the step was being taken for economic reasons.

After such a move in 2005 involving a store in Jonquiere, Quebec, Wal-Mart CEO Lee Scott defended the action in an interview with the Washington Post, saying that he “saw no upside to the higher labor costs” that union representation would have brought and that he “refused to cede ground to the union for the sake of being ‘altruistic.’”

That, in a nutshell, is Wal-Mart’s view of the world—that its desire to keep costs, especially those relating to labor, at the absolute minimum is all that matters. Any measures in furtherance of that goal are justified.

Along with fighting unions tooth and nail, the religion of cost minimization led to other practices that made life hellish for the company’s workforce. This included the systematic use of wage theft to cheat workers out of overtime pay as well as gender and racial discrimination. Over the past decade, the company has paid hundreds of millions of dollars to settle lawsuits over wage and hour violations. In 2005 it paid $11 million to settle federal charges related to the illegal use of undocumented immigrants—who were found to be working some 56 hours a week—to clean its stores. And Wal-Mart would have paid much more in damages for sex discrimination if the U.S. Supreme Court had not come to its rescue and derailed a massive class action suit (though other more limited suits took its place).

Wal-Mart’s employment practices have been so egregious that they go beyond regulatory infractions and enter the realm of human rights abuses. It’s thus no surprise that Human Rights Watch, which typically  analyzes atrocities in dictatorial governments, once published a report concluding Wal-Mart violated the right of its workers to freedom of association.

So here’s hoping that the freedom fighters of the Wal-Mart workforce succeed in fully taming the bully of Bentonville.

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