LABOR-CONTRACTOR SITUATION COULD PRESAGE BIG CHANGE

David Merrefield

This seems to be shaping up to be the year during which much changes. Long-used business practices, such as the one mentioned in the column below, are among the processes now being called into question.

Wal-Mart Stores, however, is facing a business-as-usual challenge of a different sort concerning its cleaning contractors. And it just happens that this situation is about Wal-Mart. Events might well have settled on any number of retailers, or on other forms of business for that matter. But the point is that the contractor issue may have much larger implications than what's readily evident.

The Wal-Mart matter started on Oct. 23 when federal agents swooped down on 60 Wal-Mart stores in 21 states, arresting hundreds of janitors that were alleged to be illegal immigrants. Apparently, the workers were paid through a network of contractors, each of which took a cut from the hourly rate paid by Wal-Mart. The effect was to reduce wages to subsistence levels, although that wasn't at the root of the initial sweep. But compensation became an issue before too long.

More recently, Wal-Mart became the object of a lawsuit filed by some of those arrested. It was alleged that Wal-Mart and the contractors "engaged in and profited from a nationwide fraudulent scheme designed to defraud the U.S. government through non-payment of taxes and [to] injure and exploit the plaintiffs." Wal-Mart told SN for last week's edition that it would "move quickly for dismissal."

The crux of this is the distance put between Wal-Mart and the janitorial workers. They were not employees of Wal-Mart, but of contractors engaged by Wal-Mart. So, to what entity goes potential blame? It was intimated after the original raids, and in the subsequent suit, that Wal-Mart executives knew or should have known that non-qualified workers were being hired and "exploited." After all, similar raids had occurred at Wal-Mart stores in 1998 and 2001.

Perhaps as recently as a few years ago, hiring a contractor to execute work in its own way might have been trotted out by a retailer as a sufficient and successful defense.

Indeed, a class-action suit against some supermarket operators in Southern California, alleging similar contractor-related wage issues, has been pending for three years or so, and still is. (See Page 26.)

Now, it's likely to develop, the use of a contractor will no longer provide much insulation from blame, and that's because of a cultural change. Not long ago, it could be argued that those who go to work for a contractor offering substandard conditions have chosen to do so. Now, it's increasingly easy to argue that such workers are victims.

The upshot is not just that contractors' labor practices will be more closely examined, but that any practice that could lead to "victimization" will be under fire. Those practices could include, say, the marketing or selling of food that is low in nutritional content or high in unhealthy components. In sum, the concept of choice may be of diminished utility. After all, it was when litigators found a way to show that tobacco was addictive, thus establishing a class of victims, that a few suits against that industry prevailed.