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Do Wal-Mart Class Action Lawsuits, Judgments and Appeals Reveal a Failing Business Model of Profits Over People? (WMT)

By June 16, 2011

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After a Pennsylvania appeals court upheld a $187.6 million judgment for wage and hour violations today, Wal-Mart (WMT) is undoubtedly headed to yet another appeal in yet another court where it will fight yet another legal battle. Another day, another multi-million dollar judgment. It's just a seemingly mundane part of doing business for the Wal-Mart corporation.

Index of most recent employee lawsuits against Wal-Mart and other major retail chains >>

Sometime this month it is expected that Wal-Mart will also hear back from the U.S. Supreme Court about the largest class action discrimination lawsuit in U.S. history. Ten years after the legal proceedings began, the decision from the Supreme Court will not decide whether Wal-Mart is guilty of discriminating against its female employees. Rather, the highest court authority in the U.S. will be deciding whether the 1.5 million current and former female employees involved in the suit can proceed as a group, or whether they will have to pursue justice individually. No matter what the verdict, Wal-Mart will likely be defending itself against the female employees who believe that they have been wronged for many more years to come.

Certainly the world's largest retailer must have the world's largest legal team, or at least the world's largest "legal fees" line item on its balance sheet. Seemingly high profile cases and verdicts are of little concern to the global retailing behemoth. It was recently reported that Wal-Mart has spent $2 million to defend itself against a $7,000 fine levied by OSHA after one of its part-time employees was trampled to death in the 2008 Black Friday customer stampede.

Lined up like planes at a busy international airport, new legal actions land on the desks of Wal-Mart's legal team every day, it seems. Besides the massive class action suits that Wal-Mart is defending itself against, here's a sampling of some other lawsuits that employees and customers have filed against the "save money, live better" retailer:

  • A lawsuit was filed last week in U.S. district Court by 10 former Wal-Mart employees who claim that Wal-Mart systematically fired older, long-tenured, higher-salaried managers and replaced them with younger short-term employees in order to save on employment expenses.
  • Six Wal-Mart employees have filed suit for wrongful termination against Wal-Mart because they were fired after defending themselves and their co-workers against a violent customer. The six were each fired in separate incidents because even though their actions protected others from physical harm, it violated Wal-Mart's policy about confronting people with a weapon. The fired "heros" are seeking lost wages and compensatory damages. At the time of the filing, most of them had not been able to find a new job.
  • A class action lawsuit has been filed in Florida, alleging that Wal-Mart has been cheating consumers who have used gift receipts to make gift returns. Apparently when returning a gift with a gift receipt, customers were credited with less than was originally paid for the gift. Wal-Mart is not denying this particular allegation, but rather said that it was a mistake resulting from cash registers that were not properly programmed to correctly handle the gift return transactions. Wal-Mart says that it has corrected the problem and is undoubtedly hoping that it won't be forced to pay consumers back for its "mistakes."
  • Wal-Mart is even defending itself against government entities that feel they have been wronged. The state of West Virginia has filed a lawsuit against Wal-Mart (and four other major retail chains) alleging that it violated state law when it overcharged customers for generic drugs.

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Certainly any large company can expect that it will attract its fair share of frivolous lawsuits filed by opportunists looking for handouts from big, bad corporations. But given the scope, size, and consistent nature of the lawsuits that are relentlessly filed against Wal-Mart, it's difficult to dismiss them as exploitative. Rather, there seems to be an obvious and plausible story line playing out in the Wal-Mart organization, and the courtroom is repeatedly the scene for the not-so-happy ending of the story.

Perhaps the only way Wal-Mart can sustain its aggressive strategy to undercut all its competitors is by cutting expenses with equally aggressive strategies that are proving to be at least a little bit illegal, and a lot uncaring.

It seems that in an attempt to "save people money so they can live better," Wal-Mart "withholds wages so people can work harder," "keeps refunds so people can shop longer," and "overcharges for drugs so insurance companies can reimburse bigger." That is, of course, if the litigants on the other side of the courtroom have legitimate claims against Wal-Mart.

If the claims of all these millions of defendants are found to be true, then the bottom line is that Wal-Mart has an unworkable business model. If the only way Wal-Mart can underprice its competitors and turn a profit at the same time is by cheating people and violating laws, then it's going to find itself on the receiving end of a lot of karmic payback in the form of legal filings, settlements, and judgments.

The thought that the legal defense of illegal practices might be a conscious and proactive business choice by Wal-Mart's leadership team is unnerving. But even more disturbing is the reason why Wal-Mart says it has been willing to spend thousands of legal hours and millions of dollars defending itself against the $7,000 OSHA fine.

According to the NY Times, Wal-Mart's concern in this particular legal case is that if they pay the fine related to the Black Friday trampling incident, then "surging crowds" might be officially considered an occupational hazard from this point forward at all retail stores.

And who would that be bad for? Certainly it wouldn't be bad for the employees at the bottom of the trampling heap.

Wal-Mart says it would be bad for the entire retail industry because OSHA would then have the right to look over a retailer's shoulder on big sale days to ensure that crowd control is adequate to protect the health and safety of the Wal-Mart employees.

And who would that be bad for? Certainly it wouldn't be bad for the employees who would like make it to the end of their Black Friday shift alive and uninjured.

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Wal-Mart's stance in the OSHA case, and really every other employee and customer-related case, repeatedly proves that Wal-Mart's leaders value profits over people. It is that stance that will eventually cost the Wal-Mart chain plenty, whether the payback is court-mandated or not.

Index of Most Recent Retail Employee Lawsuits and Judgments >>

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Comments

February 9, 2013 at 2:38 am
(1) mitch says:

You have opened up my eyes right now with this thx

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