Outten & Golden: Empowering Employees in the Workplace

Goliath is Reeling: Not a Good Time to Be Wal-Mart

November 8th, 2005 | Paula Brantner

The retail juggernaut known as Wal-Mart is not having a very easy time of it these days. Reeling from the release of some very damaging internal memos, and gearing up to combat a new documentary that chronicles Wal-Mart’s role in bringing down wages and working conditions, the company has been forced to establish a PR war room. Is it really just because they’re the biggest that everyone is aiming to bring them down? Or are they really just worse than everyone else? With all of the new information that is being disclosed this month, it will be up to the American people to vote with their holiday shopping dollars.

It is likely that Wal-Mart has suspected for months how rough it would be on their image during the month that documentary filmmaker Robert Greenwald (Outfoxed) released his latest work, “Wal-Mart: The High Cost of Low Price.” It is less likely that they knew how much they would already be reeling from the release of highly damaging internal memos that demonstrate just how far Wal-Mart is willing to go to bring you “always low prices.”

The first of the damaging memos had to do with health care. Wal-Mart has long been criticized for the small percentage of its employees who are able to take advantage of the company’s health care plan. Between the long waiting periods, especially for the part-time employees which comprise the majority of its workforce, and the high deductibles, which are simply not affordable for workers making less than $20,000, and much lower in some cases, Wal-Mart’s insurance plan is simply not an option for many of its workers. Fewer than half have company-sponsored insurance, and 5% are on Medicaid, the government health plan for the poor. Nearly half the children of employees are covered only by Medicaid or have no insurance. (See USA Today article.) This means that taxpayers often must assume the burden when Wal-Mart employees and their families get sick.

But if Wal-Mart had its way, its employees would simply not get sick at all, because Wal-Mart would only have the youngest and healthiest employees on its staff. A memo written by Susan Chambers, Wal-Mart’s executive vice president for benefits, on ways to reduce the company’s healthcare costs, was recently leaked to the New York Times. (See Chambers memo.) The memo recommends that all jobs include some physical activity (e.g., all cashiers do some cart-gathering), so as to discourage unhealthy job applicants, because ”The least healthy, least productive associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart” and this move would “also dissuade unhealthy people from coming to work at Wal-Mart.”

While the memo didn’t go so far as to recommend pushing out older workers, Chambers reminded Wal-Mart management that ”the cost of an associate with seven years of tenure is almost 55 percent more than the cost of an associate with one year of tenure, yet there is no difference in his or her productivity. Moreover, because we pay an associate more in salary and benefits as his or her tenure increases, we are pricing that associate out of the labor market, increasing the likelihood that he or she will stay with Wal-Mart.” Notably, Chambers acknowledged that the criticisms leveled at Wal-Mart’s health plan are hardly meritless. The memo states, ”Wal-Mart’s critics can easily exploit some aspects of our benefits offering to make their case; in other words, our critics are correct in some of their observations. Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance.”

Wal-Mart then rushed to control the damage, by announcing a so-called new plan with low premiums ($11 to $65 a month) and high deductibles. The first three doctors’ visits and three prescriptions are handled with nominal co-pays. To help employees pay out-of-pocket expenses up to the deductible, Wal-Mart also promotes tax-free health savings accounts, a kind of 401(k) plan for medical expenses. (See USA Today article.) Critics charge that this, too, is a sham, as it fails to address the real problem with Wal-Mart’s coverage:

The cheapest deductible on Wal-Mart’s new plan is $1,000 for individual coverage and $3,000 for family coverage. For Wal-Mart workers, many of whom make $12,000 to $15,000 a year, the cost could be as much as 25% of their take-home pay for individual coverage and up to 40% for family coverage.

(See Wal-Mart Watch op-ed.)

Now, just as the health care story starts to fade from the public eye, more damaging information from within has been released. This time, the subject is the immigration status of the workers who clean Wal-Mart stores. You might recall that back in 2003, federal immigration officials raided 60 Wal-Mart stores where undocumented workers were being used to clean the stores. At the time, Wal-Mart management disavowed any knowledge of the workers’ immigration status, saying that subcontractors were responsible for hiring them. However, an unsealed affidavit in the immigration investigation reveals that senior management was aware that the workers were undocumented. (See Associated Press article.)

One cleaning contractor says that a Wal-Mart vice president, Leroy Schuetz, advised him to set up multiple subsidiaries, so that if one of them were found using illegal workers, he could continue to do business with the retailer through the others. More testimony reveals Steve Bertschy, a Wal-Mart vice president who managed maintenance, commented about subcontractors using undocumented workers, “And they load them up into one or two apartments and they take a family of five and pay them $1,000 a week, that’s probably a dollar an hour if they’re there seven days a week and they’re not paying taxes because they’re not getting paid a fair rate compared to U.S. standards, then they start stealing from the store to make up the difference.” (So if Bertschy was aware of this degree of exploitation, why wasn’t he doing anything about it? Probably because no employees were stealing nearly as much as Wal-Mart and its subcontractors were stealing from them by failing to pay them even the minimum wage.)

The release of all of this harmful information has motivated Wal-Mart to gear up a PR machine. No longer can they avoid all the damaging publicity, so they’ve established a “war room.” Although Wal-Mart’s founder, Sam Walton, thought PR work was a waste of time and money, its current leadership is running scared. It has recruited political strategists on both sides of the aisle: Michael K. Deaver, chief guardian of Ronald Reagan’s image, and Leslie Dach, one of Bill Clinton’s media consultants, to take its message to the people, just like a political campaign would do. (See New York Times article.) In a second-floor conference room in the company’s Bentonville, Arkansas headquarters, “Action Alley” (the same name Wal-Mart gives to the wide, circular aisle that runs around its stores) is staffed with a team engaged in such activities as scanning newspaper articles and television transcripts that mention Wal-Mart, holding conference calls with Wal-Mart employees around the country to plan for events, and generally trying to neutralize criticism before it is leveled.

Things will most likely come to a head next week, with the premiere of “Wal-Mart: The High Cost of Low Price.” As the organizers remind us, “While would-be Hollywood blockbusters book thousands of theaters months ahead of time jockeying for the best opening weekend, we’re looking to book thousands of churches, family businesses, schools, living rooms, community centers, and parking lots the week of November 13th.” (See walmartmovie.com screening information.) More than 6000 screenings of the movie are already scheduled, most outside of theaters. Chances are, there’s already one organized near you, and if there isn’t, you can always host one of your own! (Sign up to host a screening.)

You may be wondering what you can do to fight back against the retail Goliath, beyond educating yourself by seeing the new movie. Luckily, many groups have identified a number of action steps that anyone can take. (See Action Page.) Wal-Mart’s workers can join the new Wal-Mart Workers of America (WWOA) – the first national association for Wal-Mart workers.

Ultimately, however, the American public is going to have to vote with its dollars by spending them elsewhere. It may initially hurt, especially in rural communities where Wal-Mart has driven out most of its competitors. But if we collectively hope to reverse the downward slide of wages and working conditions in this country, we have to start at the top, with the company that is influencing (and in some cases, obliterating) its competitors. Next week, when millions of Americans will be thinking long and hard about what Wal-Mart has done to this country, will be as good a time as ever to start, and to continue through the critical holiday season.

More Information:


Workplace Fairness: Wal-Mart: Bad for Workers, Bad for America

Wal-Mart: The High Cost of Low Price movie website

Wake-Up Wal-Mart

Wal-Mart Watch

American Rights at Work

AlterNet’s Wal-Mart Coverage

Impact Fund: Wal-Mart Sex Discrimination Class Action

NELA’s Amicus Program: Brief in Dukes vs. Wal-Mart

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