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WASHINGTON -- Wal-Mart's decision to settle in a case involving illegal immigrants hired by the company's cleaning contractors to work in its stores could have effects well beyond the costs to the Bentonville, Ark.-based retailer. Other store operators are likely taking note and considering their own next moves, say labor experts.
The company will not face criminal charges, but will pay $11 million to the government as directed by the settlement, which was revealed on Friday. The deal also stipulates $4 million in criminal forfeitures by 12 contractors hired by Wal-Mart to provide janitorial services and requires the company to create an internal program to ensure compliance with immigration laws.
"[We acknowledge] that our compliance program did not include all the procedures necessary to identify independent floor-cleaning contractors who did not comply with federal immigration laws," said Wal-Mart general counsel Tom Mars in a statement. "We will use this as an opportunity to improve and be a better, more tightly run business as a result."
According to Wal-Mart, the company has already begun instituting stronger controls as part of its contractor review process, and has also started requiring that floor cleaning at its U.S. stores be performed by Wal-Mart associates.
Two separate investigations conducted by federal authorities uncovered about 350 cases of undocumented workers at Wal-Marts in 21 states.
"It looks like a pretty good settlement for Wal-Mart," labor attorney Joseph Schmitt from Minneapolis-based Halleland Lewis Nilan Sipkins & Johnson told Progressive Grocer, observing that $11 million was "not a significant amount" for the retail giant and that no criminal charges would be filed.
In an interview with PG, Stephen Fox, a labor lawyer with Fish and Richardson in Dallas, said that the government went after Wal-Mart precisely to send a strong message to other retailers that if even the mighty Bentonville Behemoth could be investigated, they could be, too. The lesson here, according to Fox, is that retail employers have the responsibility to ensure their contractors don't violate labor laws, and that if the employers don't do that, they could face the same penalties as those contractors. "What a great enforcement mechanism for the government," he noted.
Fox also referred to the settlement as "a good business solution" for Wal-Mart, noting that the company, deep as its pockets were, could never "even the playing field" against the government.
Both Schmitt and Fox said that the upshot of the litigation and its resolution would be more compliance programs instituted by retailers. "Retail employers are going to take advantage of this [case] to follow that [compliance program] framework," noted Schmitt, while Fox remarked that other major retailers will want to see what Wal-Mart does in terms of compliance, then evaluate and implement their own programs. Fox added that the suit and settlement "will result in greater vigilance and more diligence on the part of all large employers that their contractors use valid workers."
Not all the experts feel that way, however. Roger Schnapp, a Newport Beach, Calif.-based employment attorney, told PG that aside from a warning to Wal-Mart that it needs to be more careful in the glare of "unbelievable scrutiny," the case and its aftermath are unlikely to have much of a lasting impact. "You'll see a flurry of interest, and lip service paid to being more careful about it, and maybe a slight improvement, but in terms of real change, no," said Schnapp. The reason is that priorities such as cost and quality of work take precedence over policing contractors. "I would applaud it [if it happened,]" he noted, "but I simply don't see it as practical." Schnapp characterized Wal-Mart's decision to settle as a way "to get rid of nuisance value and cut down on bad PR."
"I believe justice has been served," said Gil Garcia of Garcia & Kricko in Hackensack, N.J., an attorney representing the immigrant workers, in a statement. "I think this is very good for the government, because it shows that the law has been enforced. I also believe that this is good for Wal-Mart, because it demonstrates that Wal-Mart is no longer adhering to the practice of hiring undocumented immigrants. And I also believe that it is good for the undocumented workers, because by their cooperation they may have a way to remain in the United States." Garcia added that the settlement would cause pending criminal cases against his clients to be dropped.
Many of the workers claim that they were forced to work seven days or nights a week without overtime pay or injury compensation, and that they were usually locked in the stores all night. A civil suit on behalf of the workers is still pending in New Jersey. Noting that "not a penny [of the settlement] goes to the exploited individuals," James L. Linsey of New York's Cohen, Weiss & Simon, the plaintiffs' lawyer in the New Jersey lawsuit, told PG he believed that the settlement "cleared the way for Wal-Mart to consider doing the right thing" by paying reparations to such workers.
In other Wal-Mart news, Asda, the company's British division and the No. 2 grocer in the United Kingdom, has appointed c.o.o. Andy Bond to head it, succeeding Tony DeNunzio, who recently left to join Royal Vendex KBB, the Netherlands' largest nonfood retailer.
Bond became c.o.o. in September 2004 after running Asda's successful George clothing business for four years. George is now the top clothing brand in Britain, in terms of volume.
"We are pleased to have the opportunity to appoint someone from inside the business," Wal-Mart International president and chief executive John Menzer remarked in a statement. "It is clear to us that Andy is the right person to lead the next phase of Asda's success."
-- Bridget Goldschmidt