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Wal-Mart's Labor Woes Teach GCs A Lesson In Law

"Respect for the individual." "Service to our customers." "Strive for excellence." According to Wal-Mart Stores Inc.'s Web site, these are the company's three basic principles to which it claims it has remained true. Although the world's largest retailer may have gotten the second and possibly the third fundamental belief right, respect for the individual is certainly an attribute 1.6 million of its female workers recently called into question.

The former and current employees filed a class action lawsuit, Dukes v. Wal-Mart, in California in June 2004 against the company, claiming it sexually discriminated against its female employees by failing to promote them into management positions. A judge found their claims to have merit, certifying the class almost immediately.

But the retail giant's troubles don't end there.

As Wal-Mart prepares to defend itself in Dukes, the largest class action lawsuit in the nation's history, it also has to face additional suits. In January, several hourly employees in California filed suit against the company claiming it failed to pay them for all the time they had worked. And

17 illegal immigrants who worked for Wal-Mart as janitors filed suit in October 2004 claiming the company violated labor laws by not paying them minimum wage and refusing to compensate for overtime.

But Wal-Mart can take solace in the fact that they aren't alone. Already Boeing, Morgan Stanley, Costco, Home Depot and PricewaterhouseCoopers have found themselves fighting high-profile discrimination suits. Many of those have settled for tens of millions of dollars. And experts believe suits against other companies are soon to follow.

"Employment litigation is not brain surgery," says Jeffrey London, a partner at Sachnoff & Weaver in Chicago. "For plaintiffs' lawyers, it's very easy to do, and it doesn't require extraordinary intelligence. Wal-Mart, for obvious reasons, is an attractive target."

An Ounce Of Prevention

As a result of all these high-profile suits, corporate America is now on high alert. But experts suggest companies need to do more than just be aware.

"Every business is vulnerable," says Sheryl Willert, past president of the Defense Research Institute and a member at Williams, Kastner & Gibbs in Seattle. "But a large corporation that is not vigilant about preventing these types of suits is going to be much more vulnerable because they have deeper pockets."

One highly affective tool large national employers can use to deflect potential

suits is anonymous employee satisfaction surveys. These types of surveys allow employees to anonymously disclose to their employers issues they may have with, for example, inadequate pay or unfair treatment. Employers can use the survey data to address a concern before it becomes a legal issue. The key, however, is to make these surveys anonymous.

"An employee may not sign his name to something that is negative about the company for fear of retaliation," says Daniel P. Westman, a partner at Shaw Pittman in McLean, Va. "Letting employees submit suggestions anonymously will generate a lot more comments."

Additionally, if companies think there may be a problem, they can create the survey to address those specific concerns. For example, if a company believes it may have a potential wage and hour problem, it can ask the question: Do you see any department within the company in which the hours being worked are excessive?

"The combination of making the survey anonymous and asking slightly leading questions can bring out a fair amount of information," Westman says. "But if employees have no outlet for their concerns, it could drive them to litigation."

Training Days

Experts also believe providing constant training to employees will cultivate

consistent management practices.

"Companies have to have uniform application of their policies and procedures," Willert says. "Someone in Washington may be applying those policies differently than someone in Illinois. The only way to prevent that from

happening is thorough training."

But London says training can be challenging for large companies.

"Wal-Mart has managers at approximately 3,400 stores," he says. "Of course it's harder for Wal-Mart to do universal coaching and training than it is for a company that has 10 locations."

Willert says that is from a lack of effective internal communication in large companies.

"Keep those lines of communication constantly open," she says. "There is never enough cross discussion in large companies. And all too often the right hand doesn't know what the left hand is doing."

Additionally, experts believe if employees feel they are part of a team, the likelihood that there will be a lawsuit is significantly decreased.

"Treat all your employees--with regard to gender, age or any other protected class--with dignity," London says. "Coach and train your supervisors to treat employees appropriately and even-handedly. That does a lot to mitigate these suits."

Listening to employees, Westman believes, creates a climate that encourages them to bring forward their concerns.

"When you have an enormous company such as Wal-Mart that has thousands and thousand of employees, it's easy for people to feel like they aren't being listened to," he says. "The larger and less personal the company, the more likely their concerns about being mistreated or discriminated against are not being responded to appropriately."

And when that happens, companies often find themselves in hot water.

Putting Out The Fire

The consequences of a high-profile discrimination suit can be devastating to a company. Some believe Wal-Mart's poor sales during the holiday season were directly related to its tarnished image as a result of its labor and employment woes. (Wal-Mart's sales increased by only 2 percent in 2004 compared to 2003, whereas its top competitors--Target and Kohl's--increased their sales by 5 percent or more.)

In January, Wal-Mart made an attempt to reinvent itself by launching a PR campaign designed to improve its image. Until then, the company had remained tight-lipped about its legal troubles.

Under the headline "Wal-Mart is working for everyone," CEO Lee Scott claimed the company pays its employees fairly, offers them low-cost health care and gives them plenty of opportunities for internal promotion.

The ads ran in local newspapers, such as the Seattle Times, as well as national ones, such as USA Today.

Some experts believe this was the right move.

"They obviously had a pretty good idea of how to respond to this kind of negative publicity," Westman says. "One thing every company should do in these types of situations is go on the offensive and tell their story in a positive way. Having a really good PR firm on call to help you deal with the media is a good idea."

Margie Elsberg agrees, but believes Wal-Mart's campaign was a little too little, a little too late.

"The best way to get a good story out is to be sitting on top of really good policy," says Elsberg, president of Elsberg Associates, a Maryland-based media consulting firm. "If reports are accurate, as they seem to be, Wal-Mart has been very reluctant to address certain issues for a very long period of time. Clearly, they thought they were invincible, and clearly that turned out not to be true."

While some experts believe Wal-Mart has made some classic public relations mistakes, some say people need to recognize the company has finally stepped up to the plate.

"Wal-Mart used to have the reputation of being pretty cavalier about certain issues," says James Lukaszewski, chairman of New York-based Lukaszewski Group, a public relations and crisis management firm. "Now it's beginning to address issues by conducting full-fledged PR and communications campaigns to build the relationship with the public. Once it starts down this road and see the benefit of it, it will do more."

Lukaszewski also believes Wal-Mart is becoming a better defendant.

"It is responding more appropriately to what juries expect, and that will help Wal-Mart successfully defend against these types of attacks," he says.

If that's true, it's good news for Wal-Mart.

Experts believe these types of suits embolden others, who are feeling disenfranchised, to take action.

"People will stop and look at their own situation and think they are being unfairly treated as well," Willert says. "It's the natural consequence of a high-profile lawsuit."

While suits against big companies draw more headlines, any company has the potential to fall victim to a discrimination lawsuit.

"We represent companies of all sizes, and they are all getting sued," London says. "The class might be smaller. The employer might be smaller. But the issues are the same. Companies just need to know how to handle them."

Staff Writer

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