Wal-Mart to Police U.S. Warehouses

Complaints Arise Over Subcontractors That Handle Storage, Shipping for Retail Giant



December 27, 2012, 7:28 p.m. ET


Wal-Mart Stores Inc. WMT -0.16% is planning to monitor subcontractors' U.S. warehouses, in the same way it tries to police conditions at suppliers' factories around the globe.


The monitoring program follows protests, fines and lawsuits stemming from complaints of poor worker treatment at the warehouses, where work is subcontracted out.


Warehouses that sort and ship merchandise to stores, as well as handle online orders, are one of the fastest-growing sources of U.S. retailing jobs. In many cases, store chains don't own the warehouses or directly employ their workers. The warehouses ramp up operations during the Christmas season, hiring thousands of temporary workers though third-party staffing agencies to help speed the high volume of holiday presents to doorsteps and store shelves.


Recent claims of poor working conditions and withheld wages at warehouses, primarily clustered around major transportation hubs in Illinois, New Jersey and California, have led to protests by workers and criticism by labor activists and state regulators, who say retail chains should ensure the warehouses comply with labor laws.


California Labor Commissioner Julie A. Su argues that retailers are trying to abdicate responsibility for their supply chains by hiding behind subcontractors. "It's not an accident that the more levels of subcontracting, the worse the violations we find," Ms. Su said. The subcontracting system creates "an underground economy where it's hard to determine who is responsible for the welfare of workers," she said.


In California, state regulators have been investigating warehouses for violations including failure to provide necessary safety shoes and other equipment, as well as allegations that workers with heatstroke were denied proper medical care.


In Illinois, workers have filed a class-action lawsuit alleging that a hiring agency cheated warehouse workers out of wages by rounding down hours and withholding overtime pay.


Helping to fund the workers' efforts is Warehouse Workers United, a group backed by a coalition of labor unions that includes United Food and Commercial Workers International Union, which has previously tried to unionize Wal-Mart employees. Many of the protests have been directed at Wal-Mart.


Wal-Mart has argued that many of the warehouse allegations should be directed at the third-party logistics companies with which it contracts; the logistics companies maintain that they require staffing agencies to comply with labor laws.


Nonetheless, the Bentonville, Ark., giant is developing an auditing system, similar to the one it uses to monitor overseas factories in places such as China and Bangladesh, to help ensure that the domestic parts of its supply chain are complying with safety and labor rules.


Wal-Mart spokesman Dan Fogleman confirmed the monitoring plan, which includes unannounced visits of all third-party operated warehouses by independent auditors, but he declined to elaborate on how the system would work.


"We take this seriously," he said...