By Jim Morris and Adithya Sambamurthy
MIRA LOMA, Calif. - Plaintiffs in a lawsuit that seeks back pay and damages for workers who allege they were cheated out of wages at a Southern California warehouse that serves Wal-Mart, filed a motion today to include the giant retailer as a defendant in the suit.
The inclusion of Wal-Mart in the ongoing federal suit would draw the nation's largest retailer into a case that raises questions about the human cost of the company's tightly controlled supply chain, which relies heavily on contractors and subcontractors.
"Wal-Mart employs a network of contractors and subcontractors who have habitually broken the law to keep their labor costs low and profit margins high," said Michael Rubin, with Altshuler Berzon in San Francisco and one of the lawyers for the workers. "We believe Wal-Mart knows exactly what is happening and is ultimately responsible for stealing millions of dollars from the low-wage warehouse workers who move Wal-Mart merchandise."
Rubin said Thursday that the legal team had informed Wal-Mart that that the workers will file a motion to include Wal-Mart in the lawsuit today in court in Los Angeles.
The class-action lawsuit, filed in October 2011, accuses Schneider Logistics Transloading and Distribution - owner of a warehouse complex in Mira Loma, east of Los Angeles - and two staffing agencies of shorting mostly immigrant Latino contract workers on pay.
In an email Thursday, Wal-Mart spokesman Dan Fogleman disputed the allegation that the company was responsible for the mistreatment of the warehouse workers.
"We disagree with the characterization," Fogelman said. "Walmart is Schneider's customer. We have a set of business needs that we pay them to meet, just like any company might hire an accounting firm to do taxes or an advertising firm to help launch a new product.
"While we have a set of quality standards that must be met, the third party service providers we utilize are responsible for running their day-to-day business," he said. "They manage their people completely independent of us."
In a statement earlier this month, however, Fogelman said Wal-Mart was aware of problems at warehouses that serve the company.
"Even though the workers aren't employed by us, we take these types of allegations very seriously," he said. "The fact is, we hold our service providers to high standards and want to ensure that workers throughout our supply chain are treated with dignity and respect."
Fogelman said that Wal-Mart had started inspecting facilities where concerns had been raised and would begin audits of warehouses such as Schneider "within days."
According to the lawsuitfiled by the workers, Schneider and staffing agencies Premier Warehousing Ventures and Impact Logistics conspired to "cover up the extent of their wrongdoing by failing to keep mandatory payroll records, falsifying records of hours worked and compensation owed, and concealing, denying and/or misrepresenting to the workers the amount of their earnings and on what basis these earnings were calculated."
The staffing agencies have agreed to pay a collective $450,000 in fines and back wages to settle citations issued by California labor officials, who raided the warehouse the same month the lawsuit was filed last year. Schneider, which was not cited by the state, said in a statement that it "played no role in determining the rate or method of pay" that led to the violations.
The plaintiffs in the lawsuit have already won several favorable rulings. If the court approves adding Wal-Mart - the Schneiderwarehouse's only customer - to the case,lawyers for the workers will seek to prove that the company pressured Schneider to hold down costs by underpaying subcontractors who loaded semitrailers with goods destined for Wal-Mart stores. As many as 1,800 workers in Southern California could receive back pay and damages as a result of the case, and the impacts could be felt in other warehouse centers as well.
One Wal-Mart employee has an office in the Schneider warehouse and participates in daily operational meetings and audits, court documents show.
Schneider employee David Acosta, among the more than 200 plaintiffs in the lawsuit, questioned whether Wal-Mart could have been oblivious to the problems in Mira Loma.
"Wal-Mart is responsible," Acosta said in an interview. "They want to wipe their hands clean of the situation. But they make or break contractors."
In a reportlast June, the National Employment Law Project, a New York-based legal and policy analysis center, alleged "pervasive labor abuses" within Wal-Mart's supply chain.
"These worker rights violations are largely the product of Wal-Mart's signature and aggressive practice of 'outsourcing' elements of its warehousing, transportation, and goods-delivery systems to companies that, in turn, often further subcontract the work to still other entities or individuals," the report said.
The Schneider warehouse in Mira Loma has been on regulators' radar for more than a year.
Responding to worker complaints about inaccurate pay stubs, investigators with the California Division of Labor Standards Enforcement raided the complex Oct. 12, 2011. The agency citedSchneider's two labor suppliers at the time, Premier Warehousing and Impact Logistics, for failing to provide employees with statements detailing the hours they had logged, their hourly pay, deductions and other wage-related information.
Premier and Impact were using an indecipherable "group piece-rate" system to compensate workers, investigators found. Workers say they virtually always lost money in the arrangement.
"We found that workers were being denied the very basic right to know what they had earned for the work that they were doing," said California Labor Commissioner Julie Su, who ordered the raid. "We found that workers were being denied minimum wage, were not being paid overtime hours."
Premier, which no longer contracts with Schneider, agreed to pay $175,000 in fines. Impact agreed to pay $140,000. In addition, Premier will pay $75,000 in back wages to 151 workers; Impact will pay $60,000 to 283 workers.
Neither Premier nor Impact responded to emails and phone calls seeking comment. In its statement, Schneider said it was unaware of the violations prior to the raid.
"Our contracts clearly indicate that the vendors are exclusively responsible for the material aspects of the employment, including hiring, discipline, onsite management, training, determining rates of pay, timekeeping and compliance," Schneider said.
The construction of mega-warehouses near Interstate 10, east of Los Angeles, began in the late 1990s. Today, similar clusters of blocks-long buildings anchor sections of Chicago, northern New Jersey and other urban areas. Some serve only Wal-Mart; others have multiple customers.
Juan De Lara, an assistant professor of American studies and ethnicity at the University of Southern California, said that mistreatment of workers in these facilities is endemic, a product of fierce competition for contracts with Wal-Mart and other retailers. "Wal-Mart essentially distances itself from conditions inside these warehouses," he said.
In interviews and written declarations, current and former workers at Schneider said they were required to perform various tasks for which they were not paid. They might be called to work and told to wait for hours in case they were needed, they said, only to be sent home without pay.
Jesus Sauceda, 33, went to work for Impact in Mira Loma in late 2011. Sauceda said he injured his shoulder while lifting a box - a warehouse worker might move as many as 4,000 a day, he said - and has seen co-workers get hurt as well because "they don't have the time to work properly. One guy's back is messed up; he's always in pain, always taking painkillers."
"When there's a problem with pay or working conditions, a company like Schneider will hand it off to the staffing agency," said Guadalupe Palma, a director of Warehouse Workers United, an advocacy group funded largely by the labor consortium Change to Win. "The workers are bounced between the warehouse and the agencies and the problem never gets resolved."
Center for Public Integrity/Center for Investigative Reporting
Center of Public Integrity