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Walmart faces unprecedented lawsuit from contract workers

Wal-Mart has been added to a class action suit by workers who don't actually work for Wal-Mart.

Update: U.S. District Court Judge Christina Snyder issued a written order January 10, permitting the lawyers representing plaintiffs (temporary warehouse workers) in the class-action lawsuit Evarardo Carrillo et. al. v. Schneider Logistics et. al. to add Walmart as a defendant in the case. 

A federal District Court judge tentatively ruled yesterday that Walmart can be added as a defendant to a class-action lawsuit brought by temporary warehouse workers. The workers move boxes exclusively for Walmart at a big warehouse in Mira Loma, California, outside Los Angeles.

This particular warehouse is operated for Walmart by a big national company called Schneider Logistics. The workers allege massive wage-theft and other serious violations -- like failing to pay proper wages and overtime. The California Labor Department issued over $1 million in fines in late 2011, just before the lawsuit was initially filed. It covers a potential class of approximately 1,800 workers.

What is novel about this case (Carrillo v. Schneider Logistics) is that the workers don't work for Walmart directly. Rather, they’re part of a big, and growing, reservoir of low-wage contract workers, sometimes called "permatemps." This is the first time, the labor-lawyers say, that Walmart has been sued for work done by its contracted laborers.

Now, the key legal question is going to be: Is it Walmart’s fault? Does Wal-mart call the shots in these contracted warehouses?

“Walmart has the ultimate say in how the warehouse work will be conducted," says Michael Rubin, a plaintiff lawyer for the workers at the San Francisco law firm Altshuler Berzon. "The evidence shows a remarkable degree of control by Walmart. As a matter of economic reality, which is the ultimate legal test, Walmart should be held liable.” 

Walmart is fighting involvement in the lawsuit, which alleges the giant retailer is a "joint employer" of the workers, along with the warehouse-operator and the staffing agencies it employs. Dan Fogleman, a Wal-mart spokesman, said today in an emailed statement:

“This case is a small part of a broader effort to change the warehousing industry -- not just as it pertains to Walmart, but as a whole. In recent months, some workers at third party logistics facilities that we use have raised some concerns and, even though the workers aren’t employed by us, we’re taking their allegations very seriously. In fact, we recently met with some of the workers to hear and better understand their concerns."

The case itself will not likely be a huge financial hit for Walmart even if the company loses. But Walmart doesn't want to be held liable up the retail chain of command. That could be a serious kink in their famously efficient supply chain which is also a key to their low prices.

If the class-action plaintiff-lawyers "joint employer" argument is successful in this case and saddles Walmart with legal and financial liability, it could also have implications for other big retailers. Most of them also use some "permatemps" to get their imported goods from ports to warehouses to stores. Labor lawyers and state lawmakers could go after them, too, because they’ve got the big names -- and the big pockets.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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