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Is Wal-Mart Legally Responsible for Labour Abuses in its Supplier Factories?

  There was an interesting case out of the U.S. Court of Appeals (9th Circuit) last week involving a lawsuit filed against Wal-Mart by a group of workers employed by suppliers of Wal-Mart in China, Bangladesh, Indonesia, Swaziland, and Nicaragua.  Here  is the decision in Jane Doe, et al. v. Wal-Mart Stores.  The pleadings and history of the case can be reviewed here and this New York Times article.

The lawsuit was a creative attempt by the workers to hold Wal-Mart liable in an American court for harm they allege they suffered while producing Wal-Mart products in foreign countries.  The difficulty is that the workers are not actually employed by Wal-Mart, but are employees of Wal-Mart’s suppliers.  Therefore, the workers needed to find a legal hook to create common law liability by Wal-Mart for breaches of labour laws by Wal-Mart’s suppliers.  The hook they latched onto was Wal-Mart’s “Standards for Suppliers”, which you can download on Wal-Mart’s website.

The plaintiffs put forth a number of legal theories, based principally around the claim that the supplier code created an enforceable obligation on the part of Wal-Mart to monitor the suppliers to ensure labour laws were being complied with, but that in fact Wal-Mart did not do this, resulting in harm to the workers and ‘unjust enrichment’ to Wal-Mart.  

The Court rejected all of the arguments.  It ruled that the supplier code does not create any legal obligation on Wal-mart to do anything.  It doesn’t require Wal-Mart to monitor its suppliers’ labour practices, it just says that it can monitor if it feels like it.  The supplier code ‘contains no adverse consequences for Wal-Mart if Wal-Mart does not monitor the supplier”, the Court found.  

You might ask, therefore, what use Wal-Mart’s supplier code is to the workers?  The answer is that it is not clear that it has any benefit.  It might occasionally help Wal-Mart uncover labour abuses if some monitoring is done, but it creates no obligation on Wal-Mart to then try and correct the problem.  Furthermore, Wal-mart uses hundreds of factories around the world, but does not publicly disclose which factories it uses. This makes it difficult for labour groups to identify and engage in private monitoring of working conditions under which Wal-Mart’s products are manufactured.

Do you think that the law should:

(1)  Attempt to make supplier codes legally enforceable?

(2)  Require companies to disclose the names and addresses of the factories they source from?


2 Responses to Is Wal-Mart Legally Responsible for Labour Abuses in its Supplier Factories?

  1. Darren Reply

    July 24, 2009 at 1:20 pm

    I think that (2) should happen, absolutely. We are seeing more and more people wanting to spend their dollars ethically, and while I’d say that means avoiding Wal-Mart to begin with, all stores should let their customers know where their goods come from.

  2. Mike Ferrier Reply

    July 31, 2009 at 11:02 am

    Like any seemingly altruistic policy by a privately held company, it is solely for the benefit of public relations. Wal-Mart’s executives have a legal responsibility to generate profit for their shareholders, not to protect employees working at their suppliers, or to protect the environment, unless it somehow ties into the ability to generate revenue. I can’t imagine why anyone would assume that Wal-Mart’s supplier code was a sincere concern by Wal-Mart management for the welfare of the employees of their suppliers.

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