Wal-Mart battlefield: Bronx

John Seward
DOW JONES NEWSWIRES

By Marcy Gordon
Associated Press
Friday, June 30, 2006                 [back to top] 

Legislation Gaining to Block Special Industrial Banks, House Lawmaker Says WASHINGTON -- With Wal-Mart and Home Depot among a record number of companies awaiting federal approval to open banks, legislation to block this special kind of bank is gaining momentum, a senior House lawmaker said Friday.

Thirteen companies, a record number, have joined controversy-stirring Wal-Mart Stores Inc. in the pipeline for approval from the Federal Deposit Insurance Corp. to establish what is called an industrial loan corporation, agency records show. The Home Depot Inc., Warren Buffett's Berkshire Hathaway Inc. and the others are seeking permission to set up the industrial banks -- products of a regulatory loophole that allows commercial companies to own a bank.

"I think pressure is building for something to happen," said Rep. Barney Frank of Massachusetts, the senior Democrat on the House Financial Services Committee.

Frank said that he and Rep. Paul Gillmor, R-Ohio, plan to propose legislation soon that would close the ILC loophole.

There is strong bipartisan support among House members for the proposal, likely sufficient for it to pass. Nearly 100 lawmakers from both parties in early June asked the FDIC to halt any new approvals of industrial banks to give Congress a chance to consider such legislation. Prospects in the Senate are clouded, however.

If the FDIC begins granting new ILC charters, "then the pressure is going to increase very significantly" for congressional action, Frank said in a telephone interview.

The FDIC has not commented on the issue. Sheila Bair, a former Treasury Department official who recently became FDIC chairman, was not asked during her Senate confirmation hearing for her views on Wal-Mart's bank application nor on the broader issue of whether commercial companies should be allowed to own banks.

There are now 61 industrial loan corporations in the country with a total of around $141 billion in assets and $98 billion in deposits. Thirty-three are based in Utah, one of only seven states that grant charters for them.

The ILCs are allowed to issue credit cards, take deposits and make loans. What they cannot do is offer standard checking accounts if their assets exceed $100 million.

Wal-Mart's bid to own one -- which has been before the FDIC for more than a year -- sparked a wave of opposition from banks, unions, lawmakers, and consumer and community organizations. The world's largest retailer insists that it has no plans to compete with community banks and has pledged to the FDIC to stay out of branch banking and consumer lending.

Rather, the newly chartered bank would be used to handle the 140 million credit, debit card and electronic check payments it processes each year, Wal-Mart says.

The 14 companies with industrial banking applications before the FDIC represent the largest number ever pending at the same time, an examination of agency records shows. The precedent was first reported Thursday by Dow Jones Newswires. Of the applicants, four have been awaiting approval for at least 11 months -- longer than any company has waited since the agency began approving ILCs in 1984.

The hopefuls also include The Blue Cross and Blue Shield Association, automakers Ford Motor Co. and DaimlerChrysler AG, and information services provider Ceridian Corp.

The ILCs are federally insured, with deposits in individual accounts guaranteed up to $100,000 if any of them failed. The FDIC insurance fund, standing at some $49.2 billion currently, is financed by premiums paid by banks.

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Lee & Me: My Meeting With Wal-Mart's CEO, The World's Most Powerful Businessman

Seventh Generation
Friday, June 30, 2006             [back to top] 

If you spend your days immersed in the corporate world, there’s really only one way to describe a business trip I took last December: I was invited to an audience with the King. I was called to the commercial realm that is ostensibly the world’s 20th largest economy and the home of more indentured servants than any other. And so it was that I went to the very palace of the corporate kingdom some people love and others love to hate—to Bentonville, Arkansas, and the headquarters of Wal-Mart, for my meeting with CEO Lee Scott.

I have spent over a month contemplating this journey. Why does the president of the world’s largest company want to spend time with me—the president of a tiny Vermont business, author of a book about corporate responsibility, and a frequent, harsh, and vocal critic? How can I engage with the essence of a giant like Wal-Mart to meaningfully alter its trajectory and harness its potential to be a power for equity, justice and environmental sustainability? It’s a tall order.

A story that appeared in the Economist magazine the week before my trip goes a long way toward explaining why they called and why I went. According to the article, a survey by Zogby International has found that 38% of Americans have a negative opinion of Wal-Mart, and that 55% have formed a less favorable opinion of it “based on what they have recently seen, heard or read.” Those aren’t good numbers no matter how high your sales are. (And Wal-Mart sales are high. The company is responsible for an astounding 2% of the country’s GDP and accounts for 8.90 out of every $100 spent in U.S. retail stores.)

The factors that account for Wal-Mart’s low standing in the polls are neatly summarized at http://www.walmartwatch.com. Suffice it to say that Wal-Mart hasn’t been the most responsible corporation on the planet, and people have started to notice.

So there I am. Monday morning, December 19th, 2005. Burlington International Airport. The announcement about my 7:10 am Delta flight from Burlington to Atlanta sends a shiver down my spine. The gate agent says that 14 of the 37 passengers will be selected to be taken off the flight. Light snow on the runway requires that the plane lighten its load due to limited braking ability. Removing over 35% of the passengers from a single flight goes beyond anything I have ever experienced. Mentally I prepare my argument as to why I shouldn’t be one of the 14. How many people are granted a meeting with Lee Scott, president of the world’s biggest company? Thankfully the need to argue my case isn’t necessary. I win this particular lottery.

I’m honestly not quite sure where Northern Arkansas Regional Airport even is. The fellow sitting next to me on the flight out of Atlanta to Arkansas tells me 95% of the passengers on the plane are headed to Wal-Mart. He spends three weeks out of every month in Bentonville working for a warehousing & distribution company based in Boston. We talk about my trip. I mention my not infrequent concerns about Wal-Mart. Almost reflexively, he seems to defend his client. He talks about what good people they are, how hard they work to meet the social and environmental challenges they face. A fact that, if true, is lost on most of the people I know. He’s perplexed that I have no interest in selling them anything except perhaps some new ideas!

Driving from the airport to the year-old South Rogers store, I stop repeatedly to make sure that I’m not lost. The deeply rural scenery seems to lack enough people to keep a super center in business, but after a 15 minute drive I find a highway and then the store.

Andy Rubin, the VP of Corporate Strategy, meets me along with a collection of buyers responsible for infant & toddler products from Wal-Mart and Sam’s Club, including diapers, wipes, pacifiers, clothing, and furniture. We discuss chlorine, PVC, phthalates, organic cotton, toxic chemicals, the Precautionary Principle, and the power that Wal-Mart has to change the world.

By the time we’re done we’re running late, and I’m not happy. Now 15 minutes of meeting time with Lee Scott has been lost, due to our not paying attention to the time we spent in the store.

No matter how much one tries to prepare for a meeting about the current state and future direction of this gigantic company, you’re always left with a feeling that it’s just too big to get your arms around. After weeks of preparation, I have what I believe is a clear perspective and some sound strategic advice to compliment the years of relatively blistering critiques of Wal-Mart that I have delivered as part of almost every speech I have given.

Lee, dressed in a dark grey suit and a black sweater, stands holding the door open as I enter the building. I need to look down at his name badge to be sure it’s him. I’m impressed that he’s humble enough to greet me himself!

I enter a nondescript conference room where the senior management team is immersed in a conversation about holiday sales. Present are Lee Scott , CEO & President of Wal-Mart Stores, Inc; Lawrence Jackson, Wal-Mart EVP People; John Westling, Wal-Mart SVP; Andy Ruben, VP Corporate Strategy; Doug McMillon, President of Sam’s Club; Greg Spragg, EVP Sam’s Club; and Lee Tappenden, VP International Merchandizing. It’s quite an assembly!

Saturday’s numbers were off, even though same-store sales on holiday items were up 40% over last year. Lee explains the challenges of customers waiting later and later to do their holiday shopping. He’s received an unhappy call from his boss S. Robson Walton, Chairman of the Board of Directors of Wal-Mart Stores, Inc. and son of the legendary Wal-Mart founder Sam Walton. Walton phoned early Sunday morning wanting a sales update, and the news was not great. Lee called him back midday on Monday to let him know that the week was off to a better start. Sales are an obsessive focus, an almost unconscious part of every conversation. But why are they discussing this in front of me? They didn’t bring me down here to figure out how to run a sales promotion on Christmas ornaments.

I am lost and frankly a bit confused as the conversation drags on for several minutes. Lee stops and admits that this is a conversation that never quits this time of year and is, in fact, an obsession. He talks with some pride about the incredible sales of the company’s different divisions, how much toilet paper and laundry detergent they sell. It’s billions isn’t it? he asks the President of Sam’s. And you’ll do how many billion this year? he asks the head of U.S. Wal-Mart stores.

Finally we get to the introductions. Lee says he doesn’t know much about me and asks for a description of who I am and what I’ve done, other than write a book that he and his management team have read. This catches me off guard. I thought for sure that someone had prepared the equivalent of an FBI dossier on me for Lee’s review before I arrived.

I run through the two minute version of the story of my life, and then seize the opportunity to ask my own questions. I ask Lee to describe the legacy he wants to be remembered for at Wal-Mart. He struggles with the question, falls back on the Sam Walton story, and describes himself as continuing a tradition rather then designing a new purpose for the giant company. Pressing him again for a better answer, he talks about the team he wants to build and leave behind when he “turns out the lights in the office for the last time.” In effect, he keeps saying it’s not about him.

Pressed again, at this point a little uncomfortably, he talks about being the best they can be, about diversity programs, environmental initiatives, the careers they help their associates build. But nothing that feels like a clear purpose or focused direction.

I take a different tact. I admit that I, like hundreds of other critics, have my own perspective on what Wal-Mart is doing right (not much) and wrong (a lot) when it comes to corporate responsibility. On how to proactively manage the endless bad press they get. How they could go about seizing their potential. Did they want to hear my thoughts? Why not, they answer. Everyone else comes down here and tells us what they think we should do. We’re used to it at this point.

(I didn’t know it at the time, but I was part of a large parade of impressive visitors making the trip to Bentonville, from McKinsey to Eddleman Communications, hundreds of environmental NGOs, and the leaders of America’s most well respected companies. I had no idea at the time how good I had to be. Wal-Mart, as Charles Fishman writes in his excellent new book, The Wal-Mart Effect, is like a gigantic, humungous deer caught in the headlights of an oncoming meteorite.

Well I’m not here to take you to task, I say. You know the drill, what everyone thinks you’re doing wrong. I want to share a vision of possibility based on real transparency, self criticism, engagement with your toughest critics, and a disciplined understanding of your footprint on the planet. I want to help lead you to a clear and rational plan for what you’re going to do, how long it will take, and why certain issues can’t be addressed now; all in a way that everyone who’s interested can understand and get their heads around.

Look, says Lee. We’re already doing that. We talk to the activists. We have launched hundreds of initiatives. We have nothing to hide.

What about those initiatives? In a recent speech titled “Twenty First Century Leadership,” Lee asked, “What would it take for Wal-Mart to be that company, at our best, all the time? What if we used our size and resources to make this country and this earth an even better place for all of us: customers, Associates, our children, and generations unborn? What would that mean? Could we do it? Is this consistent with our business model?

“As one of the largest companies in the world, with an expanding global presence, environmental problems are OUR problems. The supply of natural products (fish, food, water) can only be sustained if the ecosystems that provide them are sustained and protected. There are not two worlds out there, a Wal-Mart world and some other world. Our environmental goals at Wal-Mart are simple and straightforward: to be supplied 100 percent by renewable energy. To create zero waste. To sell products that sustain our resources and environment. These goals are both ambitious and inspirational, and I’m not sure how to achieve them, at least not yet. This obviously will take some time.”

Sounds good doesn’t it? So how come no one believes him? That’s the $64 million question. And so it is that we move on to issues of transparency and credibility.

Doug McMillon, President of Sam’s Club says that with over 1.6 million employees Wal-Mart as a company has no secrets.

Yes, I say. You’ve got over one million people, all telling their own version of your story. That’s why it’s so confusing to understand. When you don’t tell your own story, but let everyone else do it instead, you end up with a chaotic picture that ensures that what ever message you want to communicate is lost.

Look at your website, I continue. There’s little meaningful information about your company from a social and environmental perspective. So you effectively force people like me to visit the websites of your most ardent critics to get that information, because I can’t get it directly from you. You’re letting your critics frame the story and tell it from their point of view. Your voice is lost.

There’s a pause that’s more than pregnant. I’ve struck a cord. They get it. There’s transparency and then there’s transparency. They’re starting to get what it means to take that next step.

Lee, who has been president for only five years, says that they’ve spent most of their time bringing in the sandbags to reinforce their bunker. They’ve effectively helped organize the whole activist community by refusing to engage in any meaningful dialogue. The labor community (WalmartWatch, WakeupWalMart) has seized this opening that Wal-Mart has inadvertently created.

A big mistake, says Lee. We helped organize our enemies better than they could have done themselves. (In fact, Wal-Mart has unintentionally succeeded in uniting a diverse collection of activists, from labor and environmental advocates to health care and women’s rights campaigners, that otherwise rarely even speak to each other.)

But they say they’ve changed. Starting 18 months ago, for some reason that wasn’t entirely clear, Wal-Mart launched an initiative of conversation and engagement. We talked about all the NGOs and activist groups that have secretly made the trip down to Bentonville to see if Wal-Mart was really willing to own up to its problems and consider substantive change. We talked about the fact that none of them would ever even admit to having made the trip. The company has become a giant social pariah, the ultimate embodiment of corporate evil. So bad, that NGOs are afraid to let their peers, donors and friends know that they had even talked to Wal-Mart. The blight it would leave on their reputation would cost them donor support and credibility, they say. I say that Wal-Mart shouldn’t accept that these organizations want to work with them but won’t risk their reputations to openly talk about the good and bad that they find.

Lee talks about secret meetings with politicians who were terrified of the fallout from labor unions if the meetings were to become public. He talks about entering buildings through secret entrances, conversations that “never happened.” The secrecy sounds painful.

Lee also talks about how horribly ugly their stores are, and the negative impact they have on a community because they look so inappropriate and out of place. He talks about what it feels like to watch the news, and to see Wal-Mart pop up in those ubiquitous text “crawls” at the bottom of the screen on all the news channels. “Airplane crashes in Florida, 20 feared dead… Wal-Mart store manager abuses African-American in Florida Store… Global warming talks in Canada at a standstill.”

He says that moments before he walked into the room, AP broke a story about a federal investigation into the company’s handling of merchandise classified as hazardous waste. Lee asks why every single negative act by any Wal-Mart employee anywhere seems to make the headlines. They are out to get us, he says, meaning the labor unions. In any way they can.

We talk about the failure of Wal-Mart to create a coherent and understandable framework for the huge enterprise they run. I suggest a more aggressive approach to setting expectations around what they can and can’t control; but not without making firm and clear commitments about what they’re willing to change and by when. Remember, I say. Transparency, in its most absolute sense, is about both the good and the bad things you’re doing.

Look, I continue, here’s just one example: you could revolutionize the household cleaner business overnight if you required full ingredient disclosure on the label of every cleaning product you sold. You could take the industry to task on an exemption that is enjoyed by almost no other consumer product. Not only would the entire industry comply, but most of the toxic and carcinogenic chemicals would be removed from their formulas before the new labels were printed.

Doug McMillon, an extremely open and likeable guy, says they’re the most critical people you’ll ever find. No one gives us a harder time than we do ourselves, he says. You wouldn’t believe what goes on inside this room.

Maybe, I respond, but unfortunately most of that criticism doesn’t make its way outside these walls. No one really knows who you guys are or what you believe. The fact that you’re thoughtful and compassionate is lost on the entire world.

Lee explains that they’ve got a $25 million activist campaign against them, a campaign that seeks to put the company out of business. This labor issue, that’s one place we can’t go, he says. There are people who believe that the best thing that could happen is that we simply shut down. That’s just not going to happen. (The truth is that the last thing that Andy Grossman, Executive Director of Wal-Mart Watch, ever expects to happen is the complete shut down of Wal-Mart. He knows full well that’s never going to occur.)

Lee strikes me as a passionate, authentic and, at times, embattled soul. He was humble, self-critical, and gently defensive at first, but sensing my true earnestness to help, he increasingly opens up and seems to become more deeply engaged with the possibilities here. He seems to see this challenge and the opportunity it represents with new eyes.

I end the meeting by asking if I can help. Absolutely, they say. And so I will. I’m eager to test the boundaries of change here. Because when you think about it, there’s not much greater good that I can do than corral this giant and get it to see its work as nothing more and nothing less than a labor of love for the next generations.

As fellow business people, citizens of our nation, members of the human race, and residents of a planet in trouble, we have no option but to help, cajole, push and even shove this retail behemoth onto the side of sustainability and responsibility, open dialogues, and new choices. It’s not only the best answer, it’s probably the only answer.

The opportunities are endless. Imagine a Wal-Mart committed to ending poverty and revolutionizing the U.S. healthcare system to provide preventative health care for all. Think about a Wal-Mart pushing for transparency on its products’ social and environmental impacts. Picture a Wal-Mart promoting an agricultural system that relies primarily on sustainable methods and lobbying for a world in which the United States is the primary engine for a just and equitable future.

They can do it. And I’ll go even further and say that after my meeting, I very much suspect they would like to.

P.S. Andy Rubin, the VP of Corporate Strategy, and I are still talking. We’ve exchanged phone calls, emails, and have shared a dinner together up here in my neck of the woods. We’ve reviewed the outline for their first ever Corporate Responsibility report, talked about a policy for chemicals, and discussed designing a meeting to work on the process of redefining their corporate culture. Progress is slow. But the news has been a bit more positive of late. Stay tuned…

And in case you’re wondering―despite some pretty passionate interest in selling Seventh Generation at Wal-Mart, the answer is still no. At least for now.

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Neighborhood board opposes Wal-Mart plans

By Nina Wu
Star Bulletin
Friday, June 30, 2006             [back to top] 

Kapolei residents showed up in full force at a neighborhood board meeting Wednesday night to criticize a proposed Wal-Mart store in the area, prompting the board to vote to oppose the store's development. "It was quite a night," said Maeda Timson, chairwoman of the Makakilo/Kapolei/Honokai Hale board. She estimated an audience of about 200 at the meeting. "It was very emotional. This meeting was originally intended to get information, not to take action."

Timson said she is drafting a letter this week to Wal-Mart Stores Inc., Honolulu councilmembers and Campbell Estate, asking the big-box store to look elsewhere.

"There were many questions," she said, "but there were at least 17 times when they said they didn't know. And these were basic questions."

Wal-Mart spokesman Kevin McCall said he could not answer many questions because the project is still in early stages of development. The developer is still in the due-diligence phase, he said, and no deal on the site at the mauka-Diamond Head corner of Makakilo Drive has been finalized yet.

"We were here more to listen," McCall said. "We believe that as more information becomes available, it will become more clear that this project is appropriate for that area."

He added that Wal-Mart is trying to be forthcoming with its plans.

"We've come forward that this is not a supercenter," he said. "We've come forward that traffic is our predominant issue of concern and it needs to be addressed."

The Wal-Mart planned for Kapolei will be similar in size to the one in Pearl City, which measures about 148,000 square feet.

A supercenter, McCall said, typically includes a grocery store and can measure up to 200,000 square feet.

Wal-Mart announced last week it plans to open only after scheduled traffic improvements are made in 2008.

"We think that the opportunity is there," McCall said. "It is zoned commercial, and we believe it is an appropriate place to be within the community after the improvements are done."

Theresia McMurdo, spokeswoman for the Campbell Estate, said she has received comments both for and against the Wal-Mart project.

When the deal is finalized, she said Wal-Mart's designs would need to be approved by the city's design review board.

But the core members of Kapolei First, which number about 50, are not about to stop their opposition to Wal-Mart, according to spokeswoman Carolyn Golojuch.

"This is not the end," said Golojuch, whose husband, Michael Golojuch, is vice chairman of the Kapolei neighborhood board. "It's not over until it's over. We need to continue to stand up for the welfare of the community."

She said the group would continue waving signs, knocking on doors and gathering signatures for its petition against Wal-Mart.

Some alternative uses for the site suggested by community members, she said, include a park, another school or parking for mass transit.

The issues brought before the neighborhood board were not apparently just over traffic and the size of the proposed Wal-Mart, but over the Bentonville, Ark.-based Wal-Mart's corporate practices, which have prompted class-action suits, critical books and a film.

Small-business owners at the meeting said the big-box store would put them out of business. Residents from Kapolei Knolls wanted a statement in writing, assuring them that the new Wal-Mart would not be a supercenter.

Neighborhood board member Brent Buckley, who made the lone dissenting vote, said he simply wanted more dialogue.

"I have concerns, as much of the community does, but I think we need to keep a door open to dialogue," he said. "By saying no, I'm afraid we already shut the door ... and I don't think we stopped Wal-Mart (Wednesday) night."

Buckley added that some community members in the audience did approach him afterward, saying they wanted to support Wal-Mart but were too intimidated to get up and speak.

Commentary went on for close to two hours, pushing other items on the agenda to next month's board meeting. No additional presentations by Wal-Mart were scheduled with the board.

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Angry Corona homeowners put feelings onto banners

WATER DAMAGE: They say a retaining wall between a Wal-Mart and their neighborhood caused it.

By MELANIE C. JOHNSON
The Press-Enterprise
Friday, June 30, 2006                            [back to top] 

CORONA - A group of homeowners suing Wal-Mart and developer Fieldstone Communities plan to air their grievances today at a protest of sorts.

Residents of the Vista Grande Development, which overlooks the Wal-Mart on Ontario Avenue, said they are frustrated by stalled talks with the retail and construction companies and plan to voice their displeasure in the form of huge banners visible to shoppers and passersby.

The group is angry about water damage to their backyards and homes they say was caused by a poorly constructed retaining wall between Wal-Mart and the neighborhood above it.

After more than two years of imploring the companies to fix the damage, they are taking their message to the public.

Resident Mark Stahovich said the public display is a reaction to the lack of action on the part of Wal-Mart and Fieldstone, whom he said have been largely unresponsive.

"We've invested our life savings in these homes," he said. "Our American dream has turned into an American nightmare because our lives have been on hold."

John Simley, a Wal-Mart spokesman, confirmed the lawsuit but said it would be "disrespectful to the court" to talk about the case.

"The proper place for the arguments to be handled is in court and we prefer it that way," he said.

Fieldstone said in a statement that the company is "committed to working with its homeowners and to seeing a satisfactory resolution to this problem" but said residents should look to Wal-Mart for a fix.

"As Wal-Mart designed and built the wall and slope and as it still owns and maintains them, Fieldstone Communities, Inc. believes Wal-Mart has the responsibility and ability to repair the problem."

Stahovich said Wal-Mart may have built the wall but he believes that Fieldstone knew it was unstable before the homeowners went through escrow, an allegation the company's attorneys refuted in court documents.

Stahovich moved into his newly built 3,500-square-foot home on Radcliffe Circle in February 2002. In February 2003, the first heavy rains came and about two days later, residents noticed that their backyards were sliding down the slope, he said.

Fieldstone referred the homeowners to Wal-Mart, and the retailer didn't respond at all to the complaints, Stahovich said. Several residents then retained an attorney and filed suit against the two companies.

Fieldstone said even though it didn't create the problem, it installed slope- and groundwater-monitoring devices, covered backyards with plastic sheeting to keep water from further seeping into the soil and agreed to pay the cost to repair any damage to landscaping resulting from the plastic sheeting.

Wal-Mart is nearing completion on repairs to the retaining wall, Simley said.

For Stahovich, just fixing the wall does not repair the permanent damage done to his home and others.

"Wal-Mart has not been impacted by the damage they have caused nor has Fieldstone Homes," he said. "It is just us homeowners that are struggling with the added burden of big companies taking advantage of hardworking families..."

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No Break for Wal-Mart on Its Meal Policy

Marie-Anne Hogarth
The Recorder
Thursday June 29               [back to top] 

According to plaintiffs lawyers, a $172 million verdict -- including $115 million in punitive damages -- wasn't enough to stop America's largest retailer from continuing to violate California's meal and rest break law. The question of compliance by Wal-Mart Stores Inc. -- and whether the company should have a court-appointed supervisor watching over its shoulder -- is playing out this week in a trial before Alameda County, Calif., Superior Court Judge Ronald Sabraw.

The case, Savaglio v. Wal-Mart Stores, is one of the few meal and rest break class actions to reach a trial verdict, as opposed to a settlement, lawyers say. And so the outcome of the injunctive relief phase could offer a rare glimpse into what measures a court might be willing to impose on a recalcitrant company.

"Wal-Mart is hypercontrolling and super-sensitive when it comes to their business operations," said Jessica Grant, a principal at The Furth Firm, which is representing the plaintiffs. "To see a case of this magnitude seeking an order on how they do business in California is unique."

Yet Wal-Mart argues the plaintiffs' allegations are ancient history. Since the company has worked hard to comply with all meal and rest laws, its attorneys argue, an injunction isn't appropriate, since that relief should be based on the likelihood of future behavior.

Even though Sabraw might not issue a final decision in this phase of the trial until August, some plaintiffs lawyers in the wage-and-hour arena are following the proceedings closely. If Sabraw rules against the retailer, they believe such a decision could have a positive impact in their settlement negotiations against other large corporations.

"Depending on the extent that the court imposes injunctive relief on Wal-Mart and that it is viewed by Wal-Mart as being an onerous requirement, it may impact [defendants'] willingness to take a case to trial," said Eric Grover, a partner with employment firm Keller Grover.

While many companies do implement programs and policies even before a settlement is reached, Grover said there are still many who find it cheaper to deny employees certain benefits and risk liability rather than comply with the law -- even after they have paid out a settlement.

He is currently representing plaintiffs suing Baker's Square restaurants over missed meal and rest breaks and managerial misclassifications. The company previously settled a similar case in California several years ago, said Grover, whose suit is pending in San Francisco Superior Court.

Plaintiffs in the Wal-Mart action are asking the court to appoint Emeryville, Calif.-based legal services provider LECG Inc. to act as a monitor, for Wal-Mart to undertake audits and report its compliance, and for the store to give its own employees notice of the injunction. The lawyers seek an additional $5 million in restitution for meal break violations between October and December 2000.

That was the period just before the implementation of California Labor Code §226.7, which charged employers payments for missed meal breaks. The extent of that liability is currently at issue before the California Supreme Court in Murphy v. Kenneth Cole Productions.

Plaintiffs want a court order enjoining Wal-Mart from asking employees to sign away their right to meal breaks, something they say often occurs at the retailer under coercive conditions.

The lawyers also say Wal-Mart should stop using a system that automatically clocks employees in and out for their meal breaks, which masks the true duration of their lunch, they say. The injunction is necessary since Wal-Mart has a history of ignoring even its own studies showing it was not following the law, Grant argues.

"Even today, after the jury in this case found Wal-Mart liable for punitive damages, Wal-Mart continues to violate specific provisions of both the California Labor Code and Industrial Welfare Commission Wage Orders," the plaintiffs contend in their brief.

Meanwhile, Wal-Mart lawyers and the company's outside counsel at Susman Godfrey argue an injunction isn't needed, since the retailer has demonstrated "phenomenal" compliance in California over the past three years. They fault plaintiffs for basing their argument on 5-to-8-year old documents, where injunctive relief under the Unfair Competition Law should be based on the probability of future misconduct instead.

During the jury trial, "this Court recognized the important distinction between current practices at Wal-Mart, rather than the events from 1998 through 2001, for the purposes of issuing an injunction," argued Steven Sklaver, an attorney for Wal-Mart with Susman Godfrey, in his trial brief.

Wal-Mart argued it has worked hard on the issue of meal and rest break compliance in its stores, making technological enhancements that include an automated procedure that keeps track of employee meal breaks.

Wal-Mart attorneys at Susman Godfrey didn't return telephone calls by press time. Gibson, Dunn & Crutcher partner Theodore Boutrous Jr. is representing the company in the appeal of the jury verdict.

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Wal-Mart's British Unit Agrees to a Union Contract

By Heather Timmons
New York Times
Thursday, June 29, 2006             [back to top] 

LONDON, June 29 — Wal-Mart may be anti-union at home, but overseas the company sometimes sings a different tune. The chain's British arm, Asda, which accounts for a tenth of total sales for Wal-Mart Stores, narrowly averted a costly strike on Thursday, after reaching an agreement with a union.

Employees at Asda's distribution centers were threatening a five-day strike starting Friday, during what is expected to be one of the busiest shopping weekends of the year. England plays Portugal in the World Cup on Saturday, and Asda estimates it will sell 10 million bottles of beer on Friday afternoon and Saturday morning in preparation for the game.

The agreement establishes nationwide collective bargaining for distribution center employees. In the past the union representing these employees generally negotiated agreements with Asda covering each workplace.

Unions will have a say on issues from health and safety to the technology used at work, and they will be able to recruit new members on the job. Next, the union plans to turn to employees in Asda's retail stores, and hopes to establish a national collective bargaining agreement there.

"This is a very different ethos and approach" than Wal-Mart has in the United States, said Paul Kenny, the acting general secretary of the G.M.B., the union involved. Wal-Mart bought Asda in 1999.

The agreement represents a shift in Asda's approach to unions, he said. "There had been a philosophy of excluding employees from meaningful discussions about the basics," Mr. Kenny said. "The company has realized that the system needs to change."

Asda was fined £850,000 ($1.48 million) in February after a British employment tribunal found that it was offering employees at one distribution depot raises to give up their rights to collective bargaining; such offers are illegal in Britain.

On Thursday, Asda focused on the strike's being called off. "We're pleased to have signed an agreement acceptable to both sides to end the current dispute — good news for our customers and colleagues alike," Asda's chief operating officer, David Cheesewright, said in a statement.

He said Asda expected to serve 24 customers every second on Friday afternoon and Saturday morning. "A crack team of footy-filling shelf stackers is on hand throughout the weekend to restock our stores as quickly as customers try to empty the shelves," he said. "Footy" is slang for football, known as soccer in the United States.

Asda been stockpiling basic necessities like diapers and toilet paper on its shelves in anticipation of the strikes. In some stores, the company took big-ticket items like televisions off the shelves to make more room for necessities.

The agreement is "exactly what the union demanded," said Jan Furstenborg, the commercial director of Union Network International, a global group with 900 union members that has been pushing Wal-Mart to negotiate with unions. "This means the company must begin to realize that they can't ignore the will of their employees to join and be represented by trade unions," Mr. Furstenborg said.

Unlike its United States parent, Asda has a decades-long relationship with unions, and about a third of its distribution center employees are union members.

Wal-Mart has long been known for vigorously fighting unions, and no workers in North America are represented by unions. The company says that unions would hurt its profitability and that it treats its employees fairly without them.

When Wal-Mart employees at an outlet in Canada voted last year to unionize, the retailer shut the store, contending that it was unprofitable. In 2000, shortly after 11 Wal-Mart meat cutters in Texas voted to form a union, the company eliminated meat-cutter jobs companywide and announced that it would use packaged meat instead.

British retail unions have a relatively benign reputation. "At the end of the day, the unions are very cooperative, provided you give them the chance to have their say," said Richard Ratner, a retail analyst with Seymour Pierce. "To try to ignore them entirely is a mistake."

Asda and unions have not had problems in the past, he said.

Asda is Britain's No. 2 retailer behind Tesco, another superstore that sells everything from groceries to clothing. Competition is fierce in British retailing, and Asda is struggling against rivals who aim at customers who are interested in more than just low prices, analysts say. Tesco has 31.4 percent of Britain's grocery market, while Asda has 16.5 percent, according to the research firm TNS.

Wal-Mart's ownership of Asda has not always gone smoothly, and there has been a great deal of turnover at top management positions. Analysts say that stems from innate differences between the companies.

"When you juxtapose the Wal-Mart, small-town America, Southern states culture with the British slightly self-deprecating, slightly cynical, slightly skeptical culture, they're uncomfortable bedfellows," said Richard Hyman, an analyst at Verdict Research, which focuses on retailing.

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UPDATE 2-Asda agreement with union avoids depot strike

(Adds comment from Asda, more detail)

By Gavin Haycock
Reuters                               [back to top] 

LONDON, June 29  - British supermarket chain Asda and the GMB union reached a settlement in a dispute over union recognition on Thursday, averting a five-day strike set to coincide with consumer demand fuelled by the soccer World Cup.

The deal came shortly before Asda, the British arm of the world's biggest retailer, Wal-Mart Stores Inc. <WMT.N>, was due to go to the High Court in London to try to block the strike.

The GMB called the strike as part of a drive to get national collective bargaining rights at Asda's 24 distribution depots.

As part of the deal, a new distribution National Joint Council will be established, union-management meetings will be held at least twice a year and talks will be held on updating existing collective bargaining agreements at nine Asda depots.

"This new agreement which GMB and Asda Wal-Mart have worked very hard to achieve heralds a new fresh approach to representation and bargaining between the company and the GMB," said the union's General Secretary Paul Kenny.

"It is the clear intention of this new agreement that issues beneficial to the growth of the company (and) the economic benefit of its employees will be dealt with through the new National Joint Council," Kenny said in a statement.

Asda said that due to the anticipated sales boost from the World Cup and an ongoing spell of hot weather it expects to sell around 10 million bottles of beer between Friday afternoon and Saturday morning ahead of the England match -- more than it would sell on the busiest day in the run-up to Christmas.

KEY MATCH

The timing of the industrial action provided an important test for Asda's Andy Bond, who became chief executive in March, 2005.

The protest, had it gone ahead, would also have coincided with England's quarter-final match against Portugual in Germany on Saturday afternoon, threatening to disrupt the retailer's ability to keep shelves fully stocked.

Major retailers such as Asda, Tesco Plc <TSCO.L> and J Sainbsury <SBRY.L> have seen sharp spikes in consumer spending ahead of key World Cup soccer matches.

"We're pleased to have signed an agreement acceptable to both sides to end the current dispute ...," said Asda Chief Operating Officer David Cheesewright.

The GMB balloted depot workers over a strike in March, with members voting on June 21 to take industrial action. Since then Bond and the GMB's Paul Kenny have hosted extensive talks aimed at finding a settlement.

© Reuters 2006. All rights reserved.

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UK Asda Warehouse Workers Call Off Strike Action

London Bureau
Dow Jones Newswires
06-29-06                                    [back to top] 

 LONDON -(Dow Jones)- Warehouse workers at Wal-Mart Stores Inc.'s (WMT) Asda Group Ltd., the U.K.'s second-largest supermarket chain, have called off a strike planned for Wednesday, Sky News television reported Thursday.

The strike was called after a row with the company over pay and union recognition. Last week, Asda was reportedly considering taking legal action against the GMB to stop the strike action.

Asda has a 16.5% share of the U.K. market.

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Planned Asda strike called off

This is LONDON
29/06/06                [back to top] 

A planned strike by thousands of workers at supermarket giant Asda was called off at the last minute.

Members of the GMB union at 20 distrib