Walmart supply chain: warehouse staff agencies accused of wage theft

‘They prey on people living on the edge,’ claim workers, who are already among the most vulnerable and lowest-paid in America


in Elwood, Illinois,      Thursday 18 October 2012 16.23 EDT



Walmart, which was not named in the class action suit, says it has taken steps to police standards in its supply chain. Photograph: Robert Yager for the Guardian

Phillip Bailey knows there are people worse off than him working inside the gigantic Walmart warehouse that dominates the small town of Elwood in rural Illinois.

He sleeps at a Catholic hostel in nearby Joliet and so has a solid roof over his head after a day of helping the endless flow of consumer goods supplying Walmart stores across America. Not all his colleagues can say that. One squatted in abandoned houses. Another lived rough in the woods in between work shifts. “He just set up a tent in there for a few weeks,” Bailey said.

Bailey is a warehouse worker in the outsourced Walmart supply chain that criss-crosses America, part of one of the most vulnerable workforces in the US. Bailey and his colleagues work for low pay and minimal benefits. Their recruitment is subcontracted out to myriad staffing agencies, and working conditions can involve tough, repetitive manual labour. Critics say it is a labour market reminiscent of countries like China, yet it exists here in the American heartland of the Midwest.

But Bailey and many other Walmart warehouse workers say they have to endure an especially shocking hardship: wage theft. Already very low-paid, they allege their pay packets are sometimes skimmed and squeezed by the staffing agencies subcontracted to employ them.

“They prey on people living in precarious marginal circumstances. People living on the edge. If that was not the case, they could not do what they do,” Bailey said.

The former green energy worker from Detroit has now joined a class action lawsuit recently filed against Roadlink Workforce Solutions, who supply staff to Walmart’s Elwood warehouse. The case alleges numerous ways in which wages are stolen or underpaid.

One method is for workers to be asked to appear for a shift, only to be sent home when not chosen for work. Despite turning up at 6.45am or earlier, they say they often receive no pay for their time. Elsewhere, workers say they are paid no overtime, or have time worked rounded down to the nearest whole hour. They also say retaliation for speaking out is common, which also results in lost wages.

After the suit was first filed, Bailey said, he was sent home early from his shift, seeing his pay packet cut. Another Roadlink worker at Elwood who is joining the complaint, Holly Kent-Payne, 25, said that she has simply not been paid for one day’s work. “My first pay check, they did not pay me for a whole day. That’s a whole day of my life gone,” she said.

A spokesman for RWS declined to comment on the case.

But the suit against Roadlink is just the tip of the iceberg. Since 2009 there have been five other suits filed against five different staffing companies which feed workers into the 3.4m sq ft Elwood warehouse. Of those cases, two have been confidentially settled. They, too, described wage theft.

‘It is not easy to get by’

Leticia Rodrigues worked at Elwood at the end of last year. She says she found herself often being paid by the task – effectively per truck or shipment of goods. Often jobs were so large she had to get other workers to help or take extra hours on her own time. That meant her wages dipped below the legal hourly minimum. “It would happen two or three days out of a four day week,” she said.

Robert Hines, who worked at Elwood in 2010, also says he was a victim of wage theft at Elwood. He described being asked to show up when no work was forthcoming. Hines says he was summoned into the warehouse, getting up at 4.30am to arrive at 5.30am, and was then finally being inspected by managers at 7am. Then, he says, he – along with most other workers brought in – were sent home, as all the available shifts had been doled out. There was no compensation for their time.

“I felt like an idiot. That’s my time. That’s less money to feed my family, less money to put clothes on their backs,” said Hines, 39.

There is little doubt that the workforce recruited for the warehouse industry – whether in Illinois or in other major hubs like New Jersey or the Inland Empire in California – is highly vulnerable. Many do not stay on the job for longer than a couple months. Few last a year.

Mike Compton, 36, works in Elwood but has spent time living in abandoned houses in Joliet. “I found one abandoned house that had working electricity still. And a fridge,” he said. He reckons that if he worked all 52 weeks of the year – he has no paid vacation – he would bring home a total annual salary of just $15,000. “It is not easy to get by,” said Compton.

Workers’ rights campaigners say the Walmart supply chain is set up in a way that makes wage theft likely. They say Walmart’s vast commercial power and relentless focus on driving down costs squeezes the margins of firms it subcontracts its supply chain out to. Those firms, in turn, squeeze their own subcontractors as they eke out a profit. At the bottom of this process are the workers.

The Elwood warehouse, for example, only shifts Walmart goods. But it is run by logistics giant Schneider. In turn, Schneider outsources most staffing to recruitment agencies. Those layers of outsourcing, critics say, have led to an exploitative industry where wage theft becomes part of the system.

“There are lots of low-skilled, low-paid workers and its easy for employers to chisel away at them. Wage theft is rampant in this industry. It is a perfect storm for wage theft,” said Cathy Ruckelshaus, an expert on the warehousing industry at the National Employment Law Project.

Leah Fried, an activist with Warehouse Workers for Justice which is seeking to organise warehouse employees in Elwood, was more blunt. “Is it their business model to rob people? Because it seems that way,” she said.

A good business model?

Stopping that practice is the aim behind the repeated lawsuits against wage theft. Chicago lawyer Chris Williams, who lodged the Roadlink suit, said such legal steps were often the only recourse for workers unaware of their rights or afraid to speak out. “The hope is Walmart and its subcontractors will decide this is not a good business model because they keep getting sued,” he said.

Schneider spokeswoman Janet Bonkowski said the firm held its subcontractors to high standards. “When we utilise third-party vendors, we contractually require full compliance with all required laws and that all parties conduct business ethically,” she said.

Walmart spokesman Dan Fogleman pointed out that Walmart was not named in the RWS suit and had taken steps to police standards in its supply chain. “We take allegations of workplace issues very seriously,” he said. Fogleman added the company had not uncovered any systemic problems, but is drawing up a protocol for third-party run warehouses in the future that will include random inspections by an independent group.

But there has already been worker unrest at Elwood. Recently hundreds of workers and supporters gathered outside the gates of the gigantic facility and held a rally. Police in riot gear were called and several people were arrested, including local religious leader Pastor Craig Purchase.

“The system is a modern version of sweatshop labour from the early days. I had to get involved,” he said. His arrest was the first time he had ever been detained by police.

Elsewhere in the US, conditions in the outsourced parts of the Walmart supply chain have also been the focus of protest. In the Inland Empire in California, a lawsuit was launched at a Schneider-run warehouse in Mira Loma that alleged wage theft by staffing agencies hired by the company to recruit workers.

At other warehouses in southern California, unsafe working conditions have been the subject of complaints to the state’s labour board, and there have also been walkouts, strikes, and a six-day “march to the sea” by scores of warehouse workers trying to highlight their complaints.

Critics say that Walmart has a responsibility to these workers, even though it keeps responsibility for them at arm’s length by layers of subcontracting. “Walmart knows there is a problem,” said Ruckelshaus.

Certainly Bailey sees Walmart as the ultimate beneficiary of the wages he says are lost to Roadlink. The sums are not much – just a few dollars here and there as hours are rounded down or he is summoned for work and then turned away. But for him, already caught in desperately hard times, they mean an immense amount. “It is a big chunk of change for someone in my circumstances,” he said. “It is my money, but they treat us like prison labour.”

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