Federal Judge Rules Walmart May Be Liable in Defrauding of Subcontracted Workers

Ruling denies walmart’s claims that its contractors acted independently

For Immediate Release: Wednesday, January 13, 2014
Contact: Sheheryar Kaoosji at 213-453-8454

LOS ANGELES – A federal court in Los Angeles ruled Tuesday, January 12 that Walmart and its warehouse operator must face trial to determine whether they are liable as “joint employers” for violating the workplace rights of hundreds of workers who load and unload Walmart’s goods at three Southern California warehouses.

The significant ruling subjects Walmart and Schneider Logistics to liability for all unlawful working conditions in their subcontracted facilities, which would send shockwaves through the retail and warehouse industries.

“Walmart and other major retailers use complicated networks of subcontractors to try to insulate themselves from liability for workplace violations,” said Guadalupe Palma, director of Warehouse Workers United. “The federal court has rejected Walmart’s efforts to pin the blame on its contractors and subcontractors while pretending it had no idea the law was being broken.”

Walmart and Schneider disputed liability on the ground they were not “employers” of the warehouse workers.  They argued that their contracts with two temporary staffing agencies, also defendants in the case, made those agencies solely responsible for illegal working conditions in the warehouse.

This is the first time any court has ruled that a group of workers has presented enough evidence of Walmart’s “joint employer” status to overcome summary judgment or a motion to dismiss, forcing Walmart to defend itself at trial.  If Walmart is found to be a “joint employer,” it will be liable for all of the labor violations the workers have proved.

“The workers’ day-to-day reality is vindicated by this ruling,” said Theresa Traber of Traber & Voorhees, one of the attorneys representing the plaintiffs.  “They are subjected to the directions and pressures of Schneider managers as they enforce Walmart’s performance standards on a daily basis.”

In denying Walmart’s and Schneider’s for partial summary judgment, Judge Christina A. Snyder focused on the “economic realities” of the workplace and the workers’ critical role in Walmart’s logistical supply chain.  The court cited substantial evidence, obtained through extensive investigation and discovery, showing that Walmart and Schneider controlled the terms and conditions of the work performed by the workers who load and unload trucks coming from the Southern California ports and destined for Walmart distribution centers.

For example, the court noted that that Walmart owns or leases the warehouses and provided all of the equipment; Walmart set strict productivity standards that the workers were required to meet; Walmart controlled the workers’ schedules; and Walmart controlled the rate and method of the workers’ pay by “pressuring [Schneider] to minimize its costs and . . . to pay its subcontractors on a per-container basis.”

“The court got it exactly right,” said Michael Rubin of Altshuler Berzon LLP, co-counsel in the case.  “Walmart controls every detail of its warehouse workers’ jobs and strictly monitors compliance with all its procedures.  The workers function as Walmart employees, and Walmart cannot avoid responsibility by pinning all blame on the underfunded subcontractors it uses to staff its warehouses.”

In October 2011, workers who were jointly employed at the Walmart warehouses by Schneider Logistics, Inc. and two labor services subcontractors, Premier Warehousing Ventures and Impact Logistics, filed the Carrillo class action to recover back pay, penalties, and damages.  Their lawsuit alleges that the workers who load and unload Walmart’s truck containers, many of whom have worked at these warehouses for years, were routinely forced to work off the clock, denied legally required overtime pay, and retaliated against when they tried to assert their legal rights, or even asked how their paychecks had been calculated.

The California Department of Labor Standards Enforcement raided the Walmart-contracted warehouses in October 2011 and issued citations for civil fines totaling more than $1 million for inadequate recordkeeping alone.

About 85,000 workers labor in warehouses in the Inland Empire, San Bernardino and Riverside counties, loading and unloading goods that enter through our nation’s busiest ports in Long Beach and Los Angeles en route to major retailers like Walmart. Many workers are temporary, paid low wages, receive no benefits, and have no job security.

Plaintiff workers are represented by Traber & Voorhees of Pasadena (626) 585-9611, Altshuler Berzon LLP of San Francisco (415) 421-7151, Bet Tzedek Legal Services of Los Angeles (323) 939-0506, and the Law Offices of Sandra C. Munoz of Los Angeles (323) 720-9400.  The case name is Everardo Carrillo v. Schneider Logistics, Inc., No. CV 11-8557 CAS (DTBx) (C.D. Cal.).

 

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