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Recently there has been a fascinating string of Wal-Mart news, much of it employment-related.
I’m not just gratuitously piling on the beat-up-Wal-Mart heap here. Wal-Mart is important — and bears watching — for a number of reasons.
First, Wal-Mart Stores, Inc. is the largest private employer in the United States, Mexico and Canada, holding an 8.9 percent retail store market share. This makes it potentially a huge economic trendsetter, for good or bad.
Second, Wal-Mart is the target of much criticism by labor unions, which have been unsuccessful at organizing Wal-Mart employees, as well as environmental groups and others critical of various Wal-Mart business practices.
Third, Wal-Mart has been involved in much employment litigation, and tends to fight such cases quite tenaciously.
Many may believe Wal-Mart is in this spotlight because its practices are unusually exploitive. I disagree. I attribute it to the company’s size, success, and high visibility. I believe Wal-Mart is scarcely unique, and that each issue over which Wal-Mart has been criticized and/or sued, including the employment issues, is commonplace in American business today, at least in certain sectors. (UPDATE: some say that darling, chic, oh-so-popular Target is as bad or worse!)
I would suggest that Wal-Mart management view the present challenges as an opportunity to show smart leadership and develop and exemplify best practices.
Clearly, the company has a niche serving a huge consumer population looking for everyday low prices. Unions and liberals trumpet Wal-Mart’s “responsibilities” to its workers and to society (”Wal-Mart exemplifies the harmful trend among Americas large employers to shirk health insurance responsibilities at the cost of their workers and the community, according to a new report by the AFL-CIO”).
But I would say that Wal-Mart’s primary responsibility is to its price-sensitive customers, without whom it would not exist. Its challenge is to continue to serve this market niche, while demonstrating that it makes good-faith efforts to comply with all applicable laws and that it actively develops and improves human resource practices so as to maximize employee satisfaction and productivity consistent with the cost control goals essential to serving its customers.
Many detractors clearly will never be satisfied: they just hate Wal-Mart and always will. But this is just a vocal minority, with unrealistic perceptions about the realities of business and labor markets.
Now, here’s what’s been happening in recent weeks:
- Leak of an internal memo on health care issues.
- CEO’s speech calling for minimum wage hike and announcing environmental initiatives and health-care plan change.
- Missouri circuit court grant of class-action status in overtime case.
- Scathing documentary against Wal-Mart, “WAL-MART: The High Cost of Low Price,” set to open.
- Positive alternative documentary, “Why Wal-Mart Works and Why That Drives Some People Crazy,” set to open.
- Veterans of 2004 Bush and Kerry presidential campaigns run pro-Wal-mart PR war room.
- Leaders of Wake Up Wal-Mart create new association: Wal-Mart Workers of America
- Last — and least — “Wal-Mart clothes go urban.”
Part I: The leaked memo
A Wal-Mart vice president has suggested to the company’s board of directors that it could hold down spending on health care and benefits by hiring more part-time workers and encouraging “healthier, more productive employees,” according to an internal memo.
[The memo] acknowledged that the company’s benefit offering “is vulnerable to at least some of” the criticism leveled at it, “especially with regard to the affordability of coverage and associates’ reliance on Medicaid.”
[The] memo proposes a number of ways that Wal-Mart could hold down spending on health care and benefits while minimizing damage to its reputation. Those proposals include nine “limited-risk initiatives” and five “bold steps.”
The initiatives include increasing the number of part-time employees while making it easier for part-time employees to become eligible for benefits and offering a variety of benefits from which employees may choose. [The memo] also mentioned a plan already under way to add health clinics to stores.
The “bold steps” called for Wal-Mart to institute “consumer-driven health plans” with Health Savings Accounts that would go toward paying higher deductibles; restructuring the retirement program to put more money into health care and less into retirement; redesigning employment at Wal-Mart “to attract a healthier, more productive workforce”; making strategic investments to counter criticism; and improving communications about the company’s benefits offering.
CNN/Money: “Wal-Mart memo: Unhealthy need not apply”
The above headline is truly a cheap shot. I just finished reading the entire 12-page memo, entitled “Reviewing and Revising Wal-Mart’s Benefits Strategy” [full text in .pdf].”
I recommend reading the entire memo before accepting uncritically the negative publicity it has received.
The memo notes that a factor influencing high health care costs is that “the least healthy, least productive associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart.” Accordingly, the memo notes the positive financial impact of even slight improvements in overall employee health and suggests several ways to achieve this, some of which involve discouraging unhealthy employees from pursuing or continuing employment.
Three such measures are mentioned: 1) “designing all jobs to include some physical activity (e.g. all cashiers do some cart gathering)”; 2) offering discounts on healthy foods (e.g. fruits and vegetables); and 3) offering benefits that attract healthy employees (e.g. an education benefit targeted at students).
The Memo as Employee Benefits Policy
I’m sorry, but I can’t get too upset at Wal-Mart. To the contrary, this memo strikes me as an excellent analysis of the benefits cost challenges facing Wal-Mart — and every other business in America today. Anyone involved or interested in health care funding and/or employee benefits would do well to read the entire memo. It can serve as a model for any company performing a similar analysis and striving to provide affordable health insurance.
For example, Wal-Mart took into account employee satisfaction and public perception, as well as cost control. Employee satisfaction survey results enabled the identification of benefits that were less important to employees and therefore could be modified to achieve cost savings without significantly impacting employee satisfaction. There is nothing wrong with a very cost-conscious company that has been criticized for being stingy with benefits seeking the most bang for the benefits buck. Rather, I would fault a company that did not do so.
If Wal-Mart were to adopt the recommendation that all employees be converted to consumer-directed healthcare coverage with health savings accounts (HSAs) in a manner that does not involve any further cost shifting, this could be a huge factor in moving towards such coverage becoming the national norm. That, in turn, could be expected to put a very real dent in the unsustainable healthcare cost increases faced by every business today.
Wal-Mart may be able to demonstrate that by using health savings accounts it held the line on its health insurance costs without increasing the average employee’s out-of-pocket cost, while a significant part of its employee population ended the year with accrued dollars in their HSA, mitigating the impact of the high deductible that is one of the most-criticized features of Wal-Mart benefits.
And adding health clinics to stores is another innovative idea that may make Wal-Mart an important healthcare trendsetter. The memo mentions real estate considerations, suggesting the idea may be to rent store space to a medical group, achieving a better marginal return on some of the existing space in the larger stores. A below-market rent could be exchanged for below-market medical treatment of employees.
Since one of the health insurance cost factors noted in the memo was the tendency of employees to overuse emergency rooms, substantial savings would be achieved if such clinics provided employees with urgent care and the employees had an incentive to use them instead of emergency rooms when possible.
Legal Implications of the Memo
My friends at Workers Comp Insider raise a serious concern and then close their post with a tongue-in-cheek “Modest Proposal.”, Perhaps they did not read the entire memo, but only the “cherry-picked” excerpts in negative media coverage. They say:
By writing the memo and by defending it in public, the company has created an amazing opportunity for lawyers. The memo is the proverbial “smoking gun.” Every termination of an employee who is perceived to be unhealthy will give rise to immediate suspicion of discrimination. Every time Walmart rejects a job applicant with obvious and perhaps not-so-obvious health issues, they are again open to claims of discrimination. The burden of proof will be on Walmart to demonstrate that they did not implement the suggestions of the soon-to-be notorious memo. Did someone say “class action suit”?
Technically, the burden of proof in a discrimination case never shifts. And negative employment decisions under circumstances such as those mentioned are already likely to lead to such disability discrimination lawsuits with some frequency. The memo certainly won’t help, but I wouldn’t call it a “smoking gun.”
Along similar lines, the California Labor & Employment Law blog asks: The Wal-Mart Memo: Does It Break The Law?
Wal-Mart has managed to create another PR nightmare for itself. This week, an internal memo suggesting that Wal-Mart discourage unhealthy people from applying for jobs has raised hackles from the usual anti-Wal-Mart suspects. But it might also raise a lawsuit. . .
Nothing in the memo suggests that this is anything but a proposal, and it probably wasn’t vetted by the company’s lawyers. Even still, nothing in it is per se discriminatory. Instead of trying to exclude the disabled, instead it’s trying to attract health-conscious workers.
I’m not an ADA jock. I don’t know enough to say for certain whether or not this all on its own violates the ADA, but my sense is that it doesn’t, and, if it does, it’s bad policy. Given the bovine nature of America, the country’s largest employer should do something to encourage more physical activity!
Altering job descriptions is somewhat dangerous territory. If newly imposed physical activity requirements “screen out or tend to screen out an individual with a disability or a class of individuals with disabilities” they are in violation of the Americans With Disabilities Act unless they are “shown to be job related for the position in question and . . . consistent with business necessity.”
Hard to do when the requirements didn’t exist before the memo and are implemented only to save money. And if exceptions were requested as “reasonable accomodation” the question would be whether the requirements are truly essential job functions.
But my best guess is that people discouraged or screened out from such jobs because they are lazy, overweight, or have many potentially costly, but not debilitating, health risk factors probably couldn’t raise such challenges, not being able to meet the quite strict definition of disability under the Americans With Disabilities Act.
In any event, the memo spoke of attracting a healthier workforce, not rejecting unhealthy applicants. If I’m the judge, the jury in a disability discrimination case never sees that memo: its relevance is outweighed by dangers of unfair prejudice and confusion of the issues.
UPDATE: Wall Street Journal article on legal implications of the memo: “Can Employers Alter Hiring Policies To Trim Their Health-Care Costs?” (”Employment lawyers and health consultants maintain that exactly what employers can and can’t do to insure a healthy work force falls into a legally unsettled area.”)
Next time: the Wal-Mart CEO’s speech calling for minimum wage hike and announcing environmental initiatives and health-care plan change.
For additional current information, don’t forget to visit our “Recent Reading” page, a blog-within-a-blog.
Photo credits: Jasmine White (store and fence) isotopp (shopping carts) via flickr
For additional current information, don’t forget to visit our “Recent Reading” page, a blog-within-a-blog.
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I currently work for Wal-Mart and can say it needs help. They used to be all about family now, if you have a family apply somewhere else. If your kid is sick even with a doctors note it is no longer excused and you can be terminated. Or it snows and the area in not called a state of emergency but the raods where you live are covered in ice they still want you to come in, or you could be terminated. Your in a car accident on your way into work and your more then 10 minutes late, you can be terminated. Poor Sam Walton, I bet he is rolling over in his grave to see what has become of his wonderful company.