Wal-Mart Not Liable for Poor Working Conditions

(CN) - The 9th Circuit rejected a class action brought by employees of foreign Wal-Mart suppliers, who said the retail giant ignored poor working conditions and even pressured suppliers to violate local laws on pay, hours, forced labor, child labor and discrimination.

Workers in China, Bangladesh, Indonesia, Swaziland and Nicaragua said Wal-Mart's purported "code of conduct" for foreign suppliers is a paper tiger.

Wal-Mart's supply contracts supposedly require foreign suppliers to meet industry standard working conditions, but the retailer's tight deadlines and low prices force suppliers to violate those standards in order to fulfill the contract, the workers said.

The contracts also give Wal-Mart the right to inspect foreign suppliers without warning, but the workers said Wal-Mart rarely checks its suppliers and even knows that many of them are violating labor laws.

Only 8 percent of audits in 2004 were unannounced, the workers said, adding that workers are often coached on how to respond to inspectors. And the inspectors themselves are allegedly pressured to deliver positive reports.

Foreign workers filed the class action in 2005 in a California state court, and Wal-Mart had it removed to federal court.

The district court granted Wal-Mart's motion to dismiss, saying Wal-Mart has no legal duty to the plaintiffs.

The workers tried to establish standing on four theories: foreign workers are third-party beneficiaries of Wal-Mart's supply contracts; Wal-Mart is their joint employer; Wal-Mart breached its duty to monitor suppliers and protect foreign workers; Wal-Mart was unjustly enriched by the workers' mistreatment.

Judge Gould of the San Francisco-based federal appeals court dismissed each argument in turn.

"Wal-Mart had no legal duty under the standards and common law negligence principles to monitor its suppliers or protect plaintiffs from the suppliers alleged substandard labor practices," Gould wrote.

"Wal-Mart is not plaintiffs' employer, and the relationship between Wal-Mart and plaintiffs is too attenuated to support restitution under an unjust enrichment theory."

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