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Wal-Mart Factories Cited For ‘High-Risk’ Violations

Inspectors cited more than half the factories producing goods for Wal-Mart Stores Inc. for "high-risk" workplace violations last year, a 68 percent increase compared with 2004.

Inspectors cited more than half the factories producing goods for Wal-Mart Stores Inc. for “high-risk” workplace violations last year, a 68 percent increase compared with 2004.

The $312 billion retailer made the disclosure in its 2005 Report on Ethical Sourcing, a document the company produces annually and posts on its Web site.

The percentage of factories with serious violations rose to 52.3 percent in 2005, from 35.6 percent in 2004. Wal-Mart conducted more than 13,600 audits of 7,200 factories last year. Almost 90 percent of those audits turned up moderate and high-risk violations.

Failure to pay overtime, coaching of workers for audit interviews and fraudulent wage and hour records were the most common high-risk offenses, the report said. Moderate offenses included improperly positioned fire extinguishers.

Wal-Mart designates certain violations “high risk” because those are practices the retailer considers urgent to correct, said Wal-Mart spokeswoman Amy Wyatt. The company attributed the sharp jump in violations to changes in auditing criteria and to its growing use of unannounced inspections.

“The higher number of violations is proof the program is working,” Wyatt said. “We are finding violators and working to correct them.”

Labor rights groups have criticized Wal-Mart for insufficient monitoring and have charged that the retailer’s practice of informing factories when they will be inspected has masked serious problems in working conditions.

Under the leadership of Lawrence Jackson, president and chief executive officer of global procurement and former head of the company’s human resources division, Wal-Mart’s practices appear to be changing.

Last year, 20 percent of audits were unannounced, compared with less than 1 percent in 2003. The retailer says its goal is to have 30 percent of audits unannounced this year.

Wal-Mart has begun consulting with several nongovernmental organizations for advice on improving its monitoring programs, Wyatt said. “The feedback we’ve gotten from NGOs and other stakeholders is driving change in our program.”

Among those changes: increasing bans on factories that have several violations to one year from 90 days. The retailer has also begun using pairs of auditors, rather than a single individual, during factory visits.

The report also said about 1 percent of factories employed two or more underage workers. The retailer permanently banned 141 factories from producing goods for Wal-Mart, primarily because of child-labor law violations.

Wal-Mart audits every factory from which it sources directly and hires third-party contractors to review 1,080 supplier factories producing what the company deems “high-risk” categories, such as apparel, shoes, sporting goods, accessories and toys.