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The key factor to consider in analyzing whether an entity is an employer is the right to control and direct the activities of the person rendering service, or the manner and method in which the work is performed. A finding of the right to control employment requires a comprehensive and immediate level of day-to-day authority over employment decisions.
Plaintiffs (multiple Jane and John Does) are employees of Wal-Mart's foreign suppliers in countries including China, Bangladesh, Indonesia, Swaziland, and Nicaragua. In 1992, Wal-Mart developed a code of conduct for its suppliers, entitled "Standards for Suppliers" ("Standards"). These Standards were incorporated into its supply contracts with foreign suppliers. The Standards require foreign suppliers to adhere to local laws and local industry standards regarding working conditions like pay, hours, forced labor, child labor, and discrimination. The Standards also include a paragraph entitled "RIGHT OF INSPECTION,” which essentially provides that Wal-Mart or a designated third party may undertake affirmative measures such as onsite inspections to implement and monitor the implementation of these Standards. Noncompliance with both the Standards or the inspection will result to the cancellation of business with Wal-Mart. Wal-Mart represents to the public that it improves the lives of its suppliers' employees and that it does not condone any violation of the Standards. However, Plaintiffs allege that Wal-Mart does not adequately monitor its suppliers and that Wal-Mart knows its suppliers often violate the Standards. Specifically, Plaintiffs claim that in 2004, only eight percent of audits were unannounced, and that workers are often coached on how to respond to auditors. Additionally, Plaintiffs allege that Wal-Mart's inspectors were pressured to produce positive reports of factories that were not in compliance with the Standards. Finally, Plaintiffs allege that the short deadlines and low prices in Wal-Mart's supply contracts force suppliers to violate the Standards in order to satisfy the terms of the contracts. In response thereto, plaintiffs filed a class action lawsuit in California Superior Court in 2005 and Wal-Mart removed the case to federal court based on diversity of citizenship. Plaintiffs then filed an amended complaint in federal court, which is the complaint relevant here. Wal-Mart filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, which was granted.
May Wal-Mart be considered as Plaintiffs’ employer?
Plaintiffs' allegations do not support the conclusion that Wal-Mart is Plaintiffs' employer. Plaintiffs' general statement that Wal-Mart exercised control over their day-today employment is a conclusion, not a factual allegation stated with any specificity. Plaintiffs allege specifically that Wal-Mart contracted with suppliers regarding deadlines, quality of products, materials used, prices, and other common buyer-seller contract terms. Such supply contract terms do not constitute an "immediate level of 'day-to-day'" control over a supplier's employees so as to create an employment relationship between a purchaser and a supplier's employees. Plaintiffs also allege that Wal-Mart exercised control over their employment through Wal-Mart's promise to monitor the suppliers and Wal-Mart's system for monitoring. However, the Court has already concluded that Wal-Mart undertook no duty to monitor the suppliers and the monitoring and inspections by Wal-Mart were performed to determine whether suppliers were meeting their contractual obligations, not to direct the daily work activity of the suppliers' employees.