Why is US retailer Wal-Mart fighting a fine following a fatal health and safety lapse?

Wal-Mart has spent a great deal of time and money to try to quash a $7,000 fine brought against it by the US labour department’s Occupational Health and Safety Administration (OHSA).

The penalty followed the death of a Wal-Mart employee who was trampled by a surging crowd of roughly 2,000 during a post-Thanksgiving sale in New York in 2008. Eleven people were injured.

In May 2009 Wal-Mart agreed to a settlement, including a new crowd-management plan for its 92 New York locations, a $400,000 victims’ compensation fund and a $1.5m donation to the local community. Wal-Mart did not, however, admit responsibility for the incident.

That same month, however, OHSA cited Wal-Mart for “inadequate crowd management” and issued a citation of $7,000 – the maximum amount for a “serious violation”.

So why is Wal-Mart so miffed about a $7,000 fine, a miniscule fraction of the company’s $13.3bn net income? Wal-Mart has reportedly spent more than $2m contesting the fine thus far.

Taking responsibility

The root of the issue seems to be the retail giant’s fear that OHSA is using this case to determine that “unruly crowds” are an occupational hazard. This could subject retailers like Wal-Mart to federal oversight whenever there are large crowds.

“OHSA wants to hold Wal-Mart accountable for a standard that was neither proposed nor issued at the time of the incident,” says Greg Rossiter, director of corporate communications at Wal-Mart.

Jim Copland, director of the Center for Legal Policy at the Manhattan Institute, a conservative US thinktank, says what Wal-Mart really fears is potentially more costly litigation.

“Wal-Mart does not want to concede that it has a duty to ‘manage crowds’ or otherwise protect those lining up outside its stores waiting to get in on special sales,” Copland says. He argues that if the company makes this concession – and by backing down to OHSA it effectively would be doing so – Wal-Mart would then have to worry about a whole new class of litigation. “And that litigation could cost them a lot more than $2m.”

OHSA is using its “general clause” to target Wal-Mart, which mandates that employers look after the health and safety of their employees. But because there is no specific regulation addressing crowd management, it leaves a grey area as to what specific issues fall under the general clause.

“Wal-Mart appears to be attacking the constitutionality of the general clause on the grounds it is so vague that to impose criminal penalties under it would violate what I would call the ‘rule of law’, and US lawyers would probably describe as ‘due process’,” says Hugh Collins, professor of law at the London School of Economics. “There is a legitimate concern about criminal laws that are so vague that we can never be sure if we have violated them.”

So has this incident revealed a crack in the retail giant’s corporate armour? Wal-Mart has made impressive strides in sustainable business, most notably with its global, industry-wide sustainable product index.

But whatever the outcome of this litigation or the strict letter of the law, the case is an opportunity for Wal-Mart to demonstrate a commitment to taking responsibility for worker and customer safety – which is, after all, what its millions of customers would expect.