What Employers Should Learn from Wal-Mart’s Dress Code Controversy

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Wal-Mart’s move last month to require its employees to adopt a new dress code at the workers’ expense is a test case for companies planning similar actions, according to Deborah Weinstein, a lecturer in Wharton’s legal studies and business ethics department. Under Wal-Mart’s new dress code, workers are required to wear collared shirts and khaki bottoms. The company will continue to supply for free the blue vests they currently wear.

Wal-Mart’s action triggered outrage among worker unions, which are calling on the company to pick up the tab for the new attire. Weinstein, an employment law attorney, discussed the implications of Wal-Mart’s move — which she said could spur class-action lawsuits — on the Knowledge@Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)

Legally, employers can require their workers to wear uniforms and also to pay for their cost and upkeep barring exceptions, noted Weinstein. One such exception would be if the cost of the uniform plus cleaning fees would cause workers’ wages to fall below the federal minimum wage of $7.25 an hour. If the uniforms are required for compliance with government rules, such as the federal Occupational Safety and Health Administration (OSHA) regulations, the company must pay for them, she added.

Media reports have estimated the cost of the new Wal-Mart attire to be $40-$50 annually, and many employees have complained that such an expense will put pressure on already tight budgets. The imposition of a stricter dress code has also ignited complaints of poor working conditions at Walmart stores. Richard Reynoso, a Wal-Mart employee in Duarte, Calif., representing a campaign called Organization United for Respect at Walmart said in a letter to the company’s management: “I’m getting paid only about $800-$900 a month. The sad truth is that I do not have $50 lying around the house to spend on new uniform clothes just because Wal-Mart suddenly decided to change its policy. If I have to go out of pocket for these new clothes, I’m going to have to choose which bill to skip.”

“Wal-Mart will have to do the numbers again to make sure they want to take [the employees] on and litigate this, or figure out a settlement or a better way to do it.”

In announcing the changes, Wal-Mart has chosen to use the term “dress code” instead of “uniform,” but that does not necessarily mean that the company is not bound by regulations governing uniforms, according to Weinstein. “Whether it is a dress code or a uniform depends on whether it meets the legal definition,” she said. It helps Wal-Mart that “there are there generally no bright lines in the law,” she added.

“Walmart did its homework here,” said Weinstein. In interpreting the Fair Labor Standards Act, the federal Department of Labor used an old opinion letter that says khakis and a collared shirt are not uniforms, she explained. “The reason [for that] is these are street clothes. It’s not like you are required to wear a tuxedo,” she noted, adding that the Wal-Mart management appears to have assumed “that everybody [already owns] a pair of khakis and a collared polo shirt, whether that is the case of not…. They chose pretty safe territory.”

The Risk of Litigation

Even if Wal-Mart appears to be in safe territory, it still faces the risk of class action suits by employees, Weinstein said. The Labor Department guideline that the company appears to have relied on is not a statute, she pointed out. “That doesn’t make it ultimately the law. There is no law that Congress has passed and the Supreme Court hasn’t looked at it, so there is still a blurry line here, and this could be challenged.” Wal-Mart employees could argue that the new standards are “a uniform in disguise. There is some wiggle room here for employees if they organize [themselves] to challenge this.”

If Wal-Mart becomes embroiled in class action lawsuits over the dress code, it could be several years before the matter reaches the U.S. Supreme Court, and the costs could be huge, said Weinstein. “Wal-Mart will have to do the numbers again to make sure they want to take [the employees] on and litigate this, or figure out a settlement, or a better way to do it.”

Beyond the numbers, Wal-Mart faces other challenges with its dress code. “The bigger question here might be the outrage that people feel when they read about it, because after all, the workers [subject to this] are at the bottom of the food chain,” said Weinstein. “And, we are at a time when people are increasingly concerned about economic inequality in this country.”

“The bigger question here might be the outrage that people feel when they read about it, because after all, the workers [subject to this] are at the bottom of the food chain.”

Wal-Mart may have decided to update the dress code so that the chain comes across as a more professional organization to customers. “It is good marketing,” Weinstein noted. “But it is just that it backfired Twitter .”

Developments in the broader public policy environment could also make the terrain tougher for Wal-Mart and other employers, said Weinstein. For instance, she noted that President Barack Obama in his 2014 State of the Union address in January talked of raising the minimum wage. “I will issue an Executive Order requiring federal contractors to pay their federally-funded employees a fair wage of at least $10.10 an hour — because if you cook our troops’ meals or wash their dishes, you shouldn’t have to live in poverty,” Obama said. The Obama administration is also closely monitoring big and small companies to ensure that they are complying with the Fair Labor Standards Act, she added.

The Wal-Mart case offers useful lessons for employers in general, according to Weinstein. “It will make employers think twice about instituting these rules on the backs of their low-wage workers,” she said. “It will create a public relations problem for them, and they could be on shaky ground legally.”

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