Target is having labor pains.
Until recently, the Minneapolis-based discounter largely had avoided the labor disputes and public relations challenges that have plagued Wal-Mart, the world's largest retailer. But now Target could face the same union opposition as its much bigger rival.
Target had its first union election in two decades in June amid allegations by workers of skimpy wages and reduced hours at a Valley Stream, N.Y. store. The measure ultimately failed after Target suggested to workers that the store might not survive if they vote to unionize. But the labor dispute — and Target's handling of it — is widely seen as a precursor to a bubbling national battle between Target and labor groups similar to the one Wal-Mart has been locked in for at least a decade.
"There is no question that this is becoming a hostile, caustic battle of wills," says Don Schroeder, a Mintz Levin labor attorney who has represented corporations in labor battles for 18 years.
While Wal-Mart Stores Inc. remains the biggest target for labor groups as the largest U.S. private employer, unions are increasingly setting their sights on the nation's No. 3 retailer as it adds locations across the country and aggressively expands into the heavily unionized grocery business. In addition to New York, more labor disputes are expected in big cities such as San Francisco, Seattle and Minneapolis, where Target is based and is the second-largest employer behind the Mayo Clinic. The opposition is coming at a particularly vulnerable time for Target, which is grappling with slack sales growth as shoppers are pulling back amid the painfully slow economic recovery.
Already, the United Food and Commercial Workers International Union's Local 1500 New York chapter, which organized the election in the Valley Stream store, intends to contest the election results and ask the government to order a new one because it says Target intimidated workers. It also plans to fight to get all 26 stores in the New York area unionized.
And the UFCW's local 1189 in St. Paul, Minn., near Minneapolis, is using the New York election as an impetus to recharge its campaign, which failed a couple of years because it didn't collect enough votes. The chapter is organizing a group of people to go door- to-door to almost 2,000 Target workers in four stores. It's also planning to reach out to UFCW's local Chicago, San Francisco and Seattle chapters to enlist them to join the battle.
"I was inspired. Once we heard that Local 1500 had been building toward an election, we thought we better ramp it up," said Bernie Hesse, director of special projects at UFCW'S St. Paul chapter. "We have been intrigued with what a national campaign may look like."
Target Corp. declined to comment on its strategies to counter an escalating labor fight, but spokeswoman Molly Snyder said the company does not intimidate workers or have any "companywide efforts to restructure or reduce hours."
"Our emphasis is on creating a workplace environment where our team members don't want or need union representation," Snyder said. "Target works to create an environment of mutual trust between Target and our team members — an environment that promotes listening, responding to concerns of team members and always giving honest feedback."
Labor disputes are new for Target, which has used its marketing prowess to become the discount industry's darling by offering trendy products while Wal-Mart built its no-frills business by offering everyday low prices. The companies started in the same year: 1962. And analysts say they pay workers similar wages of between $9 and $11. But the similarities end there.
Wal-Mart., which has 1.4 million U.S. workers, for years has been battling labor unions and politicians seeking to block it from opening stores in big cities amid allegations of poor treatment of workers, among other concerns. By contrast, Target has faced little to no opposition and at times has even had the red carpet rolled out for it — literally.
For instance, Wal-Mart, based in Bentonville, Ark., so far has not been able to penetrate New York City after fighting for years to get its stores there, but Target has opened 10 stores in the five boroughs without any union protests. And when Target's Harlem location opened last year, there was a red carpet event attended by New York politicians and celebrities such as Jerry Seinfeld and Moby.
As union opposition against Wal-Mart grew across the country, the retailer began employing hardball tactics to discourage workers from organizing. In 2004, for instance, the company shuttered a Canadian store after it became the first in North America to win union certification, for instance. In 2000, 11 workers in the meatpacking department at a store in Jacksonville, Tex., voted to join the UFCW. Soon after, Wal-Mart began stocking only pre-wrapped meats, effectively eliminating the positions.
The moves hurt Wal-Mart's public image, and anti-Wal-Mart sentiment spread among labor groups. So, the retailer beefed up its public relations staff, spent hundreds of millions of dollars to settle lawsuits alleging that its workers were denied breaks and rolled out lower-priced health insurance to its employees, among other changes.
Analysts say Wal-Mart's efforts to repair its battered reputation worked and deflected the attention at least partially over to Target, which is a fifth of the size of Wal-Mart with annual revenue of $65.7 billion in its latest fiscal year.
To be sure, some of the increased focus Target is experiencing from labor unions is simply a growing pain of being a bigger employer. Target now employs 355,000 workers and operates more than 1,700 stores, up from about 280,000 workers and 1,050 stores ten years ago.
But there is another big reason unions are beginning to scrutinize Target. The company is aggressively expanding its grocery business, which threatens to shrink market share of unionized supermarket chains like Pathmark. Of the 1.3 million unionized employees, 80 percent are grocery workers, according to the UFCW.
How Target handles the new scrutiny will be critical, analysts say. So far, they say the union battle in Valley Stream, N.Y. exposed how a still harsh economy has pushed Target to compete better with Wal-Mart and copy the retailer on all fronts — including wages and benefits.
Over the past year, Target has followed Wal-Mart by shifting more of its workers to part-time, analysts say. Some employees say their hours have been cut from 30 per week to fewer than 10. Part-timers must bank at least 20 hours a week, on average, to qualify for benefits.
Tashawna Green, 21, who started working at Target's Valley Stream, N.Y. store a little more than a year ago, said she voted in favor of organizing because her weekly hours have been cut from 30 to just over 20 in the past year. She recently got an 8-cent raise added to her $8 per hour pay — an increase she says isn't satisfactory.
"I can't live off this," said Green, who has a six-year old daughter and lives with her aunt in Queens. "The eight-cent raise is like a slap in the face. We're just looking for more respect." She says she gets government food assistance.
When addressing workers' concerns, analysts say Target should look closely at what worked — and didn't work — for Wal-Mart. They say one of the biggest mistakes Wal-Mart made was to not respond quickly enough.
Schroeder, the Mintz Levin labor attorney, says Target should get ahead of the attacks by making sure managers are sensitive to workers' needs. It also should hone a message that's conciliatory, not arrogant, he says, and communicate better with workers.
"You have to think how you're going to change," he says. "If you don't change, it will come back to you."
As part of changing, C. Britt Beemer, chairman of America's Research Group, agrees that Target should have a humble message. "Target can learn from Wal-Mart's mistakes," he says. "You don't want people to think you're invincible; Wal-Mart had this image that they were invincible."
So far, Ed Ott, a labor lecturer at the City University of New York's Murphy's Institute, said Target is following in Wal-Mart's footsteps. He cites the anti-union flyer that Target distributed among workers at the Valley Stream store that offered no guarantees that the store would remain open. Wal-Mart has not used the flyer as a tactic previously, but that kind of intimidation has been a part of its strategy, he said.
"They had a chance to show they were fundamentally different from Wal-Mart," he says, "but they're not."