Inside the restructuring of Walmarts law department – Business Insider
The retail giant Walmart is restructuring its law department, and a raft of changes have unsettled some insiders responsible for handling its massive caseload.
The reorganization — including job eliminations, rehires, and a reporting shift — dates back to the summer, but changes are ongoing.
So far, insiders said it has been marked by delays in a promised rollout of a new organizational structure, the outsourcing of some functions, and departures that have rattled morale.
Walmart has said that its caseload would not be adversely affected by the restructuring, and that one reason for the changes was to better support the company’s legal needs.
Walmart’s in-house team is handling a case accusing the retailer of contributing to the opioid epidemic and another in which the families of victims in a mass shooting at a store in El Paso, Texas, allege it should have had better security. In both high-profile cases, Walmart has denied the accusations.
Walmart is restructuring its law department, and a raft of changes have unsettled insiders responsible for handling its massive caseload.
The reorganization — including job eliminations, rehires, and a reporting shift — dates back to the summer, but changes are ongoing. So far, insiders said that it has been marked by delays in a promised rollout of a new organizational structure, the outsourcing of some functions, and departures that have rattled morale.
Over the past two months, Business Insider reviewed internal emails addressing the changes and spoke with three people with direct knowledge of the restructuring. Walmart confirmed the restructuring to Business Insider and provided additional details on its reasoning for the changes.
Taken together, the accounts provide rare insight into how the largest retailer is reshaping one of its most vital work units — one that is responsible for handling cases that could extract tens, if not hundreds, of millions of dollars from the company’s bottom line. Many are high profile, including lawsuits making allegations over its roles as a pharmacist amid the opioid epidemic and as the venue of a deadly mass shooting in El Paso, Texas.
In a statement, the Walmart spokesman Randy Hargrove said Walmart’s caseload would not be adversely affected by the restructuring, and that one reason for the changes was to better support the company’s legal needs.
Hargrove said Walmart is adding new areas of expertise, “moving resources to areas of growing strategic importance, like health and wellness and financial services.”
In September, Walmart launched its first health center in Dallas, Georgia, and its financial-services business includes the payment system Walmart Pay, which allows customers to pay for store items on their mobile devices. Walmart also recently partnered with Green Dot on a fintech accelerator joint venture, called TailFin Labs.
“We believe we have put our attorneys and professional staff in the best possible position to effectively and efficiently protect the business during its transformation,” Hargrove said.
A June kickoff
The changes, which started at the end of June, followed a several-month review of the company’s global governance organization, which includes legal, strategy and operations, ethics and compliance, and investigations, according to internal memos distributed by Walmart Chief Legal Officer Rachel Brand.
Brand, who joined Walmart from the US Justice Department in 2018, wrote in a June 24 memo that the changes were directed at providing visibility to leaders into “issues and emerging trends,” reducing duplication and creating new positions “where the direction of the business called for it or where we lacked expertise.”
On the same day, an email from Walmart general counsel Karen Roberts outlined a new organizational structure that included a “flattened” litigation team and consolidation of multiple teams, including discovery, litigation support, and outside counsel management.
“Change is difficult,” Roberts wrote, “but with your continued help I strongly believe our new approach and ways of working will allow us to better serve our clients and the company.”
A sense of scale
The exact number of people affected by the changes could not be determined — it does not appear to have been communicated across the entire organization — but Roberts told the Association of Corporate Counsel that as of 2018, the retailer had 150 lawyers in the US alone, not counting support staff such as paralegals and administrative assistants or lawyers in other parts of the world, like China, Brazil, and Canada.
Cuts to the law department appear to have been confined to the single digits in each affected division, such as intellectual property, litigation, and discovery, according to people with direct knowledge of the matter.
In some instances, employees have been given the opportunity to reapply for their positions, these people said. In most cases, though, employees whose jobs were eliminated were let go, with the option to apply for roles within other divisions of the company. Some opted to leave and take a severance package.
At the same time, Walmart has increasingly relied on the outside consultancy of Deloitte in handling legal work, setting up a special team called Project Interstate, or nonlawyer staff who handle discovery in litigations, according to sources and emails reviewed by Business Insider.
The work performed by Deloitte, according to Hargrove, is confined primarily to “document retrieval.” He said Deloitte is one of several vendors Walmart uses for document-retrieval services, though he did not name others.
Walmart also hired Deloitte in a consulting capacity. “While working in that role, they have consulted with us on how we create efficiencies and enhance our discovery and other document-retrieval services,” Hargrove said.
Hargrove declined to say how many people were displaced by the restructuring overall but said by the time it is complete, Walmart expects to still have about 150 lawyers in the US, the same number of attorneys in the US as it had before the restructuring started.
The moves have set off a stir in the legal workforce that Walmart’s team leaders are trying to tamp down: Some employees are worried about whether the cuts will hinder some legal functions, including its ability to produce evidence in litigation. Others are considering alternative employment opportunities.
On November 6, employees in Walmart’s litigation and discovery teams learned that the new organizational structure Roberts had initially announced in June would not be finalized as early as they had hoped.
In an email titled “Update on Roll-Out,” Kerri Ruttenberg, a Walmart senior vice president and its chief counsel, wrote to her litigation and discovery teams of more than 100 people that an anticipated mid-November announcement would need to be pushed back “a few weeks” because of unspecified administrative issues.
“We know the uncertainty can be both challenging and frustrating, but we continue to ask for your patience,” Ruttenberg wrote.
Walmart is one of the largest companies, counting $514 billion in revenue and 2.2 million employees in 2018. Lawsuits against it are some of the most publicized, and hundreds listing it as a defendant hit the docket every year, according to a review of cases on Westlaw.
The responsibility of its in-house team includes case strategy, producing documents, and settlement negotiations.
In both cases, Walmart has said it did nothing wrong. In the El Paso case, it has said the shooting was the fault of the gunman alone, not Walmart, while in the opioid case, it has maintained that Walmart’s drug distribution accounts for a “vanishingly small part of the relevant market” and that it did not create a black market for opioids.
Walmart has at times been criticized by federal judges. For instance, Walmart has been sanctioned for losing or destroying evidence in cases, such as security footage in a personal-injury lawsuit in which the judge had rejected Walmart’s argument that it didn’t have a duty to preserve the evidence.
As part of the reorganization, the Walmart discovery team has experienced a shake-up, with the reassignment of a handful of members, the departure of at least one senior member, and additional responsibilities given to the team, handling not just litigation but also investigations, according to a person with direct knowledge of the matter.
Meme of Al Pacino left by outgoing employee
Lawyers handling lawsuits against Walmart were unaware of the internal changes that have swept the law department over the past four months, saying their main points of contact are with Walmart’s outside law firms.
Inside Walmart’s Bentonville, Arkansas, headquarters, though, insiders familiar with the law department depicted a work environment where employees are on pins and needles after witnessing the exits of colleagues and not knowing if they are next to go.
It all began the day after a $282 million settlement was announced to conclude a US bribery investigation into Walmart’s operations in China, Brazil, and other countries. Hargrove, the Walmart spokesman, said there was no connection between the settlement and the restructuring, and that the $282 million was accrued by November 2017.
The next day, June 21, Roberts, the general counsel, held a series of sudden mandatory meetings with various units within her law department.
Employees had already expected the worst after Roberts had been seen pulling down the curtain of the windows to a room near her office — a meeting room called “Sidebar” that fits about six people — as she met with members of human resources.
“We knew something was up,” one person who was there and working on the third floor said.
One by one, groups of employees in Walmart’s legal divisions, including litigation, intellectual property, and privacy, entered and exited the meetings held in a more spacious room called “Service First,” where Roberts delivered news of a company restructuring.
The meetings were short, between 10 and 20 minutes, and resulted in teary-eyed employees who left, packed their things, and headed home. It was a Friday — the day the company typically delivers bad news — and individual follow-up meetings with affected employees continued through Monday.
What would follow struck many within the law department as a chaotic rollout, with certain employees told they had to reapply for their own jobs and others left in a limbo state, awaiting reassignment to a new division. One person who was laid off — who packed his desk and went home — later returned to the company in a whole new job.
The discord employees felt was captured in a goodbye note left by one low-level staff member.
Before leaving the office, the man taped a piece of paper over his computer monitor. On it was a color photo of a meme, showing Al Pacino in the movie “And Justice For All” pointing his finger defiantly at a judge, with the words, in bold lettering: “I’M OUT OF ORDER!? NO, YOU’RE OUT OF ORDER!”
“Everyone respects it and leaves it there,” one Walmart employee told Business Insider in October.
The piece of paper remained taped to the monitor until a new hire moved into his seat.
Walmart attempts to calm employees
Recently, legal-team leaders have attempted to assuage employee concerns within the Walmart discovery team, according to company emails reviewed by Business Insider.
“Understandably there is anxiety around the continued transition process,” wrote one supervisor, in an email dated Oct. 4, to her team of professionals handling documents and data in litigations. “Everyone’s patience is greatly appreciated and cannot be overstated.”
By the end of the month, Oct. 31, the same supervisor announced a spate of new hires, including contractors, a full-time member from the law firm White & Case, as well as a newly advertised, open position, raising questions among the rank-and-file about why previous cuts took place if Walmart was just going to refill positions.
“Stress test? Social experiment?” one Walmart insider speculated in jest.
Still no clarity
For now, many within Walmart’s legal department await further clarification on what their teams might look like in 2020 and how they fit into the organization, if at all.
The latest organization Business Insider could confirm was the org chart distributed at the time of the initial June announcement — a reporting structure that placed Brand at the head of global governance, with seven direct reports, including Roberts.
Roberts oversees all legal functions, including litigation, intellectual property and international matters.
Hargrove, the Walmart spokesman, did not provide a date as to when the restructuring will be complete.
“Walmart is committed to serving customers every day through everyday low prices and everyday low cost,” Hargrove said in a statement. “The company’s legal department, like other departments within the company, is always looking to be more effective and efficient.”