WSJ.com - June 22, 2004
Wal-Mart Faces Class Action In Sex-Discrimination Case
By ANN ZIMMERMAN Staff Reporter of THE WALL STREET JOURNAL June 22, 2004 9:57 a.m.
A federal judge in San Francisco ruled that a gender-discrimination lawsuit against Wal-Mart Stores Inc. could move forward as a class action, allowing the lawsuit to apply to as many as 1.6 million current and former female employees who worked for the company since Dec. 26, 1998.
The move makes the case the largest civil-rights action ever brought against a private employer in the U.S.
The original suit, filed in June 2001 by six former and current female employees, charged that the Bentonville, Ark., retailer systematically denies women workers equal pay and opportunities for promotion. Wal-Mart, America's biggest private employer, with 1.3 million employees, said it plans to appeal the decision.
Federal Judge Martin J. Jenkins rejected the retailer's argument that the enormous class size made the case too unwieldy. In addition, Wal-Mart had argued that most hiring and promotion decisions were made at the store level, and thus, there wasn't any pattern of corporate discrimination.
The judge, however, found the plaintiffs had enough evidence that the company had common pay and hiring practices across the country, raising the "inference that Wal-Mart engages in discriminatory practices in compensation and promotion that affect all plaintiffs in a common manner." The decision affects who can participate in the case, but isn't an indicator of the outcome.
Judge Jenkins also ruled that the class can pursue an award of punitive damages in addition to back pay for wage differences and lost earnings to those who were actually denied promotions.
Joseph M. Sellers, co-counsel for the plaintiffs and a lawyer with the Washington, D.C., firm of Cohen, Milstein, Hausfeld & Toll, called the ruling "a terrific recognition of the plight of women at Wal-Mart." "It is an unprecedented opportunity to pursue their claims together," he said.
Wal-Mart, however, noted that the certification is just a first step and the case has a long way to go. "Let's keep in mind that today's ruling has absolutely nothing to do with the merits of the case," said Wal-Mart spokeswoman Mona Williams. "Judge Jenkins is simply saying he thinks it meets the legal requirements necessary to move forward as a class action. We strongly disagree with his decision and will appeal."
Wal-Mart has 10 days to ask the U.S. Ninth Circuit Court of Appeals to review the case. If the review is denied, lawyers for plaintiffs say they hope to get a trial set within the year.
However, most cases of this size and complexity are settled out of court -- and for huge sums. Home Depot Inc., for example, agreed to pay $104 million in 1997 to settle a class action on behalf of 25,000 women who claimed they were denied promotions because they were female. Coca-Cola Co. in 2000 and Texaco Inc., now a part of ChevronTexaco Corp., in 1996 each paid well more than $100 million to settle race-discrimination cases.
Wal-Mart, which racked up $9.05 billion in profit on $256.33 billion in sales in the year ended Jan. 31, has the financial wherewithal to deal with a potentially large jury verdict or settlement, observers says. More troubling are Wal-Mart's persistent image problems. The world's largest retailer is facing a host of labor-related problems and has become a target of unions and activists, who portray it as a penny-pinching corporate giant that puts profits ahead of workers.
More than 30 lawsuits filed against Wal-Mart allege it failed to pay workers overtime, and a federal grand jury is investigating whether the company knowingly used contractors who hired illegal immigrants to clean its stores.
The company recently has taken steps to change its employment practices, creating a director of diversity and a compliance team. In January, it instituted its first company-wide electronic system to allow employees to apply for management training. It also has restructured pay scales. At the company's annual meeting in early June, Chief Executive Lee Scott also announced that executives will forfeit a percentage of their bonuses if they fail to meet specific employment diversity goals.
Still, Wal-Mart fiercely denied that it has engaged in a pattern of discrimination against women. In a two-hour class-certification hearing last September, Wal-Mart argued that each member's case is unique and that it is entitled to individual hearings regarding each class member's claims. The company said this process would entail at least 13 years of testimony and it argued that such testimony was the only way it could receive "due process."
Wal-Mart also argued that most of its employment decisions are made on the store level and don't amount to any pattern of corporate discrimination that would merit class-action status for the lawsuit.
The plaintiffs in the case claim sheer numbers prove their point: About two-thirds of Wal-Mart's hourly employees are women, though they make up only a little more than a third of all its salaried managers. Just 14% of the top managers at its 3,000 stores are female. The plaintiffs, women from several states who mostly held hourly jobs, also contend that women earn 5% to 15% less than their male counterparts in the same jobs, differences that can't be explained by seniority or performance reviews. The plaintiffs' statistical studies also show that the average proportion of women in managerial positions at the country's 20 largest retailers is some 20 percentage points higher than at Wal-Mart, according to data filed with the U.S. Department of Labor.
Although Wal-Mart has provided its own statistics that attempt to show that women are paid fairly and they don't apply for promotions as readily as males do, the judge was unconvinced, noting that the plaintiffs' statistical presentation was "largely uncontested."
Judge Jenkins also rejected Wal-Mart's argument that the case is too large to try, noting that this year is the 50th anniversary of the Brown v. Board of Education case, "which services as a reminder of the importance of the courts in addressing the denial of equal treatment under the law wherever and by whomever it occurs."
The plaintiffs are represented by three public-interest groups: The Impact Fund of Berkeley, Calif.; Equal Rights Advocates of San Francisco; and the Public Justice Center of Baltimore. Four law firms also are involved in their case: Cohen Milstein; Davis, Cowell & Bowe of San Francisco; Tinkler & Firth, of Santa Fe, N.M.; and Merit Bennett also of Santa Fe.