A wave of high-profile, class-action lawsuits and settlements this summer has raised allegations of race and sex discrimination in pay and promotion at some of the nation's best-known corporations, a list that expanded yesterday to include retailer Costco Wholesale Corp.
Last month, investment bank Morgan Stanley agreed to pay $54 million to settle claims that it underpaid and did not promote women. A few days later, aircraft manufacturer Boeing Co. agreed to pay up to $72.5 million to settle similar allegations. That same month, a group of black employees sued Eastman Kodak Co. accusing the company of systemic race discrimination, and an Alabama judge held a hearing on an ongoing race discrimination case against BellSouth Corp.
In June, a federal judge ruled that a sex-discrimination case against Wal-Mart Stores Inc., the nation's largest retailer, could proceed as a class action involving as many as 1.6 million women, although Wal-Mart has persuaded an appeals court to review the ruling. Gaithersburg food-service giant Sodexho Inc. is scheduled to go to trial in November over accusations that it failed to promote black managers.
The prominent cases are rooted, in part, in 1991 civil rights legislation that allowed victims of employment discrimination to seek punitive and compensatory damages, according to academics and lawyers who represent both employers and employees. The change makes such lawsuits potentially more lucrative for law firms, which have begun building the expertise to pursue them.
The discrimination cases come from all over the country and make a variety of claims, but some common threads run through them. The claims tend to focus on pay and promotion rather than hiring, they rely heavily on statistical evidence of race or sex disparities, and so far, most of them haven't gone to trial. In most cases, either the employer wins when a judge or an appeals court refuses to allow the case to go forward as a group action or the employees win when the class is certified and the two sides settle.
In a case filed yesterday in San Francisco, a Costco assistant warehouse manager alleged that the Issaquah, Wash., retailer did not announce openings for higher-paying managerial jobs, relying instead on a "tap on the shoulder" by top-level male executives to pick other men for higher-level positions. Although Costco's U.S. workforce of 78,000 is nearly 50 percent female, fewer than 1 in 6 senior managers are women, according to the lawsuit, which seeks to represent about 650 women.
Lead plaintiff Shirley "Rae" Ellis, who has worked for Costco for six years, said she was surprised when she started to feel discriminated against, "but it's surprising when you find out how few women are involved in the more senior ranks of companies. I don't think there are very many women in charge in this United States. It's unfortunate," she said.
Class-action employment claims make up only a small part of the 40,000-plus federal civil rights cases filed every year, and they are hard to track because they are filed all over the country. But federal statistics suggest that the actions have been climbing slowly over the past decade or so. In fiscal 2003, employees filed 76 federal class-action claims, only slightly more than the 74 filed in 2002, but more than double the 32 filed in 1991, according to the Administrative Office of the U.S. Courts.
"Courts have finally gotten around to looking at these larger issues, looking at larger companies," said Bill Lann Lee, a partner with Lieff Cabraser Heimann & Bernstein LLP who is involved in the Costco case.
In 1991, changes in discrimination law increased the potential financial payout and allowed plaintiffs to seek jury trials, which in turn made these cases attractive to a more sophisticated and wealthier group of lawyers. "Folks who had been doing securities litigation and toxic torts [like breast implants and chemical disasters] are noticing that there are green pastures in a new area," said Neal D. Mollen, a Washington partner at Paul Hastings who represents employers.