A federal judge in San Francisco ruled yesterday that a sex-discrimination lawsuit against Wal-Mart Stores Inc. could proceed to trial as a class action because of evidence the nation's largest employer paid female workers less and gave them fewer promotions than men.
The suit could include as many as 1.6 million current and former female Wal-Mart employees, in what would be the largest private employer civil rights case in U.S. history.
U.S. District Judge Martin J. Jenkins found that attorneys for the six named women who filed suit in 2001 "present largely uncontested descriptive statistics which show that women working in Wal-Mart stores are paid less than men in every region, that pay disparities exist in most job categories, that the salary gap widens over time even for men and women hired into the same jobs at the same time, that women take longer to enter into management positions, and that the higher one looks in the organization, the lower the percentage of women."
The judge said his decision to certify the case as a class action "should not be construed in any manner as a ruling on the merits or the probable outcome of the case." He noted the case falls near the 50th anniversary of the landmark racial discrimination case Brown v. Board of Education. The anniversary, he wrote in an 84-page ruling, "serves 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."
Wal-Mart said it would appeal. "Let's keep in mind that today's ruling has absolutely nothing to do with the merits of the case. 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 seek an appeal," the company said in a statement.
Wal-Mart officials declined interviews. Its lawyers had argued to the judge that the statistical differences were due to differing job aspirations and interests between men and women that exist in the general labor force and thus can't be blamed on the company. They also argued that the case shouldn't be a class action because managers in the company's more than 3,000 stores, which include Wal-Mart and Sam's Club stores, had considerable autonomy.
Legal experts said that because of the appeal, it will likely be a year or more before the case comes to trial.
Yesterday's decision comes at a time when Wal-Mart has been on the defensive on several fronts. A federal grand jury is investigating the company after federal raids found illegal immigrants being used on cleaning crews in 61 stores in 21 states. It also is being sued for allegedly faking timecards of employees so they would not be paid overtime. The federal Equal Employment Opportunity Commission said it has sued Wal-Mart 48 times since 1990, mostly for discriminatory hiring practices, winning $8.6 million and changes in policy and training.
Unions have been trying to organize Wal-Mart workers, citing their low pay and poor benefits. In recent months, the company has run television ads depicting happy workers extolling its benefit plans to counter the unions and surveys that found consumers mistrusted Wal-Mart's labor practices and its impact on local communities.
Wal-Mart has recently taken steps to change its employment practices. At its annual shareholder meeting earlier this month, chief executive H. Lee Scott Jr. said he would cut executive bonuses if the company fails to meet diversity goals. The company will reduce executive bonuses by up to 7.5 percent this year and 15 percent next year if the chain fails to promote women and minorities in proportion to the number applying for management positions.
Experts in employment law said the case is significant beyond its potential effect on Wal-Mart.
"The magnitude of the class is more [notable] than anything else. The issues of the individuals are not particularly novel," said Thomas J. Flaherty, an employment lawyer in McLean who represents employers. He said cases "of this magnitude and scope are pretty unique and are precedent-setting."
Joseph M. Sellers, a District attorney who is co-counsel for the women in the case, said the class-action certification is significant because "it's going to open the courthouse doors for 1.6 million women, most of whom would never bring their case to court, many of whom have suffered in silence and probably given up on any chance to make things better."
Carolyn P. Short, a lawyer in Philadelphia representing companies, called the Wal-Mart suit "a landmark case" that will be felt throughout corporate America. "I do think there's going to be an internal corporate focus within the boardroom where programs are going to be tightened and improved. . . . I do think there are going to be concentrated corporate efforts to make sure they're in compliance with the law and be female-friendly."
In his ruling yesterday, Jenkins cited statistical evidence that lawyers for the women found in Wal-Mart files. Richard Drogin, a statistician at California State University at Hayward, found that it took women an average of 4.38 years from the date of hire to be promoted to assistant manager, while it took men 2.86 years. It took 10.12 years, on average, for women to reach store manager, compared with 8.64 years for men. He also found that female managers made an average salary of $89,280 a year, while men in the same position earned an average of $105,682 a year. The results for hourly workers show that women were paid 6.7 percent less than men in comparable positions.
Attorneys for the women also cited an analysis by labor economist Marc Bendick Jr., who compared hiring practices at Wal-Mart and 20 other retailers. He found that 56.5 percent of the in-store managers at the competitors' stores were female, compared with 34.5 percent at Wal-Mart. In anecdotal evidence cited in the ruling, a male Wal-Mart manager was quoted as telling an employee, "Men are here to make a career and women aren't. Retail is for housewives who just need to earn extra money."
Most large discrimination cases are settled out of court. Home Depot Inc. settled a sex-discrimination class-action suit in 1997 for $104 million. In 1996, Texaco Inc. shelled out a $176.1 million settlement on behalf of black employees who sued for racial discrimination. And Coca-Cola Co. paid $192.5 million in 2000 to employees who sued for discrimination. Publix Super Markets paid $81.5 million in 1997 for discriminating against female workers.
Randel Johnson, U.S. Chamber of Commerce vice president of labor, said, "I think that's more incentive to file lawsuits because damages are exponentially larger than they ever were. And there's an enormous amount of potential damages at the end of the rainbow here should Wal-Mart be proven guilty. That drives litigation in this area, and much of it is frivolous."
Wall Street analysts yesterday said the history of settlements in large corporate discrimination cases could mean Wal-Mart faces paying billions of dollars. Sanford C. Bernstein & Co. told clients the company has almost $4 billion in cash.
The Bentonville, Ark.-based company reported profit of $9 billion on sales of $256 billion for the fiscal year ended Jan. 31. The company's stock closed yesterday at $54.06, down 87 cents.
Staff researcher Richard Drezen contributed to this report.