Wal-Mart Must Face Huge Sex-Bias Suit

A federal judge said Tuesday that he would allow a gender discrimination lawsuit to proceed against Wal-Mart Stores Inc. on behalf of more than 1.5 million women who have worked for the retailing giant, expanding a case that could encourage similar mass class-action suits against U.S. employers.

The lawsuit, originally filed by six women, alleges that the world’s largest company pays female employees less than men for the same jobs, passes them over for promotions and retaliates against those who complain. A study of Wal-Mart payroll data by the plaintiffs last year showed women at the retailer earned an average of 5% less than male counterparts with inferior education, experience and performance reviews.

The ruling by U.S. District Judge Martin J. Jenkins in San Francisco broadens the suit to cover potentially all women who have worked at Wal-Mart’s stores in the United States since late 1998.

“Until this ruling, this was a case about six women and the only impact it would have was on those six women,” said Brad Seligman, the Oakland lawyer leading a team of attorneys from seven firms representing the plaintiffs. “The judge’s ruling means any decision by the jury in this case will cover all the members of this class. The damages and injunctive relief will apply across America.”

Bentonville, Ark.-based Wal-Mart said it would appeal the ruling.

Lawyers said the suit, which dwarfs any class action ever assembled in a civil-rights employment case, had the potential to change the legal landscape for large companies.

“It’s obviously a precedent,” said Stephen Gillers, a professor of law at New York University. “It says, ‘No matter how big you are, you can still be the target of a class action.’ ”

At the same time, lawyers noted that workers will need more than payroll data showing disparities in wages for men and women to establish grounds for a broad class-action case. In addition to detailed payroll analyses, the Wal-Mart plaintiffs compiled more than 1 million pages of documents, including depositions of Wal-Mart executives, internal corporate memos and government-reported employment demographics of similar retailers.

The case pits the plaintiffs against an extremely high-profile defendant. Wal-Mart, which last year posted revenue of $256 billion, operates almost 3,600 stores that employ more than 1.2 million workers in the United States.

Wal-Mart has consistently denied condoning a pattern or policy of bias, blaming any missteps on wayward individual managers.

Jenkins’ ruling “has absolutely nothing to do with the merits of the case,” Wal-Mart spokeswoman Mona Williams said in a statement. “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.”

Wal-Mart had argued that the number of potential plaintiffs made it impossible to try the case as a class action, which sweeps into the lawsuit women who aren’t directly named as long as they worked for Wal-Mart at any time since Dec. 26, 1998.

In his 84-page ruling, Jenkins acknowledged that the number of plaintiffs raised concerns about how he would manage the case. But, the judge wrote, the 1964 Civil Rights Act forbids discrimination in the workplace and makes no exception for large employers.

“Insulating our largest employers from allegations that they have engaged in a pattern and practice of gender or racial discrimination -- simply because they are large -- would seriously undermine these imperatives,” Jenkins wrote.

The suit seeks unspecified back pay and lost wages for all women employed by Wal-Mart -- from front-door greeters to executives -- during the period covered by the suit. It also demands punitive damages and asks the court to impose changes on the way Wal-Mart trains and communicates with employees, gives raises and decides whom to promote.

Based on settlements in other gender discrimination suits, the case could cost Wal-Mart billions. In 1997, Home Depot Inc. settled a bias case with 25,000 women for $104 million -- or $4,160 a person.

The suit against Wal-Mart is the latest blow for the retailer on the employment front. The company faces several lawsuits claiming the company cheated workers out of overtime pay and is the target of a federal grand jury investigation examining the company’s use of janitorial subcontractors that employed illegal immigrants.

The plaintiffs accuse Wal-Mart of a variety of sexist treatment, including a male store manager who told a female colleague that men “are here to make a career and women aren’t. Retail is for housewives who just need to earn extra money.” In another allegation cited by Jenkins, a male store manager allegedly told a woman who had sought a transfer to hardware: “We need you in toys ... you’re a girl, why do you want to be in hardware?”

“We’re representing a lot of women who wouldn’t come forward and speak for themselves,” said Christine Kwapnoski, 39, of Antioch, Calif., who has worked for Wal-Mart for 18 years and is one of the original plaintiffs in the suit filed three years ago. “I hope women get braver in terms of standing up against big business, and I hope it makes some changes where the playing field is a lot more equal.”

In his ruling, Jenkins said the plaintiffs made a case that there were widespread, significant differences between men and women at Wal-Mart in terms of compensation and promotions. The plaintiffs presented evidence that the disparities cut across regions and could not be explained by factors such as education, experience or performance evaluations, Jenkins wrote.

The findings were bolstered by a plaintiff-sponsored study that concluded that Wal-Mart promoted a lower percentage of women than 20 competing retailers.

In addition, the plaintiffs say the depositions, e-mails and memos they submitted provide support for their allegation that promotion opportunities at the retailer were conveyed through a “tap on the shoulder,” as opposed to being posted where all interested employees might see them.

“Together this evidence raises an inference that Wal-Mart engages in discriminatory practices in compensation and promotion that affect all plaintiffs in a common manner,” Jenkins wrote.

Wal-Mart argued that such pay and promotion decisions largely were made at the local level. The company also said that individual women’s claims didn’t have enough in common to be evaluated as a class and that the plaintiffs’ statistical analysis was flawed. The company said its own store-by-store statistical analysis refutes the existence of any company-wide discrimination policy.

Wal-Mart has 10 days to ask the U.S. 9th Circuit Court of Appeals in San Francisco for permission to appeal. Such requests are not automatically granted, but lawyers predicted the 9th Circuit would allow the company to appeal because the size of the class was unprecedented.

Even if an appeal is granted, said Richard T. Seymour, a plaintiffs class-action employment lawyer in Washington, “I think Wal-Mart has at best a slim chance of reversal because the court was so careful in its decision.”

Pending the outcome of Wal-Mart’s appeal, the next step would be to notify the class members. Under Jenkins’ ruling, women who have worked for Wal-Mart since late 1998 are automatically included as members of the class unless they notify the judge that they wish to be excluded. Any judgment would apply to all the women who fall into that category unless they opt out.

Plaintiffs attorney Seligman said that a trial was at least a year off, but that the plaintiffs were open to a settlement. Most class-action lawsuits are settled before reaching the courtroom.

Emme Kozloff, a senior analyst with Sanford Bernstein in New York, said Wal-Mart had plenty of cash with which to settle a suit or pay a judgment, so that “even a settlement or judgment in the billions of dollars is not necessarily a death blow.”

Less certain is the effect the suit could have on how Wal-Mart does business. Wal-Mart’s famous low-cost, decentralized system may have to evolve to one of heightened scrutiny and controls regardless of the outcome of the case, Kozloff said.

Wal-Mart said it had already made changes and would continue to evaluate employment practices. This month, the company announced that it had launched a series of pay initiatives and opportunities aimed at women and minorities. For instance, managers can lose as much as 7.5% in compensation this year and 15% next year for failing to achieve diversity goals.

Wal-Mart’s shares fell 87 cents to $54.06 on the New York Stock Exchange on Tuesday.