Wal-Mart Stores Inc., the biggest U.S. private employer, lost a bid to prevent 2 million current and former female workers from proceeding as a group with sex bias claims in the largest employment lawsuit in U.S. history.
A federal appeals court in San Francisco today upheld a 2004 lower court ruling granting class-action status to a lawsuit accusing Wal-Mart of paying women less than men and giving them fewer promotions. That ruling expanded the suit, originally filed by six women, to include all women who worked at Wal-Mart stores from December 1998 to the present, excluding upper management and pharmacy workers.
“Expert opinions, factual evidence, statistical evidence and anecdotal evidence present significant proof of a corporate policy of discrimination,” the appeals court said.
The court’s 2-1 decision is a blow to Bentonville, Arkansas- based Wal-Mart, which is facing more than 200 federal lawsuits by employees. While the workers still have to prove their claims at a trial, the ruling provides leverage for a settlement. The workers are seeking billions of dollars in back pay and punitive damages, court-ordered changes in Wal-Mart’s practices and independent monitoring of company practices.
Wal-Mart will have a teleconference on the decision this afternoon, company spokesman John Simley said. He declined to comment beforehand.
Wal-Mart shares rose 6 cents to $48.58 at 4:01 p.m. in New York Stock Exchange composite trading.
The decision shouldn’t harm Wal-Mart shares, said David Abella, an analyst at Rochdale Investment Management in New York, with $2.2 billion in assets including Wal-Mart shares.
“It’s not something you want surfacing now as you’re trying to upgrade your image,” Abella said. The decision wasn’t a surprise and should already be factored into the share price, he said.
The potential number of women covered by the case, originally about 1.5 million, had grown to about 1.6 million by the time of the class certification decision in 2004, according to plaintiffs’ lawyers. The number of former and current women workers who could be part of the class is now closer to 2 million, said Joseph Sellers, an attorney for the plaintiffs.
Wal-Mart employs 1.3 million people in the U.S., more than 815,000 of them women, and 1.8 million people worldwide.
‘In the Billions’
“The lost wages and benefits alone would be in the billions,” Sellers said. “This decision reaffirms that big companies like Wal-Mart are covered by our civil rights laws and there is no large-company exception.”
Wal-Mart has said there is no pay disparity between men and women at most of its stores and it should be allowed to rebut workers’ claims of discrimination individually. Pay and promotion decisions are made at the local level by store managers, so the experience of workers at one store would be different from those at another, its lawyers said.
Wal-Mart can ask for a larger appeals court panel to rehear the case or it can appeal the ruling to the U.S. Supreme Court.
“The case is not over,” said law professor Carl Tobias of the University of Richmond law school in Virginia. “It’s highly likely Wal-Mart will ask for a rehearing.”
If the decision is upheld, the Supreme Court may agree to hear Wal-Mart’s appeal because of the 2-1 split and the importance of the lawsuit, Tobias said in an interview. “The Supreme Court has passed up other similar cases, but there seems to be a lot at stake in this case.”
Chamber of Commerce
The ruling could have ramifications for other companies. The U.S. Chamber of Commerce, siding with Wal-Mart, argued in court papers in 2005 that allowing so many plaintiffs to sue as a group would lead to more class-action lawsuits against employers and force unfair settlements.
“It may signal a return to broad class actions against employers,” said Los Angeles attorney Anthony Oncidi, who represents companies other than Wal-Mart in employment litigation.
Certification of the class “deprives Wal-Mart of due process of law,” and may force the company to settle even if it believes the lawsuit to be meritless, Judge Andrew J. Kleinfeld said in a dissent. “When the potential loss is stratospheric, a rational defendant will settle even the most unjust claim,” he wrote.
“Plaintiffs’ only evidence of sex discrimination is that around 2/3 of Wal-Mart employees are female, but only about 1/3 of its managers are female,” Kleinfeld wrote.
Class certification helps plaintiffs because it’s cost- effective and provides leverage for a settlement.
A recovery of more than $1 billion would dwarf the two largest employment discrimination class action settlements in U.S. history, both involving sexual discrimination.
The largest was in 2000 for $565 million, including interest, which ended a suit by 1,100 employees of the U.S. Information Agency and the Voice of America against the agency. The second-largest, and the biggest involving a publicly traded company, was in 1992 for $250 million against State Farm General Insurance Co. and involved California workers.
The appeals court upheld a June 2004 ruling by U.S. District Judge Martin Jenkins of San Francisco, who decided that the experiences of the six original plaintiffs may be common to other current and former female workers at Wal-Mart.
Plaintiffs’ lawyers, using anecdotal evidence from workers and experts’ estimates, claimed Wal-Mart has shown a pattern of discrimination, paying female hourly workers $1,100 less per year than men and female managers $14,500 less than their male counterparts. They said Wal-Mart didn’t post job openings and male managers tended to promote men to management positions.
Delayed for Appeal
The lawsuit, filed in 2001, has been on hold since September 2004 pending the outcome of Wal-Mart’s appeal of Jenkins’s ruling.
Wal-Mart has beefed up its public relations and lobbying staff in the past two years, hiring former Democratic adviser Leslie Dach to a new position overseeing both areas.
“We play offense every day,” Dach told attendees at the company’s analyst conference in October. “We want our opponents to react to what we’re doing,” said Dach, who started in August.
The case is Dukes v. Wal-Mart Stores Inc., 04-16688, Ninth Circuit U.S. Court of Appeals (San Francisco).
--With reporting by Lauren Coleman-Lochner in New York. Editors: Dunn (cwc).
To contact the reporters on this story: Karen Gullo in San Francisco at +1-415-355-1916 or email@example.com; Margaret Cronin Fisk in Southfield, Michigan, at +1-248-827-2947 or firstname.lastname@example.org.
To contact the editor responsible for this story: Patrick Oster at +1-212-893-4088 or email@example.com.
-0- Feb/06/2007 21:14 GMT