New York Times
June 23, 2004
By Steven Greenhouse
and Constance L. Hays
Wal-Mart Sex-Bias Suit Given Class-Action Status
A federal judge ruled yesterday that a lawsuit that accuses Wal-Mart
Stores Inc. of discriminating against women can proceed as a class
action covering about 1.6 million current and former employees,
making it by far the largest workplace-bias lawsuit in United
The lawsuit, brought in 2001 by six women, accuses Wal-Mart of
systematically paying women less than men and offering women fewer
opportunities for promotion. The lawsuit stated that while 65
percent of Wal-Mart's hourly employees are women, only 33 percent
of Wal-Mart's managers are.
While not ruling on the merits of the lawsuit, the judge, Martin
J. Jenkins of the United States District Court in San Francisco,
wrote that the case was "historic in nature, dwarfing other
employment discrimination cases that came before it."
Wal-Mart said it would appeal the class-action certification,
arguing that the company did not discriminate and that decisions
about raises and promotion were made by individual stores, not
at the corporate level.
As the world's largest retailer, Wal-Mart has become the target
of dozens of lawsuits regarding off-the-clock work and other employment
practices. Indeed, because of its huge size, the company has become
a lightning rod for criticism. Famed for its low prices, it has
become one of the biggest sellers of products from detergent to
DVD's. Wal-Mart's power helps consumers as the company pushes
manufacturers and suppliers to reduce prices on many items. But
Wal-Mart's influence is at times more far reaching: entertainment
companies, for example, say they edit music albums and movies
to suit Wal-Mart's conservative sensibilities.
Such controversies, however, pale compared with the potential
the job- discrimination lawsuit has to hurt the company's image
and bottom line. Shares of Wal-Mart fell 1.6 percent yesterday
in trading on the New York Stock Exchange.
Worried that this case would anger and perhaps chase away many
women shoppers, Wal-Mart has spent millions of dollars on television
spots showing how well it treats women. And this month it announced
that it would increase wages and improve some workplace practices
at the corporate and store level.
The lawyers who brought the case say their goal is nothing less
than to press Wal-Mart to change the way it treats its more than
700,000 employees who are women. These lawyers say they will not
settle the case unless Wal-Mart makes ironclad pledges to treat
women better and agrees to a substantial settlement, larger than
any previous settlement in a job-discrimination case.
"This is the largest civil rights class action ever certified,"
said Brad Seligman, executive director of the Impact Fund, a nonprofit
group that is the lead counsel for the women. "We hope to
fundamentally change Wal-Mart since Wal-Mart is the industry leader.
We think changing Wal-Mart for the better is going to help change
everybody for the better."
Until early last year, Wal-Mart's stores generally did not post
openings for managerial trainees, the plaintiffs noted, asserting
that male managers often tapped other men for the management track.
Stephanie Odle, an assistant store manager in Riverside, Calif.,
said in an interview that she was shocked to learn that a male
assistant manager at the store was making $60,000 a year, $23,000
more than she was earning. She said, "When I went to the
district manager, he first goes, `Stephanie, that assistant manager
has a family and two children to support.' I told him, `I'm a
single mother and I have a 6-month-old child to support.' "
The ruling could include nearly every woman who has worked at
Wal-Mart since December 1998. With more than 1.2 million employees
in the United States, Wal-Mart employs more women and more workers
than any other American company. It is difficult to estimate exactly
how many plaintiffs will be in the class, because some women may
choose not to participate.
"Let's keep in mind that today's ruling has absolutely nothing
to do with the merits of the case," said Mona Williams, Wal-Mart's
vice president for communications. "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."
Lawyers for Wal-Mart, which has 3,586 stores across the United
States, had asserted that a class action was inappropriate on
the grounds that Wal-Mart does not have centralized employment
policies and that individual store and district managers, rather
than headquarters, make decisions on pay and promotions.
They had also urged the judge to deny class certification, arguing
that the class would be too large and unwieldy to handle in a
In rejecting this argument, Judge Jenkins wrote, "Insulating
our nation's largest companies from allegations that they have
engaged in a pattern and practice of gender or racial discrimination
— simply because they are large — would seriously
undermine" the civil rights laws.
With such a large class, any settlement by Wal-Mart could ultimately
cost the company billions of dollars, even if individual awards
are small, analysts and industry experts said.
"It does have huge financial implications for them,"
said Emme P. Kozloff, a retail analyst with Sanford C. Bernstein,
who reduced her price target for Wal-Mart's stock by 20 percent
as a result.
Miranda O. McGowan, a professor of employment-discrimination
law at the University of Minnesota Law School, said Wal-Mart might
have been able to settle the case for a much lower amount before
Judge Jenkins issued his ruling.
"At this point, it becomes an extremely expensive case for
Wal-Mart to settle," she said.
Wal-Mart, even as it revolutionized the retail business, allowed
other aspects of its business to stay rooted to an old-fashioned,
small-town business culture — the legacy of its founder,
Sam Walton. Company memorandums submitted as part of the case
show that compared with other retailers, Wal-Mart lagged in the
promotion of women. Women also complained of a culture that did
not take them seriously and included trips to strip clubs for
managers and clients.
One expert for the plaintiffs found that at 20 large retail competitors,
57 percent of the managers were women, compared with 33 percent
No trial date has been set for the case. The next procedural
step is for the two sides to meet with Judge Jenkins on July 28
to discuss future steps, including reopening discovery. The lawyers
for the plaintiffs would like more information about Wal-Mart's
pay and promotion policies.
Certification may also enable the plaintiffs to demand additional
documents from Wal-Mart. Their disclosure in open court would
provide fresh detail about the inner workings of a company that
has long been among the country's most secretive.
To make the case about large pay disparities, an expert hired
by the plaintiffs, Richard Drogin, an emeritus statistics professor
at California State University, Hayward, found that full-time
women hourly employees working at least 45 weeks at Wal-Mart earned
about $1,150, or 6.2 percent, less a year, than men in similar
jobs. He found that women store managers made $89,290 a year on
average, $16,400 less than men store managers.
Another expert for the plaintiffs, William T. Bielby, a sociology
professor at the University of California, Santa Barbara, found
that women make up 89.5 percent of Wal-Mart's cashiers and 79
percent of its department heads, an hourly non managerial position.
He also found that women make up 37.6 percent of assistant store
managers and 15.5 percent of store managers.
Judge Jenkins, who took nine months to issue the ruling, wrote,
"Plaintiffs present largely uncontested descriptive statistics
which show that women working at 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, that women take
longer to enter management positions, and that the higher one
looks in the organization the lower the percentage of women."
Wal-Mart has criticized the plaintiff's experts, saying they
misinterpreted the data, and Wal-Mart officials say that women
represent a low percentage of managers partly because women have
shown little interest in management positions.
Judge Jenkins allowed a class action on the plaintiffs' equal-pay
claims and their claims for punitive damages and for corrective
action regarding promotions.
But, in a victory for Wal-Mart, he rejected the request of plaintiffs
for class action for all the women regarding claims for lost pay
over discrimination in promotions. He said he would allow class
action on lost pay only for those women who had demonstrated interest
The decision deals another blow to Wal-Mart's efforts to portray
itself as a good employer. In a case in Oregon, the company was
found to have forced 400 workers to work off the clock, and lawsuits
making similar accusations are pending in 31 states. Wal-Mart
was also the target of a raid last year in which federal agents
arrested 250 illegal immigrants who were hired, by subcontractors,
to clean hundreds of Wal-Mart stores.
Criticism of its labor practices, especially its anti-union stance
and relatively low wages, has fueled local opposition to plans
to build stores in some areas.
In April, a plan to build a store in Inglewood, Calif., was defeated
in a referendum, with the help of labor unions, while public opposition
has stalled or wrecked other plans for new stores in New Orleans,
Chicago and Dallas.
Wal-Mart's directors and shareholders have been keenly aware
of such pressures on the company. At the company's annual meeting
this month, a series of executives denounced what they called
negative publicity about Wal-Mart's working conditions and urged
employees to spread encouraging stories in their communities.
More important, the company also announced then a new job- classification
and pay structure, which company officials said was intended in
part to ensure fairness in pay and promotions. Wal-Mart's chief
executive, H. Lee Scott Jr., said senior managers, including himself,
would lose 7.5 percent of their bonuses next year if women were
not promoted in direct proportion to the numbers that apply for
Ms. Williams, the Wal-Mart spokeswoman, said yesterday, "While
we cannot comment on the specifics of the litigation, we can say
we continue to evaluate our employment practices."
Joseph Sellers, a lawyer for the plaintiffs, said any settlement
would have to include internal changes at Wal-Mart. "Our
clients got into this seeking to change the way they do business,"
he said. "We would never settle for just money."
Noting that this year was the 50th anniversary of the Brown v.
Board of Education decision, Judge Jenkins wrote in his ruling,
"This anniversary serves as a reminder of the importance
of the courts in addressing the denial of equal treatment under
the law whenever and by whomever it occurs."
The case, Betty Dukes v. Wal-Mart Stores, the judge wrote, should
be certified as a nationwide class action because the plaintiffs
have shown that there are significant common legal and factual
issues concerning Wal-Mart's suspected discriminatory practices,
including gender stereotyping and a culture of corporate uniformity.
As issues that might be examined in the class action, the judge
pointed to Wal-Mart's highly centralized management style, statistical
evidence of discrimination and anecdotal evidence of discrimination
from 114 current and former women Wal-Mart employees.
The judge cited a declaration by one woman that a store manager
told her: "Men are here to make a career and women aren't.
Retail is for housewives who just need to earn extra money."
He cited a second woman who said that when she sought a job in
the hardware department, a male manager told her: "We need
you in toys. You're a girl, why do you want to be in hardware?"