A federal judge granted class-action status Tuesday to a lawsuit on behalf of 1.6 million women who claim that Wal-Mart Stores Inc. discriminated against them in pay and promotions, a ruling that exposes the world's largest private employer to the largest civil rights suit in the nation's history.
In approving class-action status for the 3-year-old case, U.S. District Judge Martin Jenkins of San Francisco carefully expressed no opinion on whether the Arkansas-based retail giant had systematically favored men over women, an issue he left for the jury. But his ruling has potentially devastating consequences for Wal-Mart.
At issue was whether Wal-Mart must defend against lawsuits by six individual women who brought the original lawsuits or against a single, colossal class-action suit on behalf of nearly every woman who has worked at one of its 3,566 stores nationwide -- including 16 in the Bay Area -- since Dec. 26, 1998.
"Instead of facing six plaintiffs, which ... would make no difference to a company as large as Wal-Mart, they face a trial in which the claims of 1.6 million women will be resolved,'' plaintiffs' lawyer Brad Seligman said Tuesday. "If they lose this case at trial, it isn't just money at risk. They will be under the supervision of a judge for many years to come.''
Seligman said he couldn't estimate the potential damages but said they could dwarf the record settlement of more than $600 million paid by the U.S. government in a 2000 class-action settlement with African American farmers who sued over discrimination in lending.
In his 84-page ruling, Jenkins said the Wal-Mart case, despite its unique scope, meets the traditional criteria for class actions -- in particular, the need to show a single issue, common to all plaintiffs, that outweighs individual differences among the plaintiffs. That issue, he said, is sex bias, allegedly carried out by individual managers who determined pay and promotions with little outside review under the influence of "a strong corporate culture that includes gender stereotyping.''
Wal-Mart, which opposed class-action status and emphatically denies discriminating, said it will seek an appeal. In a statement issued from its Bentonville, Ark., headquarters, the company stressed that Jenkins' ruling was unrelated to 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,'' said company spokeswoman Mona Williams. "We strongly disagree with his decision.''
Williams said Wal-Mart is continuing to evaluate its pay practices and announced a new job classification and pay structure earlier this month for its hourly "associates,'' or employees. The pay plan "is designed to ensure internal equity and external competitiveness,'' she said.
The Ninth U.S. Circuit Court of Appeals in San Francisco has the option of taking up Wal-Mart's appeal as soon as it is filed and putting the suit on hold while it reviews Jenkins' decision. Or the appeals court can await the outcome of the trial before deciding whether Jenkins was right to approve a class action.
Two lawyers unconnected with the suit said they expect the appeals court to review the case promptly.
"It is precedent-setting'' because of the sheer size of the case, said Lynn Bersch, a partner with Reed Smith in San Francisco, who represents employers. "If class certification stands, that will be a concern for every large employer.''
The numbers "are going to create some pressure on the Ninth Circuit to take the case,'' said Michael Lieber, a partner with Sprenger and Lang in Washington, D.C., who represents employees. While many other federal courts have been "hostile to class actions'' on behalf of workers, he said, the San Francisco-based court is "as good as it gets from a plaintiff's point of view. ''
Wal-Mart has faced an onslaught of negative publicity in the past year, including lawsuits claiming sex discrimination and violations of wage-and-hour laws and a federal investigation into its hiring of undocumented immigrants.
"Their image has been suffering for at least the last year,'' said retail analyst Joe Bonner of Argus Research. "They've been hit by a succession of black eyes. ... They have tried to mitigate a lot of this through (changes in) discrimination policies.''
Wal-Mart shares fell 87 cents, or 1.6 percent, to close at $54.06 Tuesday on the New York Stock Exchange.
At the same time, Fortune magazine last year named Wal-Mart the most- admired company in the United States. Its power and continued growth set the agenda for much of the retail industry.
Most customers haven't and won't react noticeably to allegations of sex discrimination, because the primary force that drives them to Wal-Mart is low pricing, said Sarah Wallace, a brand-image expert with the Addis Group, a Berkeley brand-strategy and design firm.
"Something like this, at the end of the day, will not affect Wal-Mart's strategy for its core brand customer,'' Wallace said. Wal-Mart's customers, she said, "will not pay to be activists,'' which would mean shopping at other stores.
The National Organization for Women is trying to change that outlook. NOW has declared Wal-Mart a "merchant of shame'' and has sent activists to hand out cards to customers reading, "Wal-Mart: Always Low Prices, But Who Pays?''
With Tuesday's ruling, "we are one giant step closer to combating workplace discrimination,'' said Olga Vives, a NOW vice president.
The suit before Jenkins combines individual claims of discrimination with statistics purporting to show company-wide bias.
Of Wal-Mart's 1.2 million employees, women make up 65 percent of the non- management staff, 33 percent of the managers and 14 percent of the store managers, figures that the plaintiffs say show much less diversity than other large retailers.
Jenkins said some of the plaintiffs' evidence was largely undisputed: that women were paid less than men in every region and in most job categories, that the salary gap widens over time even for employees hired into the same jobs, that women take longer to reach management positions, and that "the higher one looks in the organization, the lower the percentage of women.''
That evidence does not prove intentional, systematic bias, he said, but it helps to support "an inference that Wal-Mart engages in discriminatory practices,'' justifying class-action status for the suit.
The figures are backed up with statements from the six plaintiffs and another 114 women in stores around the country. Jenkins quoted one from a woman who was allegedly told by a male store manager, "Men are here to make a career, and women aren't.'' Another said a manager turned down her transfer request and asked her, "You're a girl. Why do you need to be in hardware?''
Lead plaintiff Betty Dukes, 54, has worked at Wal-Mart's Pittsburg store for 10 years and said Tuesday she still dreams of a career in management, despite repeatedly training men for managers' positions that were never offered to her. She also has alleged that her complaints were met by unfair discipline, a demotion and a pay cut. She now makes $12.53 an hour.
After the suit was filed in 2001, she said, the atmosphere got "a little chilly,'' but it's thawed since then. "A lot of males have probably talked to their sisters and mothers and wives, and found out the issues I was complaining about were true,'' Dukes said.
Women and Wal-Mart
On average, women working for Wal-Mart Stores Inc. in 2001 earned less than men in various job categories, according to a statistician's analysis of company data supplied to the court.
35% of hourly employees were men and 65% were women while about 33% of management employees were women.
Full-time employees working at east 45 weeks
Hourly employees: Women earned about $1,100 less than men
Salary employees: Women earned about $14,500 less than men
Source: Drogin, Kakigi & Associates