Wal-Mart is closer to paying out the largest sex-discrimination settlement in history, a move that would cost the nation's largest retailer and private employer billions of dollars.
A federal appeals court in San Francisco yesterday ruled in favor of upholding an earlier judgment that allowed as many as 2 million current and former female employees of Wal-Mart from across the country to join together in a class action lawsuit.
Plaintiffs' lawyers said Wal-Mart was paying female hourly workers $1,100 less a year than men, and female managers $14,500 less a year than their male counterparts. They said Wal-Mart didn't post certain high-level job openings and male managers tended to promote men to management positions.
The Ninth U.S. Circuit Court of Appeals ruled 2–1 in favor of the plaintiffs. The majority opinion said experts and evidence "present significant proof of a corporate policy of discrimination and support plaintiffs' contention that female employees nationwide were subjected to a common pattern and practice of discrimination." Bentonville, Ark.-based Wal-Mart denies there is pay discrimination at most of its stores, and had argued class-action status shouldn't be allowed because its stores are individually managed and run.
Company officials said yesterday they would ask a larger panel of appeals court judges to rehear arguments in the case and issue a new decision. If the judges of the Ninth Circuit decline the appeal, Wal-Mart will likely seek a judgment in front of the Supreme Court, legal experts say.
The dissenting judge in yesterday's ruling, Andrew Kleinfeld, said the size of the class action would force any defendant to settle. "When the potential loss is stratospheric, a rational defendant will settle even the most unjust claim," he wrote in his eightpage opinion.
A law professor at Columbia University, John Coffee, told The New York Sun that Wal-Mart would seek to avoid a trial at all costs. He said that in a trial the plaintiffs' lawyers could cherrypick the 10 worst cases of discrimination from more than 1.5 million female Wal-Mart employees, giving the jury an unrepresentative sample on which to base their decision.
"To go to trial in this case would be rolling the dice with the company's solvency," Mr. Coffee said. "Even if there is a 10% chance of losing, they would say, ‘We can't take that chance.'"
He said it was unlikely that any court of appeals in America other than the Ninth Circuit would have allowed as broad a grouping for a class action.
"They are probably the most liberal circuit in these matters," Mr. Coffee said, but he said it is likely the rest of the judges working on the Ninth circuit would vote in favor of hearing Wal-Mart's appeal. The largest gender-bias settlement to date was a $508 million payment in 2000 by the federal government to 1,100 women who said they were denied jobs at the Voice of America and the U.S. Information Agency. In 1992, State Farm Insurance Cos. agreed to $240 million settlement, according to Dow Jones Newswires.
The plaintiffs hailed the decision as a long-awaited victory. "Our words are true. We are not falsely accusing Wal-Mart," a lead plaintiff, Betty Dukes, said at a news conference, according to Bloomberg News.
Wal-Mart said the ruling would have no financial repercussions. A Wal-Mart executive vice president, Tom Schoewe, said in a statement the decision "does not require the company to take any action that will increase its cost of operations."
Allowing such a large group of plaintiffs to sue together could cause a spike in the number of class actions against businesses and force employers to make unfair settlements, a point argued in 2005 by the U.S. Chamber of Commerce in court papers, Bloomberg News reported.
The decision, and any ensuing trial, would represent another public relations blow to the retailing giant. In New York City, a number of City Council members, including Speaker Christine Quinn, have opposed the presence of a Wal-Mart in the five boroughs, criticizing the company's treatment of its employees and what they say is a negative effect on small businesses located near the chain's outlets, charges the retailer denies.
Yesterday, a lobbyist representing anti-Wal-Mart groups, Richard Lipsky, said the court's decision does not bode well for the retailer's chances of finally opening in New York City.
"There is a reason for everyone to dislike Wal-Mart. Today it is women and feminists, and tomorrow it will be others. It is a never ending cornucopia of negativity that this company," Mr. Lipsky said.
On Thursday, anti-Wal-Mart activists will rally against the siting of a Wal-Mart in downtown Brooklyn, near Fulton Street Mall. Rumors of a Wal-Mart at that location have been circulating for some time.
Wal-Mart employs 1.3 million people in the U.S., more than 815,000 of them women, and 1.8 million people worldwide.