Wal Mart sued by as many as 1.6 million female employees

A federal judge has approved a class-action status sex-discrimination lawsuit against Wal-Mart Stores Inc. in the largest private civil rights case in U.S. history.


A federal judge conferred class-action status on a lawsuit against Wal-Mart Stores Inc. charging the world’s biggest retailer discriminated against women in pay, promotions and training can proceed as a class action.

Attorneys for the six lead plaintiffs said it was the largest civil rights class action case in U.S. history.

U.S. District Court Judge Martin Jenkins in San Francisco certified the class of some 1.6 million women who worked for Wal-Mart’s U.S. stores at any time since December 26, 1998.

The lawsuit, filed in 2001, accuses the largest U.S. private-sector employer of discriminating against women employees and retaliating against those who complained.

Wal-Mart said it would appeal the decision, released on Tuesday, and said the ruling “has absolutely nothing to do with the merits of the case.”

Wal-Mart, the world’s largest retailer, has previously denied a pattern of discrimination and argues that the number of men in management reflects the higher number of men who apply for those jobs.

Lawyers for the plaintiffs said 70 percent of Wal-Mart’s hourly employees are female, but women hold fewer than 15 percent of store manager positions.

The lawyers said female workers were routinely steered toward positions such as cashier, where there was little chance for promotion. According to court documents, one woman was told she was not qualified to be a manager unless she could stack 50-pound bags of dog food.

Wal-Mart’s stock was down $1.08, or 2 percent, at $53.85 near midday Tuesday on the New York Stock Exchange.

Wal-Mart faces dozens of lawsuits claiming violations of wage-and-hour laws and discrimination, but analysts think this one in particular could prove costly for Wal-Mart.

“The concern is the potential impact on earnings growth,” said James Luke, who manages the large-company growth fund for BB&T Asset Management. “Wal-Mart may have to change the way they do business, and ultimately it could add to their cost structure.”

Home Depot Inc. (HD.N: Quote, Profile, Research) settled a sex discrimination case in 1997 for $104 million, and that case covered just 25,000 women. If Wal-Mart were forced to cough up a comparable $4,000 per person, that would be $6.4 billion, although legal experts have said a figure that high was very unlikely.

Emme Kozloff, retail analyst with Sanford Bernstein, said even a settlement or judgment in the billions of dollars “is not necessarily a death blow to Wal-Mart.” She said every $1 billion of pretax settlement or damages would reduce earnings per share by about 15 cents. Wal-Mart earned $2.2 billion, or 50 cents per share, in its first quarter ended April 30.

Kozloff said Wal-Mart could cover up to $10 billion in damages or settlement costs with cash on hand and cash flow, but would probably have to suspend share repurchases.

Wal-Mart, based in Bentonville, Arkansas, employs more than 1.2 million people in the United States — about two-thirds of whom are women — and operates more than 3,000 U.S. stores. Globally, Wal-Mart has more than 1.5 million employees, and stores in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, South Korea, Germany and the United Kingdom.

Stung by high-profile lawsuits and negative press about employee treatment, Wal-Mart has recently turned up its public relations efforts with an advertising campaign featuring women and minority managers.

Chief Executive Officer Lee Scott announced earlier this month that he and other top executives would forgo 7.5 percent of their bonuses this year if Wal-Mart does not meet certain diversity goals.

“Up until now, Wal-Mart has never faced a trial like this,” Brad Seligman, lead attorney for the six women plaintiffs, said in a statement. “Lawsuits by individual women had no more effect than a pinprick. Now, however, the playing field has been leveled.”

Most large class-action lawsuits in the United States are settled before they go to trial.

Author: Emily Kaiser

News Service: AP/Reuters

URL: http://www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=5484875