A federal appeals court ruled Tuesday that Wal-Mart Stores, the world's largest private employer, must face a class-action lawsuit alleging female employees were discriminated against in pay and promotions.
The ruling by the 9th U.S. Circuit Court of Appeals upholds a 2004 federal judge's decision to let the nation's largest class-action employment discrimination lawsuit go to trial. The suit claims that as many as 1.5 million current and former female employees earned less than men and were bypassed for promotions.
The lawsuit exposes the Bentonville, Ark.-based retailing powerhouse to the possibility of billions of dollars in damages.
Wal-Mart claimed that the conventional rules of class actions should not apply in the case because its 3,400 stores, including Sam's Club warehouse outlets, operate like independent businesses, and that the company did not have a policy of discriminating against women.
But the court, in a 2-1 decision, disagreed.
"Plaintiff's expert opinions, factual evidence, statistical evidence and anecdotal evidence present significant proof of a corporate policy of discrimination and support plaintiff's contention that female employees nationwide were subjected to a common pattern and practice of discrimination," the court wrote.
U.S. District Judge Martin Jenkins, the San Francisco trial court judge who said the case could proceed, had ruled that lawyers for the women had enough anecdotal evidence to warrant a class-action trial. Wal-Mart took the case to the San Francisco-based appeals court.
Jenkins said if companywide gender discrimination is proven at trial, Wal-Mart could be forced to pay billions of dollars to women who earned less than their male counterparts, with no opportunity to dispute their individual circumstances.
Jenkins said it was "impractical on its face" to have individual hearings for each plaintiff and had planned to use a statistical formula to compensate the women.
Donald Gher, chief investment officer of Coldstream Capital Management,which owns Wal-Mart stock, said the decision was a setback for the retailer and would cheer the company's critics in the U.S. labor movement. "Clearly this is a big win for the tort lawyers and for the unions who are looking to cases like this to help bolster their ranks," he said. But Gher noted that the lawsuit is far from over. "This could drag on for a very long time," he said.
Wal-Mart said it plans to seek a reversal in the decision. Wal-Mart said women who allege they were discriminated against can file lawsuits against individual stores. The women's lawyers said the idea was ridiculous, and would clog the federal judiciary. Its shares ended little changed on the news, closing at $48.58 on the New York Stock Exchange.