Women's Rights Employment Law Blog: Costco Bias Suit Is Given Class-Action Status

Wal-Mart policies continue to hurt. Costco Wholesale employees are not amused, and a lawsuit on behalf of 700 female workers, has been finally granted. More on New York Times this Friday:

By STEVEN GREENHOUSE and MICHAEL BARBARO

A federal judge granted class-action status yesterday to a lawsuit filed on behalf of more than 700 female workers at Costco Wholesale claiming that the retailer had systematically discriminated against women seeking jobs as managers.

In the lawsuit, the lead plaintiff — a former assistant store manager who was upset about not being made a store manager — asserts that Costco discriminated against women in promotions because 13 percent of the company’s store managers were women, while nearly half of its employees were women.

The lawsuit undercuts Costco’s image as one of retailing’s most benevolent companies, with generous wages and benefits that make it more attractive for employees than competitors like Wal-Mart Stores.

In her ruling yesterday, Judge Marilyn Hall Patel of Federal District Court in San Francisco concluded that the case should be certified as a class action because “plaintiffs have presented strong evidence of a common culture at Costco which disadvantages women.”

The lawsuit, filed in August 2004, contends that at Costco, the highest-paid store management positions — assistant general manager and general manager — are doled out through an informal, word-of-mouth system that favors men over women.

Unlike most competitors, Costco neither posts openings for such positions nor accepts applications for them, the lawsuit said. Instead, it said, a largely male group of senior executives handpicks managers.

Brad Seligman, the plaintiffs’ lead lawyer, said, “Costco has a blind spot in its employment policies, which has allowed a glass ceiling to fester.” He called on the company, based in Issaquah, Wash., to start posting jobs and to adopt objective standards to determine who should qualify to be a store manager.

Richard A. Galanti, chief financial officer at Costco, declined to remark on yesterday’s ruling, saying the company does not comment on lawsuits. With 370 stores and 90,000 employees in the United States, Costco is the nation’s largest warehouse store chain.
In the past, Costco has denied any discrimination. The company gave the judge statistical studies asserting that women were not underrepresented in managerial positions and that if they were, it was limited to two regions. Two experts hired by Costco asserted in declarations that any gender disparities that might exist were based on factors like women’s lack of interest in jobs requiring early morning hours.

In what the lawsuit said was the embodiment of a “paternalistic” system of promotions, Costco maintains an office inside its headquarters, called the Green Room, where the photographs of up-and-coming leaders are posted. Only senior managers have access to it, the suit said.

As a result of this and other practices, the lawsuit maintains, women make up only 12.9 percent of store managers and 16.6 percent of assistant managers at Costco, although they represent 45 percent of the chain’s employees.

In a deposition, James D. Sinegal, Costco’s chief executive, said that, more than men, women chose not to take management positions within the company, preferring jobs like cashier. “Our experience is that the women have a tendency to be the caretakers and have the responsibility for the children and for the family,” he said, according to the lawsuit.

Judge Patel ruled that the class of plaintiffs in the case should consist of all current and former female employees nationwide who have been denied store manager or assistant store manager positions since Jan. 3, 2002.

Mr. Seligman is also the lead lawyer in a sex discrimination lawsuit against a Costco rival, Wal-Mart. In that lawsuit, federal courts have granted class-action status on behalf of 1.6 million current and former female employees, making it the largest employment-related class action in the nation’s history. Wal-Mart is appealing that class certification.