Bloomberg News

Costco Workers Win Class Certification for Bias Case

September 26, 2012

Costco Wholesale Corp. (COST:US) workers who sued the retailer for gender bias will be able to proceed with their claims as a group.

U.S. District Judge Edward Chen in San Francisco certified a class, or group, of plaintiffs, seeking monetary relief that includes several hundred women employed since 2002 who have been subject to the Issaquah, Washington-based company’s system for promotion to management positions.

Costco “offers numerous competing explanations for the observed gender disparity in promotions,” Chen said in yesterday’s ruling. “None of these explanations undermine the companywide nature of the challenged policies and their disparate effects.”

Costco, the biggest (COST:US) U.S. warehouse-club chain, was sued in 2004 for allegedly limiting promotions of female employees to assistant general manager and general manager by failing to post job openings. The company denies the claims.

The ruling injects new life into the lawsuit after Costco won a ruling last year voiding another judge’s decision to expand the complaint, originally filed by three women, to include hundreds.

“We established that there was a set of company policies set at the corporate level and that senior management was involved in the decisions,” Jocelyn Larkin, an attorney for the Costco workers, said in a phone interview.

Bob Nelson, a spokesman for Costco, didn’t immediately return a phone message seeking comment on the ruling.

Wal-Mart Ruling

A federal appeals court in San Francisco ruled last year that lawyers for the Costco workers had to follow standards set by the U.S. Supreme Court in a June 2011 decision throwing out a gender-bias lawsuit against Wal-Mart Stores Inc. (WMT:US) involving potential claims for more than 1 million women. That case is known as Dukes v Wal-Mart.

Lawyers for Costco workers went back to the trial court with a new proposal to limit the proposed class of employees to two management level positions -- assistant general manager and general manager, according to Chen’s ruling.

They also targeted specific employment practices implemented companywide under the influence and control of top management at Costco, including a “tap-on-the shoulder appointment process” without applications or interviews, and a mandated lack of posting for open positions, Chen said.

Management’s Instructions

“Unlike in Dukes, in which Wal-Mart permits store managers to apply their own subjective criteria when selecting candidates, here the criteria plaintiffs allege to be subjective and unvalidated derive from top management (COST:US)’s own instruction,” Chen said.

Chen set a tentative trial schedule. In the first stage, a jury would decide whether Costco discriminated against women. Chen then would decide whether Costco’s practices had an adverse impact on the group and if he should issue an injunction against the company.

Depending on the outcome, individual hearings on back pay and compensatory damages would be held and punitive damages would be determined.

The case is Ellis v. Costco, 07-15838, U.S. Court of Appeals for the Ninth Circuit (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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Companies Mentioned

  • COST
    (Costco Wholesale Corp)
    • $121.29 USD
    • -0.33
    • -0.27%
  • WMT
    (Wal-Mart Stores Inc)
    • $75.73 USD
    • 0.18
    • 0.24%
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