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A federal judge said Tuesday a lawsuit can proceed against Wal-Mart
Inc. in what may be the biggest civil rights class-action in U.S.
history as the company faces allegations it discriminated against
female workers.
U.S. District Court Judge Martin Jenkins in San Francisco
certified the class of about 1.6 million women who worked for
Wal-Mart's U.S. stores at any time since December 26, 1998,
attorneys for the six lead plaintiffs said.
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 Tuesday, and
said the ruling "has absolutely nothing to do with the merits of the
case."
Wal-Mart's (WMT: down $0.96 to $53.97, Research, Estimates) stock
sank 2.1 percent after the ruling in heavy trading on the New York
Stock Exchange, where it was one of the most active issues.
Wal-Mart has previously denied a pattern of discrimination and said
that the number of men in management reflects the higher number of
applications it receives from men for management positions.
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 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: Research, Estimates) 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 by about 15 cents
a share. Wal-Mart earned $2.2 billion, or 50 cents a 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 from its operations, 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 Britain. |