Wal-Mart's gender bias case: What's at stake?

April 4, 2011: 12:09 PM ET

The discrimination case, which the Supreme Court is now reviewing, could set a standard for how American companies promote and pay their female workers.

By Elizabeth G. Olson, contributor

FORTUNE -- When it comes to pinpointing how women are faring in today's workplace, there is no shortage of studies, statistics and sharp differences of opinion. But very few, if any, could have as much of an impact on the working lives of American women as the massive discrimination lawsuit against Wal-Mart Stores, the country's largest employer.

The gender bias case, which the U.S. Supreme Court is now reviewing, could encompass as many as 1.5 million of the giant retailer's female employees who claim to have

Betty Dukes, who started as a Wal-Mart cashier in Pittsburg, Calif. claims that her efforts to advance into a management position were thwarted and even punished with a demotion.

Betty Dukes, who started as a Wal-Mart cashier in Pittsburg, Calif. claims that her efforts to advance into a management position were thwarted and even punished with a demotion.

encountered practices and policies that resulted in lower wages and fewer promotions. And because Wal-Mart (WMT) is such a huge employer, the eventual outcome could set an authoritative standard for how numerous companies pay and promote their female employees.

The justices, though, will not be waving a magic wand to right inequities wholesale. The six men and three women justices will decide sometime before summer begins whether or not the case can go forward as one massive class action suit.

And that depends on how the court views Wal-Mart's actions. If the justices determine that the retailing behemoth's centralized policies and practices could have resulted in less pay and fewer advancement opportunities for female workers, that would clear the way for the women's grievances to be considered together -- a class action suit. Or, the court could decide that the pay and promotion discrepancies resulted from decisions by local managers that affected women individually -- leaving each one to fend for herself legally against Wal-Mart. That would wind up costing Wal-Mart far less than a multi-billion dollar award in a class action lawsuit.

The claims against Wal-Mart

The case's origins go back to when Betty Dukes, who started as a Wal-Mart cashier in Pittsburg, Calif. -- east of San Francisco -- found that her efforts to advance into a management position were thwarted and even, she claims, punished with a demotion. In 2001, she and five other female employees filed a federal discrimination lawsuit -- which her supporters affectionately call, "Betty v. Goliath."

Her claims are familiar to many female workers who feel their advancement has been hindered by discriminatory practices, such as a failure to openly post internal job openings that would allow all workers to compete. Overall, full-time female workers today are paid only 80% of what men earn, according to federal statistics.

Such pay gaps are hardly new, and they are much narrower in certain industries, such as construction, where a woman earns 92.2 cents for each dollar a man earns, according to data from the federal Bureau of Labor Statistics. However, few women are employed in construction and similar industries.

In the case against Wal-Mart, female workers bringing the suit cite more than 100 specific instances of discrimination and describe the company culture as biased against women, including instances where senior managers have called them "girls." In another instance, the suit claims that a store executive gave approval to hold management meetings at Hooters, the restaurant chain with scantily clad waitresses.

Wal-Mart says it has non-discriminatory policies and argues that any unequal treatment was solely at the local level. Managers at its 3,400 stores could not have made uniformly biased decisions about employees ranging from hourly workers to full-time salaried managers, the Bentonville, Ark.-based company contends.

The women bringing the suit said that less than one-third of Wal-Mart managers are women, while women account for 80% of the company's hourly employees. They also claim that the company has favored men when it comes to pay and promotions, underscoring the gender stereotype of men as the sole breadwinner of a household.

Ironically, the number of single mothers or wives who support a household -- at 14.2% of U.S. households as of 2009, according to the Bureau of Labor Statistics -- has increased since the recession began, adding another layer of economic significance to any limits on pay and promotions for women.

The evolution of the gender pay gap

Even though Congress passed the Equal Pay Act of 1963 almost 50 years ago, the pace of pay and promotion equality for working women has been uneven. Women have made strides, with recent federal data showing that female workers under 35 years old generally experience a less dramatic difference in pay from their male colleagues -- likely because they are college educated. Women working full-time also have seen their weekly wages jump between 1979 and 2009. Their paycheck rose 31%, compared to 2% for men during that same period. And women working part-time are earning more than men in the same situation, other studies show.

Even so, large disparities in wages and advancement persist in many occupations and cannot be explained by variations in education, experience, personal preferences, job responsibilities or race, according to legal views submitted to the court in the Wal-Mart case by the National Women's Law Center and the American Civil Liberties Union.

"There is little doubt," Laura D'Andrea Tyson, former chairwoman of the Council of Economic Advisers in the Clinton Administration, writes in a recent New York Times' Economix blog post, "that discrimination and implicit biases against women, even in jobs requiring college or postgraduate education, continue to play a role," referring to the gender-based earnings gap.

Potential benefits of class action gender bias suits

The current Supreme Court has largely sided with companies in its rulings, but earlier this month it gave workers a boost when the justices decided  that a company may not retaliate against an employee who orally complains to the company about its practices. A number of large companies, including giants like Costco (COST) and Microsoft (MSFT), support Wal-Mart, arguing that such sweeping class action suits could pressure them into settling spurious discrimination claims rather than risk a large and expensive verdict.

Groups supporting the women filing the suit against Wal-Mart argue that companies need to put in place mechanisms to ensure that women are treated equally in the workplace. And some argue that a class action suit of this kind could do precisely that.

The Institute for Women's Policy Research submitted a report called "Ending Sex and Race Discrimination in the Workplace: Legal Interventions That Push the Envelope" to the justices that notes that about two-thirds of all employment-discrimination related class action settlements in the past decade wound up requiring companies to set objective and transparent criteria for job assignments and promotions.

Most settlements also require companies to commit to open posting of job vacancies, perform analysis of its promotion and compensation decisions for potential sex or race bias and hold supervisors accountable for preventing discrimination.

"Having good human resource management and diversity policies is important, yet our study shows that, without clear measurement, policies alone do little to prevent bias and discrimination in the workplace," writes Ariane Hegewisch, lead author of the study.

"Monitoring of the gender and race outcomes of policies," she adds, "is essential to making real change."

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