Dukes Backgrounder

of 14

  • date post

  • Category


  • view

  • download


Embed Size (px)

Transcript of Dukes Backgrounder

  • 7/29/2019 Dukes Backgrounder


    BETTY v. GOLIATHA History ofDukes v. Wal-Mart

    November 2006

  • 7/29/2019 Dukes Backgrounder



    Section Page

    I. Background 2

    II. The Wal-Mart Way: Centralization, Centralization, Centralization 3

    III. Why is Dukes so Important? 4

    IV. History and Allegations o the Dukes Litigation 5

    V. Expert Analyses Conclusions rom Dukes v. Wal-Mart 6

    VI. One Step Forward, Two Steps Back: Positive Changes Oset byPolicies Such As Wage Caps and Requiring Around-the-Clock Availability 7

    VII. Conclusion 9

    Appendix 11

  • 7/29/2019 Dukes Backgrounder


    I. Background

    Dukes v. Wal-Martis the largest employment dis-crimination class action suit in American history.Filed in June 2001 in the United States DistrictCourt or the Northern Dis-

    trict o Caliornia, the law-suit alleges that Wal-Martactively discriminatedagainst its emale employees by: advancingmale employees more quickly than emale em-ployees; denying emale employees equal job

    assignments, promotions, training and compen-sation; and retaliating against those who opposeunlawul practices.1 The class was certied by

    District Judge Martin J. Jenkins on June 21, 2004,and encompasses all women employed at Wal-Mart rom December 26, 1998 through to thepresent, or at least 1.6 million current and pastemployees.2 Wal-Mart has appealed the certi-cation to the United States Court o Appeals orthe 9th Circuit. Plaintis are condent they willsucceed:

    They [the 9th Circuit] will only reverse JudgeJenkins i they conclude he made a clear er-ror, according to Brad Seligman, an attorneywith The Impact Fund and a lead attorney orplaintis. I am quite condent we are going toprevail.3

    Should Wal-Mart lose its appeal, its options

    would be settlement or trial. Any settlement

    could be enormous, a loss at trial could amountto damages in the billions o dollars, and, eitherway, shareholder anger and damage to the Wal-

    Mart brand name wouldbe a near certainty. A deci-sion by the 9th Circuit as

    to whether Judge Jenkinsabused his discretion by certiying the Wal-Martclass is expected soon.

    Dukes v. Wal-Martis a landmark case, serving as areminder that 42 years ater the passage o TitleVII o the Civil Rights Act o 1964, discriminationhas yet to be eradicated, even at our nationslargest employer. Facts brought to light through

    the Dukes litigation include the ollowing:

    The representation o women in Wal-Marts workorce drops steadily the ur-ther up the company ladder one looks.Although women outnumber men by

    nearly 4-1 among hourly supervisors, in2001 they comprised only 45.1% o the

    Support Managers, the highest-levelhourly supervisory position.4

    Moving up the ladder into purportedsalaried positions, women comprisedonly 37.6 % o Assistant Managers, 21.9%o Co-Managers, and 15.5% o Store Man-agers.5

    Betty versus Goliath:A History ofDukes v. Wal-Mart


  • 7/29/2019 Dukes Backgrounder


    Women at Wal-Mart, though sometimescalled supervisors, are disproportion-

    ately working in hourly jobs, which payar less than salaried positions. About

    65% o hourly employees are womencompared to about 33% o managementemployees.6

    In a memorandum to all Wal-Mart di-vision heads in 1999, the companydeclared that Wal-Marts women in

    management (32.4%) is signicantlybehind several o the other retailers reporting (43.2% to 65.3%).7

    Figures rom 2001 show that rom dateo hire until being promoted into an As-sistant Manager position took on aver-age 4.38 years or women, compared to

    2.86 years or men. To reach Store Man-ager, the average male needed 8.64 yearscompared to 10.12 years or a emale.8

    In 1998, a diversity task orce ound thatWal-Mart was alling short when it came

    to promoting women. Instead o heed-ing the internal warnings and carryingout recommendations provided by the

    diversity task orce, Wal-Mart promptlydisbanded the panel. Two years ater thetask orce delivered its ndings, Wal-Marts percentage o emale managershad actually gone down.9

    II. The Wal-Mart Way: Centralization,

    Centralization, Centralization

    District Court Judge Jenkins recognized thehistoric nature o this class action, the act that

    Title VII contains no special exception or largeemployers, and that shielding the nations larg-

    est employers rom allegations o gender or ra-cial discrimination simply because o size wouldundermine the very goals Title VII has sought

    to achieve.10 While Wal-Mart has argued thatthe sheer size o the class counsels against classcertication,11 plaintis have countered that the

    extreme centralization o Wal-Marts businesspractices makes class action treatment ecient.

    Wal-Mart asserts that the employment decisionscarried out by thousands o local managersdid not aect every single member o the classuniormly, but Judge Jenkins disagreed, holdingthat those local managers who determined payand promotions did so with little outside reviewunder the infuence o a strong corporate cul-

    ture that includes gender stereotyping.12

    In sum, plaintis allege that Wal-Mart employsuniorm employment and personnel policies

    throughout the United States. These central-ized policies, coupled with Wal-Marts low levelso emale representation in true managementpositions, refect a lack o success in identiying,

    developing and promoting managerial talentrom within its emale workorce.13

    These arguments are buttressed by the ollow-ing points:

    Wal-Mart has centralized its pricing,buying and promotional decisions on anational level, and deposition testimony

    refects that this same system o central-ized control extends to Wal-Marts humanresources department.14

    Corporate culture, and a shared set ovalues and belies, is strongly refected inthe nature o Wal-Marts practices andpolicies. Corporate culture is a topic

    covered requently in monthly newslet-ters circulated to all o Wal-Marts em-ployees and it is an important element ocompany meetings, especially its annualshareholders meeting.15 It is not surpris-ing then to nd discriminatory employ-ment patterns o striking similarity inWal-Mart stores across the country.


  • 7/29/2019 Dukes Backgrounder


    Overseeing store-level human resourcesactivities, including stang and compli-ance with government regulations and

    company policies, are the Regional Per-sonnel Managers, and most Regional

    Personnel Managers work out o the corporate headquarters in Bentonville.16

    From 1975 through 1999, Wal-Mart kepta practice o locating an unusually largenumber o its managers at its corporateheadquarters in Arkansas. Its managerial

    centralization ratio remained 2-3 timesthat o its competitors in every year overthat time span. Wal-Marts strong cor-porate culture has resulted in a striking

    consistency in Wal-Marts employmentpatterns across locations and over time,despite Wal-Marts argument that hiringdecisions are made at the store level.17

    III. Why is Dukes so Important?

    Discrimination suits have the potential to ad-dress issues such as gender discrimination byincreasing the public awareness that is crucial to

    large-scale and dramatic change.18

    One theorysuggests that, while large nancial penaltiesmight impact the bottom line, the continued riskto the Wal-Martbrand in thepublic eye is what

    might drive seri-ous change. TheDukes case hasalready been acatalyst or ocusing consumer and shareholder

    attention on Wal-Mart. Analysts have suggestedthat potential damages to Wal-Mart rom the

    Dukes case could range in the billions o dollars,

    including what the company could be orced topay to equalize inequitable salary scales.19Similar to Ingram v. The Coca-Cola Company20 andRoberts v. Texaco, Inc.21, Dukes is being monitoredby some o the nations largest institutionalinvestors.22 In 2000, Coca-Cola settled a racial

    discrimination class action or $192.5 millionater spending a year sending mixed messagesregarding the signicance o the suit. Analystsidentied the bias suit as a prime reason or the$100 billion decrease in Coca-Colas stock value

    between the years 1998 and 2000.23

    A judgmentagainst or settlement by Wal-Mart could orce

    the company to raise the wages o approximate-ly 60 percent o its U.S. workorce, raising pricesand lowering Wal-Mart sales and its share price,according to investors at Wentworth, Hauser &Violich in Seattle.24

    From the perspective o investors and thepublic at large the impact on brand and repu-

    tation is a question o how the wrongdoing will

    be perceived by consumers. Consumers may beturned o i they believe the companys pur-portedly low prices are being underwritten byWal-Marts ailure to compensate and promotewomen properly. This premise is important con-sidering who the majority o Wal-Mart shoppersare, or more specically, what gender they are.Research has shown that 54 percent o Wal-Mart

    shoppers are women, and that nearly 70 per-cent o women surveyed between the ages o

    18-49 had shopped at Wal-Mart within a 30-dayperiod.25 Four out o ten American women visita Wal-Marts store each week.26 People keep

    shopping at Wal-Mart becausethey dont con-

    nect the act thatthe low pricetheyre paying iseectively subsi-

    dized by the woman at the checkout counter,27

    and the current Dukes litigation will reocus theattention o shoppers and shareholders to thatsubsidy.

    The Dukes litigation is also being closelywatched by Wal-Mart competitors, and a nega-tive outcome against the retail giant could orceother companies to review and make sure thattheir own pay scales are air and balanced.28