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Costco Class-Action Settlement Brings Justice to Women Workers Denied Equal Opportunity

Costco Class-Action Settlement Brings Justice to Women Workers Denied Equal Opportunity

By Sarah Belton, Staff Attorney

In 2002 a woman named Shirley Ellis filed a complaint with the U.S. Equal Employment Opportunity Commission alleging that her employer, Costco Wholesale Corporation, denied her a promotion from assistant manager to store manager because she was female. After she filed her complaint, Costco retaliated by transferring Ms. Ellis to a different store, requiring her to commute up to four hours each day.

Costco Store

Two years later she filed a federal class action lawsuit on behalf of herself and other women alleging that Costco systematically discriminated against women in the way the company handled promotions. Earlier this week, over a decade after Ms. Ellis first filed her complaint with the EEOC, the lawsuit has reached a tentative settlement agreement that will both compensate Ms. Ellis and the approximately 700 women who were passed over for promotions and implement new procedures – overseen by an organizational psychologist – to change the way Costco handles promotions.

In the recent decision in the DR Horton case, the Fifth Circuit held that employees can be required to sign an arbitration agreement banning class actions as a condition of employment. Today’s announcement provides a live, real life example of the importance of class action litigation for employees. What if this court case never happened?

If Ms. Ellis case had been subject to an arbitration clause banning class actions, the public may have never known about the systematic discrimination women faced at Costco where, while roughly 50% of all employees are women, females only occupy 17% of top management positions.

If this case hadn’t proceeded as a class action, then the approximately 700 women who were improperly denied promotions would not be receiving any compensation from Costco from the $8 million compensation fund. Costco also probably wouldn’t have agreed to wide institutional changes: to change its promotion procedures, hire a professional to evaluate its methods, create a posting process for job vacancies, and establish a system to track employee interest in promotions to management positions.

In short, instead of a far-reaching public agreement resulting in real, tangible results for hundreds of past, current, and future employees at Costco’s over 300 stores, there may have been a private arbitration proceeding that happened in the dark. It’s hard to imagine that Ms. Ellis, a single employee against a powerful corporation would have reached the same result.

We shouldn’t forget that class actions remain an important tool to redress injustices and address violations of wage and hour laws, discrimination, and other issues.  Companies should be held accountable if they violate our laws, and workers who face systemic discrimination should be compensated.

photo credit: RodBegbie via photopin cc