Costco Manager Files Sex-Bias Suit

Costco Wholesale Corp., often lauded for its generous pay and benefits, was sued Tuesday by a female employee who claims the company denies women promotion to the highest ranks of store management.

The federal lawsuit, filed in San Francisco by an assistant manager at a Costco store in Colorado, seeks class-action status on behalf of more than 650 women who have worked for Costco since 2001. The main lawyer, Brad Seligman, is also the lead counsel in a gender-bias suit against Wal-Mart Stores Inc. that was recently certified as a class action, making it the nation’s largest-ever workplace discrimination case, with as many as 1.6 million plaintiffs.

The Costco suit claims that the best-paying and most influential Costco jobs are unattainable for most women because the company doesn’t post openings, explain application procedures or provide criteria for promotion. People promoted to store manager -- which pays about $100,000 plus bonuses and stock options that are often worth many times that amount -- instead are chosen via a “tap on the shoulder” that disproportionately benefits men, the suit alleges.

“Those few women who do receive a ‘tap’ mostly find themselves relegated to the warehouse locations that generate the lowest revenue, which directly affects the women’s earning potential,” the suit says.

Costco, based in Issaquah, Wash., denied the charges. “We strongly disagree with any claim that Costco has discriminated against any individual or group of employees, and we will respond to this particular claim in the proper forum,” the company said in a statement.

The plaintiff, Shirley “Rae” Ellis, has been a Costco assistant manager since she joined the company in 1998, after having worked as a general manager for Costco competitor Sam’s Club, a division of Wal-Mart Stores.

Ellis claims she was willing to take a pay and seniority cut to work for Costco because she was told she would be eligible for a promotion to general manager within a year, at which point she would earn more than she did at Sam’s Club.

Costco employs 103,000 people at its 438 warehouse stores worldwide. Unlike many competitors, Costco tends to follow the pay and benefit packages at unionized grocery stores, although only a portion of Costco stores have union contracts. Wal-Mart’s wage-and-benefit package, in comparison, is about $10 an hour less.

Ellis said despite her receipt of excellent performance reviews, numerous general manager openings were given to men with less experience than she had.

“I’d put my management ability against any manager at Costco,” Ellis said at a news conference in San Francisco on Tuesday. “It’s not a good feeling when you keep knocking and the door doesn’t get answered.”

Although women make up almost half of Costco’s workforce, one in six managers is a woman, all of Costco’s operations vice presidents are men and only two of 30 executive and senior officers are women, the suit contends. It says that although 33% of managers at other large chains in the same business are women, women made up only 26.4% of the management ranks at Costco in 2000.

Ellis filed gender discrimination complaints against Costco in October 2002 with the U.S. Equal Employment Opportunity Commission and the California Department of Fair Employment and Housing. Her lawsuit claims that after she lodged the complaints, Costco retaliated by transferring her from a store in Aurora, Colo., to a store in Douglas County, Colo., which requires her to commute three to four hours a day.

The two agencies issued right-to-sue notices, and she chose to do so in federal court in California because she hoped to land a general manager position in the state; she says in her suit that she several times requested a transfer to California, where Costco has more than 100 stores, the most in any state.

Seligman said Ellis hired him in 2002 after she learned about the gender-bias suit against Wal-Mart, filed by six women. That suit alleges that the world’s largest company pays female employees less than men for the same jobs, passes them over for promotions and retaliates against those who complain.

The U.S. 9th Circuit Court of Appeals in San Francisco has agreed to hear Wal-Mart’s appeal of the order approving class-action status for the suit.