Costco to Pay $8 Million to Women Denied Top Promotions

A group of 1,300 female workers denied promotions to General Manager (GM) and Assistant General Manager (AGM) throughout the U.S. will share in an $8 million settlement reached with Costco on December 17, 2013. The settlement is the culmination of litigation brought in 2004 by three employees who alleged that Costco’s uniform, corporate-directed system of internal promotions failed to promote equally or better-qualified women into positions into which men were eventually promoted. The employees alleged that Costco used subjective decision making and unwritten job criteria that it had not validated, and that Costco failed to provide female employees opportunities to gain appropriate experience. The class of employees grew to 1,300 during the litigation.  

The employees must now go through a claims process, and if successful, may receive up to $150,000 for AGM promotion claims, and up to $300,000 for GM promotion claims. Each employee may challenge up to three promotion decisions, but claims will be subject to caps of $250,000 and $600,000 respectively. If any amount remains after payment, up to $100,000 will be used to pay an independent consultant to conduct job analyses, evaluate promotion processes, and develop promotion selection criteria and assessment tools for Costco that do not have discriminatory impact. Attorneys for the class of employees are separately seeking more than $5 million in attorney’s fees and costs.

This case emphasizes the need for organizations to review their internal processes periodically to ensure they do not result in a discriminatory impact on any protected classes of employees. Title VII of the Civil Rights Act prohibits discrimination based on gender in any employment decision, even if unintended.