Costco allegedly ignored bias advice

Costco Wholesale ignored internal warnings that female workers couldn't get promoted, and chief executive Jim Sinegal opposed recommendations to post all management positions, employees suing the company claim.

Court filings in a sex-bias case against the Issaquah-based warehouse chain show that members of a 2001 team investigating workplace barriers for women and minorities said company practices "allow for favoritism and individual biases" in promotions. The team recommended posting all management jobs. Costco didn't follow the suggestion, John Matthews, vice president of human resources, testified in a March deposition, the Aug. 28 filings show.

The workers' lawyers said the filings bolster their claims that there was a pattern of discrimination against women at Costco. They are asking a federal judge to expand the case to cover as many as 700 workers.

Costco has denied it discriminates. But its response to the 2001 internal recommendations could put the company at risk for punitive damages.

"They're vulnerable to the argument that the red flags were raised and they ignored them," said Cyrus Mehri, who represents workers in lawsuits and isn't involved in the Costco litigation. "This shows reckless indifference to the rights of workers."

Bob Nelson, a Costco spokesman, declined to comment.

Costco is scheduled to file its reply to the workers claims Sept. 29. U.S. District Judge Marilyn Patel will hold a hearing Nov. 6 in San Francisco on class certification.

In the lawsuit, filed in 2004 by one current and two former Costco employees, workers claim women are prevented from applying for higher-paying management positions because the company doesn't post or advertise positions when they become available. The suit is seeking back pay, future pay and punitive damages for up to 700 employees and a court order to change the policy.

The allegations are contrary to Costco's image, said Don Gher, chief investment officer of Bellevue-based Coldstream Capital Management, with $1 billion in assets, including Costco shares. "Costco has been over the years a very fair employer," he said.

Brad Seligman, an attorney representing Costco workers, said, "Costco has become enamored of its own reputation as a good employer and they've allowed this very serious problem to develop."

Costco has about 78,000 U.S. employees; about half are women. Only one in six senior managers is a woman, the lawsuit says. Women held 16.6 percent of assistant manager and 12.9 percent of manager jobs from 1999 through 2004, below the 34.1 percent benchmark rate for other retail companies, the lawsuit claims.

The average hourly wage at Costco is $17, the company says.

Store managers earn $100,000 and receive annual stock options, Seligman said.

Sinegal said fewer women were in the higher-level positions because of their own preference for family-friendly hours.

"Our experience is that the women have a tendency to be the caretakers and have the responsibility for the children and for the family," he said in an April deposition.

Sinegal opposed posting of senior management positions, he said in the deposition. "I have always felt very, felt very strongly and very adamantly, that those were not the types of jobs that should be up for posting," he testified.

"I considered the jobs of assistant manager and manager to be top management jobs that should be given on the basis of merit," Sinegal said.