Archives for April 2011

A Crain’s investigation shows benefits were less than suggested by the national hype

By Brigid Sweeney and Eddie Baeb
First published by ChicagoBusiness.com, April 11, 2011

When Wal-Mart Stores Inc. hired Margaret Garner in 2005 as the first black woman contractor to build one of its stores, she was hailed as a symbol of the benefits local businesses and minority communities would reap from the retail giant’s push into Chicago.

Six years later, her company is bankrupt, crushed by cost overruns on Wal-Mart’s first Chicago store, located in the Austin neighborhood on Chicago’s West Side. A Crain’s investigation shows that the benefits to minority contractors were less than suggested by the hype surrounding Ms. Garner’s hiring.

Much of the large-scale work on the Austin store went to non-minority firms. Ms. Garner herself engaged two such firms during much of the project to fulfill her role as general contractor.

“What happened at the end of the day is that (Wal-Mart) paraded her around the country as its African-American female (general contractor),” said Omar Shareef, founder of the Chicago-based African American Contractors Association. “And she wound up going down.”

The Austin project casts doubt on the predicted boon in jobs and contracting dollars for minorities from Wal-Mart’s plan to build several dozen stores in Chicago over the next five years. Wal-Mart and supporters, including Mayor Richard M. Daley, used such promises as a rallying cry to beat back opposition to the Bentonville, Ark.-based chain’s expansion in Chicago.

“It’s not at all what was promised to residents of that ward and the city of Chicago,” said Virginia Parks, a professor at the University of Chicago’s School of Social Service Administration, who is co-writing a book on Wal-Mart’s push into urban neighborhoods.

Contractors in Austin also learned a hard lesson about the risks of major construction projects on urban sites for a demanding customer like Wal-Mart. Some subcontractors wrote off from 10% to 50% of their bills as the project’s cost soared to $27 million from a budgeted $17.8 million.

Wal-Mart has been eyeing locations in New York City for several years and is reportedly gaining momentum to open its first store in the five boroughs.

Ms. Garner, 51, canceled a scheduled interview for this article and did not respond to subsequent requests for comment.

HARD-WON APPROVAL

The world’s biggest retailer won approval to build the Austin store in 2004 after months of debate that pitted Mr. Daley and aldermen who wanted jobs in their wards against unions and community leaders who cast Wal-Mart as a predatory company that pays low wages and kills small businesses.

Wal-Mart’s pitch to city leaders emphasized not just the jobs the store would create, but also the opportunities for minority contractors to help build it.

The following year, Wal-Mart awarded the contract to build the store to Broadway Consolidated Cos., the Chicago construction company Ms. Garner founded in 2000. Before launching the firm, she held executive posts at the U.S. Department of Housing and Urban Development and the Chicago Housing Authority. In its first five years, Broadway worked on government projects around the Chicago area, often paired with a more-established contractor such as politically wired Walsh Construction Co. The Wal-Mart job landed Ms. Garner on the pages of local and national publications, including Time and Ebony , in which Wal-Mart took out a full-page ad praising her work in Austin.

The partnership also was a coup for Wal-Mart, which was running out of room to grow in rural and suburban America. To crack city markets like Chicago, it needed to present a more multicultural image. Hiring a charismatic African-American woman to build its first Chicago store helped accomplish that.

But while Ms. Garner served as the public face of the Austin project, she quickly farmed out the nuts-and-bolts duties of a general contractor to a white-owned firm.

Just months after Broadway won the Wal-Mart job, in early 2005, Ms. Garner tapped Canadian construction giant Ledcor Group of Cos. as a subcontractor. The Vancouver-based firm, a general contractor that has built many Wal-Mart stores, was hired to “provide project-management supervision and coordination,” according to Ledcor’s October 2005 lien seeking more than $168,000 from Broadway and Wal-Mart.

Ledcor initially competed against Ms. Garner to become the general contractor. But when it appeared Ledcor wouldn’t win the job, the company approached Wal-Mart in hopes of teaming up with Broadway as co-general contractors so that the veteran firm could guide Ms. Garner, said Chad Bouck, Ledcor’s Oakbrook Terrace, Ill.-based regional manager.

Wal-Mart rejected such an arrangement, said Mr. Bouck, whose firm no longer does work with the retailer.

Nevertheless, Broadway hired Ledcor as a subcontractor, with the responsibilities of a general contractor, including hiring subcontractors and overseeing the site’s construction superintendents, Mr. Bouck said.

“It was a good move for Wal-Mart to go with a woman-owned (company),” he adds. “She had a lot of political connections that we needed.”

In a Jan. 5, 2007, letter seeking payment of about $368,000 from Wal-Mart, Ms. Garner says Broadway’s work on the project “included extensive community interaction, emotional and procedural guidance of minority subcontractors, regular intercession with the city building department in obtaining permits and correcting design deficiencies and regular assistance arranging meetings with city officials.”

Ledcor left the project in July 2005, after less than two months, over a payment dispute. Mr. Bouck says the firm received about $80,000 for its work—less than half of its $168,000 bill. Eight months later, Broadway hired another non-minority company for general-contracting duties.

Bush/Kowert Associates of west suburban Glen Ellyn, Ill., signed on in March 2006 and oversaw the project until quitting in a payment dispute in February 2007. The firm acted as the “de facto general contractor,” according to an Aug. 28, 2007, letter from Bush/Kowert’s attorney to Wal-Mart.

Broadway acknowledged as much in a court filing, saying Bush/Kowert’s “duties and responsibilities included, but were not limited to, the supervision of the entire Wal-Mart project until completion and acceptance by the owner, scheduling of the entire Wal-Mart project to ensure the Wal-Mart project was completed on time, supervision of the entire budget for the Wal-Mart project to ensure the project was within the allotted budget, and to oversee and obtain approvals from all change orders for the Wal-Mart project.”

Bush/Kowert executives didn’t return calls seeking comment.

Non-minority firms also were well-represented among the project’s subcontractors. Some of the biggest contracts—steel-framing, masonry, electrical and concrete—went to white-owned firms, according to legal filings and a partial list of contractors obtained by Crain’s .

Some 17 of the 19 subcontractors that filed liens against the project were not minority- or woman-owned. (Only firms that have done actual work on a project can file liens.)

A separate lawsuit also reveals that at least one minority subcontractor on the Wal-Mart job farmed out substantial work to a non-minority company.

Now-defunct United Demolition Inc. of northwest suburban Vernon Hills, Ill., sued in 2005 to collect on its lien of $417,000. The suit says the company, which filed for Chapter 7 bankruptcy liquidation in July 2010, entered into a contract with minority-owned Midwest REM Enterprises Inc. in February 2005—the same month Broadway awarded the job to Midwest REM.

Melrose Park-based Midwest REM, headed by Alberto Ramirez, later sued Broadway, saying it was owed $1.4 million, indicating Midwest REM also did significant work on the project.

Former United Demolition President August Pusateri didn’t return calls seeking comment, and a Midwest REM executive declined to comment.

So-called pass-throughs, when minority subcontractors pass along their assignments to white-owned firms, are a common way of undermining minority contracting requirements, according to a 2010 report by Chicago’s inspector general on that city’s Minority and Women-Owned Business Enterprise Program.

According to the report, the city’s program is “beset by fraud,” and it found that in 2008 the program overstated by about 15% the amount of actual payments to minority firms for city construction projects.

Inspector General Joseph Ferguson says rampant gaming of the system impedes the mission of bolstering minority- and women-owned businesses. He’s calling for better oversight and auditing “to make sure the money is going to the sort of businesses that were intended.”

A Wal-Mart spokesman says the company isn’t involved with the hiring of subcontractors, but it urges its general contractors to meet or exceed city procurement mandates and minority set-aside requirements for public works projects. On the Austin project, the spokesman said, 57% of the contracts went to minority- or women-owned firms. That far exceeds the requirements for city work—that 24% of contract amounts go to minority-owned firms and 4% to women-owned firms.

One reason local officials and community leaders press for minority contracting set-asides is to increase the number of minority group members and neighborhood residents hired to work on local projects. Wal-Mart’s Austin store was expected to generate well-paying construction jobs in a neighborhood beset by unemployment.

A Wal-Mart spokesman said “nearly 100” tradesmen from the Austin community were hired for the job. No record of total hiring on the project could be found.
But a black subcontractor who worked on the site questions Wal-Mart’s figure. Silas Williams, chief executive of Chicago-based TVS Mechanical Inc., says no one on the project verified names and addresses of laborers to prove that they lived in the neighborhood. He says the 100-worker estimate is too high, based on his observations at the worksite and the fact that Wal-Mart pledged to hire only union labor.

“How many neighborhood union (members) are there? Not that many,” he said.

NEW TO THE CITY

Ms. Garner and her subcontractors encountered problems early. Unlike most Wal-Mart stores, which often are built on greenfield sites in suburbs or outside small towns, the Austin project was on an old industrial site in a densely populated city neighborhood.

“(Wal-Mart is) used to having a big open farm field in the suburbs to do what they need to do,” said Todd Kalesperis, the Ledcor project manager on the Austin store. “Producing stores in inner cities is just a different ballgame.”

The Austin site, a former Helene Curtis hair-care products factory at 4650 W. North Ave., sat atop a huge underground storm-water system. Ultimately, more than 40,000 cubic yards of hazardous materials and buried concrete structures had to be removed at a cost of $4 million, according to the Jan. 5, 2007, letter Ms. Garner wrote to a Wal-Mart executive.

Removing the materials took longer than expected, delaying construction and increasing costs. What was supposed to have been a 30-week project stretched to 63 weeks.

According to Ms. Garner’s letter to Wal-Mart, the project racked up $10 million in cost overruns on top of an original budget of about $17.8 million.

Calling site conditions “amongst the most difficult and complicated in the city of Chicago,” the letter said preliminary cleanup work “pushed the completion of the majority of the weather-sensitive activities like concrete, masonry and other structural work from a normal fall construction season into the more demanding and expensive cold Midwestern winter months.”

She also cited numerous changes and design revisions required because of the “prototypical nature of this building and the unique building standards required by the city of Chicago.”

Recovering unexpected costs requires a general contractor to submit “change orders,” a meticulous process on any job and more so with demanding clients like Wal-Mart and other large retail chains.

Subcontractors say the process didn’t go smoothly on the Austin site. Weeks or months passed without payment. Some say they still haven’t been paid what they’re owed.

TVS Mechanical’s Mr. Williams says his firm has received only $70,000 of the $86,000 it was to be paid for completing the store’s heating, ventilation and air-conditioning systems, putting him in the red on the project. “I just paid to work on that Wal-Mart,” he said.

Thomas Mooncotch, owner of La Grange, Ill.-based All Erection Co., says he has never encountered such a messy project in more than 25 years building Wal-Marts. He had to file a lien to collect $182,000 of the $612,000 he was owed for erecting steel framing.

All told, contractors filed liens for unpaid claims totaling $4.4 million, or 16% of the project’s total costs. Most were paid eventually, although some accepted lesser amounts.

A TOUGH BOSS

Contractors say it’s difficult to make money building for Wal-Mart in part because the company is such an exacting client and also because fierce competition for the work forces bids lower.

Generally, subcontractors provide their own materials and add a 3% to 4% markup that’s passed on to the owner. But Mr. Williams says subcontractors lose one opportunity for profit when working for Wal-Mart because the company, like other large retail chains, provides its own materials and supplies as a cost-cutting measure.

“You’re taking these jobs to break even at best,” said Herb Lande, owner of Joliet-based Imperial Construction Associates Inc., whose steel-erection firm has done work for several large retail chains, including Wal-Mart.

Mr. Lande’s firm worked on the construction of a Sam’s Club store in Calumet City in September 2007, a project Wal-Mart awarded to Ms. Garner as general contractor despite the difficulties on the Austin store. The Sam’s Club project also resulted in a spate of liens and litigation.

Mr. Lande cites Wal-Mart’s rigorous inspections and “demanding” processes as the reason it’s difficult for some contractors to turn a profit building the company’s stores. He says he’s still owed $17,000 on his $400,000 contract to provide steel erection, decking and roofing detail for the Sam’s store.

“Before they pay you, they run you through the wringer and you wind up doing all the procedures 1 1/2 times,” he said. “Even if you doubled your bid, you’d have trouble making money.”

Ledcor’s Mr. Bouck says Wal-Mart pays promptly but only if the general contractor closely follows its bill submission processes.

The process can be daunting for contractors who haven’t worked for big companies like Wal-Mart before. Improperly submitted invoices get snarled in red tape, Mr. Bouck and other veteran Wal-Mart contractors say.

Mr. Lande says Ms. Garner struggled with Wal-Mart’s record-keeping requirements.

“The only thing Broadway may have been guilty of was not following Wal-Mart’s paperwork (requirements) as closely as they should have,” he said. Adhering to Wal-Mart’s “paperwork trail is very difficult.”

But many contractors, especially in a moribund construction market, can’t afford to wait weeks as payment vouchers are resubmitted and reprocessed.

“If you don’t have deep pockets, you’ll choke off and die,” Mr. Lande said. “You can’t pay your vendors, and then you won’t be able to staff your next job.”

BANKRUPTCY FILING

Ultimately, the burden of the cost overruns fell on Ms. Garner. General contractors often are required to obtain surety bonds guaranteeing their client that the job will be completed on time and within budget. When costs run over, the bonding company steps in to pay the subcontractors. Once the bills are paid, the bonding company then looks to collect from the general contractor.

“A bond claim can be fatal,” said Joshua Glazov, a construction attorney at law firm Much Shelist Denenberg Ament & Rubenstein P.C. in Chicago.

An $11.9-million claim stemming from a surety bond on the Austin project accounted for most of $14.1 million in liabilities listed in the Chapter 7 liquidation petition Broadway filed in Bankruptcy Court in Chicago on Dec. 7, 2010.

Despite the project’s construction woes, Ms. Garner’s public role didn’t change.

In April 2006, a month after bringing in Bush/Kowert to take over the general contractor’s role, Ms. Garner toured the construction site with Wal-Mart’s then-CEO, H. Lee Scott. When the store opened five months later, she appeared in newspaper photos with other Wal-Mart executives.

To give Ms. Garner another shot, Wal-Mart awarded her the Calumet City Sam’s Club contract in 2007. Expected to be a simpler job, that project also generated its share of payment disputes with subcontractors.

Even in January 2010, as her firm was months away from failing, Ms. Garner was a panelist at a Black Enterprise magazine forum conducted with Wal-Mart.

The promise of Wal-Mart still burns brightly for many in Chicago. Indeed, the Austin store created jobs in an area where they are scarce and brought groceries to a neighborhood abandoned by traditional supermarkets.

Last summer, the company overcame years of resistance from unions, community activists and Chicago aldermen to win approval to build two more supercenters on the city’s South Side. Construction starts on one in the Chatham neighborhood this spring and another in the Pullman area next year. After winning those approvals, Wal-Mart announced plans to open several dozen stores of varying sizes in Chicago by 2015.

Last month, Mr. Daley stood at a podium flanked by fresh produce to herald six additional sites in the Englewood, Chatham and West Loop neighborhoods of Chicago. Chiding rivals who fought Wal-Mart, Mr. Daley touted the jobs those projects would create for minority workers. “When construction comes, I’m going to see men and women of color on this job,” he said.

Mayor-elect Rahm Emanuel has said repeatedly that he views Wal-Mart and other big-box retailers as a solution to Chicago’s “food desert” problem and, like his predecessor, welcomes them to the city.

NEW CANDIDATES

Although the Wal-Mart project sank Broadway, other minority contractors have stepped up for the retailer’s next Chicago projects. A pair of local African-American-owned general contractors, Powers & Sons Construction Co. and Ujamaa Construction Inc., are strong contenders to build the Chatham supercenter.

Chicago-based Ujamaa is an 8-year-old firm whose recent jobs have included a green-roof installation for FedEx at O’Hare International Airport.

Ujamaa also has been in a joint venture with Chicago-based Bulley & Andrews—a non-minority firm—to build the Lowe’s-anchored Chatham Market on the South Side, where Wal-Mart will build its next supercenter. The company has at least one Wal-Mart job under its belt: the remodel of the Austin store last year that added a full-size grocery department.

Gary, Ind.-based Powers & Sons has ranked among the 100 biggest contractors in the Midwest. The company has been building stores for Wal-Mart for several years and for other national chains including McDonald’s, Walgreen and Menards, according to its website.

Wal-Mart will require general contractors on all future projects to use an online system that tracks the amount of work done by minority- and women-owned firms.

“Across the country, Wal-Mart seeks to ensure minorities and women are a part of the process when it comes to building and remodeling our stores,” a Wal-Mart spokesman said.

Still, some wonder if the new Chicago stores will be a better deal for contractors than the Austin project.

“Might be, but I doubt it,” TVS Mechanical’s Mr. Williams said. “There’s just not much room to make money.”

Sidebar: A sad chapter in Garner’s rags-to-riches story

Before she won national media attention as the first black female general contractor on a Wal-Mart store, Margaret Garner was a single mother who built her firm, Broadway Consolidated Cos., from the ground up.

Ms. Garner, 51, grew up in a public housing complex in Pittsburgh, the youngest of eight children. She graduated from the University of Pittsburgh in 1981 with a degree in business and economics, married soon after and had a daughter.

Her marriage ended around 1990, forcing Ms. Garner to find subsidized housing and start a new career.

She went to work in Pittsburgh for the U.S. Department of Housing and Urban Development before joining the Chicago Housing Authority in 1995, overseeing housing redevelopment projects.

Ms. Garner founded Broadway in 2000. Her company worked on local construction projects, including Comer’s Children Hospital at the University of Chicago, the Randolph Street Metra station and the Wacker Drive restoration.

In partnership with Chicago-based Walsh Construction Co., she built a Near West Side mixed-income housing development and sites for the U.S. Navy on the Great Lakes Naval Base in North Chicago.

“We think that there’s unlimited opportunity for quality people like Margaret, in quality companies like Broadway Consolidated, in finding mentor companies like Walsh Construction and in pursuing a joint business plan together,” Walsh Construction President Dan Walsh gushed in a testimonial that once appeared on Broadway’s website.

Ms. Garner said in a media interview in 2006 that Broadway employed as many as 12 people and had annual revenue of $5 million to $20 million.

She often spoke of her commitment to creating jobs in city neighborhoods, especially during the Austin project. Problems on the job weighed heavily on her, according to a subcontractor.

“She was struggling,” said Christy Webber of Chicago-based Christy Webber Landscapes. “You could just see it on her face.”

Broadway filed for Chapter 7 bankruptcy protection in December, citing $14 million in liabilities—$11.9 million from the Wal-Mart project. In February, the trustee overseeing the case declared Broadway had no assets.

A Wal-Mart spokesman says the company will continue to give minority- and women-owned businesses key roles in building its Chicago stores.

“We worked with Ms. Garner throughout the process to give her company every opportunity to succeed and wish her well in her future endeavors,” the spokesman said.

©2011 Crain Communications Inc.

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By Dave Jamieson
First published by Huffington Post, April 12, 2011

The Supreme Court recently heard oral arguments in Dukes v. Wal-Mart, the largest class-action civil-rights lawsuit in American history, and will soon decide whether the sex-discrimination case — which could affect 1.6 million women — can move forward.

Less attention has been paid to a much smaller class-action lawsuit , recently filed in Chicago, that involves Walmart’s business — perhaps because it involves far fewer workers, and because the retail behemoth isn’t actually named in the suit.

A group of eight workers has accused Wisconsin-based Schneider Logistics, a Walmart contractor, and Reliable Staffing, an Illinois-based temp agency, of violating state and federal labor laws at the Elwood, Ill., warehouse where the workers load and unload trucks and containers carrying goods bound for Walmart stores in the Midwest.

Schneider is contracted to run what is effectively a Walmart distribution center. The warehouse inked its contract with Walmart back in 2006.

Reliable and other staffing agencies supply the workforce for Schneider and other warehouses like it in the Chicago area, and much of the staffing comes on a temporary rather than direct-hire basis. The suit could involve hundreds of warehouse employees if it is certified as class-action.

As In These Times first reported, the workers claim their employer reneged on the promise of a $10 hourly rate for their work, a “piece rate” for each of the items they schlepped and bonuses for “team lifts” on especially heavy goods. Robert Hines, who’s been working on and off in Chicagoland warehouses on a temp basis for years, said he wasn’t compensated for what was often grueling work.

“I noticed after a couple of weeks that my checks didn’t match my hours,” said Hines, who claims he sometimes worked more than 50 hours per week and was shortchanged on overtime, too. “People are breaking their backs, trying to feed their families and be right.”

Hines and other workers marched on the warehouse earlier this year, hoping to resolve the issue short of a lawsuit, but they were encouraged to go to court by a local advocacy group, Warehouse Workers for Justice.

Abraham Mwaura, one of the group’s organizers, said “perma-temp” work, in which workers retain temp status in spite of working for the same company for months or even years, has become a common form of employment in Chicagoland’s sprawling warehouse network. It’s particularly prevalent in Will County, where Mwaura’s group estimates 30,000 warehouse workers are employed.

Warehouse worker complaints aren’t exactly uncommon. In 2009, a separate group of employees at the same distribution center filed a class-action suit accusing a different staffing agency of wage theft.

Greg Rossiter, a Walmart spokesman, said the company wouldn’t comment on litigation that it isn’t directly involved in, pointing out that “the facility isn’t operated by Walmart nor are the people who work in it employed by Walmart.” But he did say the retailer keeps an auditor at the facility to monitor the work environment and productivity level.

In a statement, a spokeswoman for Schneider said, “Schneider does not employ any of the workers at issue. The plaintiffs in the litigation were employed by a third party vendor to another vendor to Schneider. Schneider has at all times complied with Illinois and federal law and declines further comment on the pending matter as a courtesy to the involved parties.”

A woman who answered the phone at Reliable Staffing said the company’s president was traveling and could not be reached.

“Many [big retailers] are using this model,” said Mwaura. “They hire a third party to run the warehouse, and a third party hires the temp agencies. That’s become the way to compete in this industry. They’re just moving the cost to someone else. Ultimately, the people who pay for it are the workers.”

Surveys done by Mwaura’s group have determined that the vast majority of warehouse workers in the area are African-Americans and Latino immigrants, and more than half of them have temp status, which often puts health insurance and other benefits out of reach.

The perma-temp system “gets people stuck on the job ladder,” Mwaura said. “There’s no job mobility. They’re not going to make you a supervisor. You may not even have a job tomorrow.”

A warehouse like the one in Elwood might have a dozen or more staffing agencies operating within it, said Chris Williams, the attorney whose Chicago legal clinic filed the class-action suit. Williams said the pay scheme is often too complicated for workers to understand. He believes the workers may have been shorted as much as 20 percent of the pay due them, but he said some math still has to be done.

“Part of it is they’re trying to incentivize productivity — the more you work, the more you get paid,” Williams said. “Sometimes [workers] will go into a truck and unload everything just to find a few boxes, like a needle in a haystack,” only to be paid for just the items they were sent in for. “They get the short end of the stick.”

Hines, who started working in the warehouse last August, described the items he unloaded from containers as “anything and everything you’d find at Walmart,” save for groceries. He said workers were often told they were moving too slow, and it was common for workers to be put off the clock while they waited at the warehouse for a new container to come in.

Hines quit after working in the Schneider warehouse Thanksgiving week. He said his plan is to start his own landscaping business, which will let him set his own hours and spend more time with his kids.

“If I work for myself, I figure I won’t sell myself short,” he said.

©2011 Dave Jamieson

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By Bill Mears – Published by CNN March 29, 2011

Female workers suing retail giant Wal-Mart Stores for workplace discrimination faced an uphill battle at the Supreme Court on Tuesday in their efforts to proceed in a massive class-action lawsuit.

The case is among the most important dealing with corporate versus worker rights that the justices have ever heard, and their ruling — expected by late June — could eventually impact nearly every private employer, large and small.

The conservative majority on the bench appeared skeptical during oral arguments that allowing employees from across the country to band together and make their claims in one trial would be appropriate, at least in this particular case. But the three female justices each offered a spirited defense of the plaintiffs’ claims of a consistent pattern of discrimination that allegedly trickled down from corporate headquarters to individual stores.

Justice Ruth Bader Ginsburg, who before joining the court was a pioneering legal advocate for gender equality on the job, said that based on the similar claims from the workers, it was “reasonable” to allow the case to proceed as a class action.

“The company gets reports month after month showing that women are disproportionately passed over for promotion, and there is a pay gap between men and women doing the same job,” she said. “It happens not once, but twice. Isn’t there some responsibility on the company to say, is gender discrimination at work, and if it is, isn’t there an obligation to stop it?”

But Justice Anthony Kennedy appeared skeptical there was a corporate culture of discrimination, noting Wal-Mart has a long-standing anti-discrimination policy.

“You said this is a culture where Arkansas (home of Wal-Mart) knows, the headquarters knows, everything that’s going on,” he told the plaintiffs’ attorney. “Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there’s an inconsistency there, and I’m just not sure what the unlawful policy is.”

At issue is whether as many as 1.6 million current and former female Wal-Mart employees can make a unified claim of systemic discrimination, which they say has occurred over the past decade, at least. The plaintiffs allege women were paid less than, and were given fewer opportunities for promotion than, their male counterparts. They seek back pay and punitive damages against the world’s largest retailer.

A divided 6-5 ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals last year had allowed the combined, multiparty litigation to move ahead to one trial, where a verdict against the company could result in tens of billions of dollars in damages.

The Supreme Court will decide only whether the original lawsuit should be handled as a class action, instead of lower courts potentially being flooded with thousands of individual discrimination claims against the company. A ruling by the justices against Wal-Mart, permitting class-action status, could put severe pressure on the company to settle the claims out of court.

The lawsuit alleges the company’s “strong, centralized structure fosters or facilitates gender stereotyping and discrimination.” The workers bringing suit also say women make up more than 70 percent of Wal-Mart’s hourly workforce but in the past decade made up less than one-third of its store management.

The current litigation was filed in 2001 by Betty Dukes, a store greeter in Pittsburg, California, along with five of her co-workers from different facilities. She and another of the original six plaintiffs attended the arguments.

“I brought this case because I believe that there was a pattern of discrimination at Wal-Mart, not just in my store, but I believe that it is across the country,” she told CNN at the court. “Since we have filed our lawsuit in 2001 I have heard from numerous women telling me basically the same story as mine of disparate treatment in lack of promotion as well as in lack of pay.”

The company has protested the size of the class action, which it called “historic” in scope, saying it would be too onerous to litigate. The company has more than 4,300 U.S. facilities in 41 regions.

Gisel Ruiz, who now heads the company’s human resources division, told CNN after the arguments, “Wal-Mart has had a long history of promoting and advancing women. I joined the company in 1992 as a management trainee in Medera, California, and in less than four years, I was promoted to store manager. What’s wrong with this case is that three plaintiffs are trying to represent more than 1.5 million associates. I’ve had a very positive experience at Wal-Mart like thousands of other women, and not being able to opt out of the case is wrong.”

In arguments, Theodore Boutrous, attorney for Wal-Mart, cited company figures that at “90 percent of the stores, there was no pay disparity.”

But Justice Sonia Sotomayor cited information accepted by lower federal courts “including job history, job ratings, and other things, and found that the disparity could not be explained on any of the normal variables that one would expect and that the disparity was significantly much higher than the 10 competitors of Wal-Mart and what they were paying their labor force.”

Joseph Sellers, attorney for the women workers, cited what he called “the Wal-Mart way” of dealing with pay and promotions. “The company has a very strong corporate culture,” he said, adding, “the decisions of the managers will be informed by the values the company provides to these managers in training.”

Chief Justice John Roberts sharply questioned that premise.

“How many examples of abuse of the subjective discrimination delegation (by mangers) need to be shown before you can say that flows from the policy rather than from bad actors?” he said. “I assume with however many thousands of stores, you’re going to have some bad apples.”

Roberts added that Wal-Mart’s pay disparity across the company was less than the national average.

Justice Samuel Alito expressed concern about whether the claims against Wal-Mart met the criteria for establishing class-action. Citing a hypothetical business similar to Wal-Mart, he wondered, “You have the company that is absolutely typical of the entire American workforce, and let’s say there weren’t any variations (in an anti-discrimination policy). Every single company had exactly the same profile. Then you would say every single company is in violation” of federal civil rights laws?

Alito’s colleague, Justice Antonin Scalia, followed up, pressing Sellers further: “(What) your answer assumes is if there is a disparity between the advancement of women and the advancement of men, it can only be attributed to sex discrimination.”

Sellers said that was not true in every case but was true at Wal-Mart, a situation he blamed on “standardless, recordless decisions” by the company, in essence benign neglect of what he said is a nationwide pattern of discrimination at individual stores.

“Well, if it’s standardless and recordless, then why is there commonality?” asked Kennedy, who could prove to be the swing vote in the case. “It seems to me that your answer that you just gave really shows a flaw in your case on commonality” of discrimination claimed by the plaintiffs.

Declaring class-action status for the lawsuit would raise the financial and judicial stakes considerably, since more individual plaintiffs could join, creating greater potential liability for the company. In federal courts, such certification must generally follow well-established principles to ensure a lawsuit would not become so large as to be impracticable, and would allow the parties to fairly represent the common interests of the larger class of plaintiffs.

Wal-Mart also has been accused in separate lawsuits of discrimination against African-American truck drivers and workers with disabilities. In 2001 the company settled 13 lawsuits by paying out $6 million.

‘I’m a fighter’

A mammoth appeal started small — six women from California, unknown to each other at first, but sharing a common story.

“I’m a fighter if nothing else, and so are all the other women that are involved,” said Christine Kwapnoski, one of the original plaintiffs. Speaking with CNN, she recounted why she brought suit against Wal-Mart in 2001.

“I was saying I want to do something more, but for whatever reason I kept getting overlooked for team leader positions,” she said. “They kept hiring men off the street. Literally, I don’t even know where they came from, whether they came from college, men who never even had a day’s worth of Sam’s Club experience were coming in and I was the one training them.”

Kwapnoski, 46, began working at Sam’s Club retail warehouse — part of the Wal-Mart brand — in 1986, eventually relocating to a store in Concord, California. By 2000 she was the longest-tenured hourly employee at the store, but claims she was being paid “virtually the same” as male associates with half her experience. She was eventually promoted in 2001, two weeks after the lawsuit was filed, and remains at the company.

Kwapnoski soon realized her experiences were similar to other female workers — first in the San Francisco Bay area, then across the country.

“They know we’re right and they just don’t want to admit it,” she told CNN Correspondent Kate Bolduan. “They never want to admit anything when they’re wrong, they just believe that they’re semi-untouchable because of their size.”

Kwapnoski claims she was told by a male general manager “to doll up,” wear more makeup and dress a little better as a new supervisor on the loading dock, comments she says were inappropriate. And she says mangers frequently yelled at her and other female workers, but not male counterparts.

The plaintiff’s lawyer Joseph Sellers says there is a “corporate culture” at Wal-Mart, where female associates are treated as second-class employees, and that the company’s “strong, centralized structure fosters or facilitates gender stereotyping and discrimination,” which trickles down to individual stores.

“The store managers don’t make up their own pay and promotion policy — they follow a common set of policies that are established by headquarters in Arkansas,” he said. “There is extensive oversight of the decisions they make.

Spokeswoman says people are held accountable

Wal-Mart operates 4,300 facilities in the U.S., with more than $400 billion in global sales in 2009. It employs 1.4 million people in the U.S. alone. Officials boast their anti-discrimination policy has been in place as long as the company has been around, and a recent public relations campaign has been launched to promote its diversity and inclusion.

Gisel Ruiz is an example of what Wal-Mart says is a person who started small but has risen in the company because of her talents and hard work. After beginning as a store management trainee nearly two decades ago in California, she is now executive vice president for people at Wal-Mart, responsible for human resources. Ruiz is also a representative in corporate efforts to fight these claims of discrimination.

“From my personal experience, it’s not part of the company’s culture or part of the policies. My career growth has been very positive with Wal-Mart. I am in a job that I never dreamed that I would be — it’s based on my ability, my performance, my leadership abilities, but I am just one of many women,” she told CNN. “I’ve never been exposed to the examples that have been shared by the plaintiffs. I simply haven’t seen it and I will tell you that we don’t have a tolerance for that kind of misconduct.”

Ruiz says every employee from part-time entry level hourly workers to salaried managers must follow the rules.

“The policies against discrimination are in place for very good reasons; not only is the law, but is the right thing to do,” she said. “There’s oversight at a corporate level to ensure that the policies are in place, that they are relevant to today’s workforce and today’s workforce issues. Ultimately at store level, that’s where those policies are enforced, and people are held accountable if they violate those policies.”

Wal-Mart says case is too big

The workers bringing suit say women represent more than 70% of Wal-Mart’s hourly workforce, but in the past decade made up less than one-third of its store management.

A federal appeals court had concluded there was enough merit in the claims to proceed to trial on a class-action track. Since the lawsuit was filed a decade ago, both sides of the dispute have held discovery hearings, where preliminary testimony was taken to establish facts.

The high court will not judge the merits of the sweeping claims at this stage, just whether a class-action trial can proceed. The parties have the option of settling the dispute out of court at some point in the future, and the company may feel great financial pressure to do if they lose at the Supreme Court on this gateway issue.

The company has protested the size of the class action, which it called “historic” in scope, saying it would be onerous, with too many disparate issues, to litigate.

“The plaintiff’s lawyers in this case went way too far. It’s the way the plaintiffs have framed the case, implicating every store, every person. There’s no way, one woman can be representative of a million women in a case like this,” said Theodore Boutrous, an experienced appellate attorney who will argue the case for Wal-Mart before the justices. “The danger is that it would expose virtually every company in America to huge, costly, baseless class actions that’s bad for jobs, bad for the economy, and at the end of day it doesn’t help the people on behalf the case is being brought.”

The company has the support of the business community, while a variety of civil and gender rights groups and unions back the plaintiffs. The Obama administration has not weighed in on the case.

“Wal-Mart is arguing in effect there is a large-company exception — that when the company is sufficiently large and the discrimination is sufficiently widespread — it’s just impractical to have a class action,” said Sellers, attorney for the plaintiffs. “But there is no large-company exception to civil rights claims in this country.”

Declaring class-action status for the lawsuit raises the financial and judicial stakes considerably, since more individual plaintiffs can now join, creating greater potential liability for the company being sued. In federal courts, such certification must generally follow well-established principles to ensure a lawsuit would not become so large as to be impracticable, and would allow the parties to fairly represent the common interests of the larger class of plaintiffs.

Wal-Mart also has been accused in separate lawsuits of discrimination against African-American truck drivers and workers with disabilities. In 2001 the company settled 13 lawsuits by paying out $6 million.

Most workplace discrimination lawsuits fail to reach a court for resolution, according to data compiled by the federal Equal Employment Opportunity Commission.

In 2003, when the Wal-Mart litigation was in its preliminary court stages, about 27,000 sex discrimination claims nationwide were resolved administratively by the EEOC, little changed from the prior decade. More than 57 percent — some 15,000 claims — were ruled administratively to have “no reasonable cause” and those usually were dismissed.

Just over 10 percent were judged to have merit, resulting in a total of $94.2 million in settlements, or $34,200 on average per case, according to the data, which include all such claims, not just those involving Wal-Mart.

The case is also a clash of dueling cultures — some have dubbed it the Battle of Bentonville vs. Berkeley, for the corporate headquarters and the home to the liberal legal team outside San Francisco where the lawsuits first percolated.

Both sides have lots of data

Three women now sit on the high court and each brings their own personal and judicial approach to gender bias cases.

Whether their views will sway their male colleagues is unknown, but the court in the past three decades has restricted when class actions can proceed, saying “rigorous analysis” must first be conducted by the courts. This after women, blacks, Latinos and the disabled launched high-profile class actions beginning in the 1960s.

The problem is that both Wal-Mart and the plaintiffs have presented their own massive sets of data — statistics and depositions — that could overwhelm any “rigorous analysis” of the facts. The dueling numbers — which experience shows can often be manipulated in creative ways to make the point — paint completely different pictures of the level of discrimination.

Both sides agree the case, however it is resolved in the courts, will irrevocably alter the workplace landscape for generations to come.

The case is Dukes v. Wal-Mart Stores, Inc. (10-277).

© 2011 CNN

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