Another Big Problem for Wal-Mart

The latest in Wal-Mart's (NYSE: WMT  ) plethora of problems has taken the company all the way to the Supreme Court. A proposed class action lawsuit would pit more than a million female employees against the corporate giant. Whether the case goes forward or not, the damage done to Wal-Mart's reputational problems could create future financial damage that far outweighs even a significant court settlement.

Wal-Mart's currently trying to convince the Supreme Court that the case, which alleges decades of bias by the retailer against its women workers, is too immense in scope -- covering dozens of women at stores throughout the country -- to be heard as a single lawsuit.

So far, several Supreme Court justices appear to agree with Wal-Mart's argument. Meanwhile, huge American companies like Bank of America (NYSE: BAC  ) , Microsoft (Nasdaq: MSFT  ) , Intel (Nasdaq: INTC  ) , Altria (NYSE: MO  ) , and General Electric (NYSE: GE  ) are taking Wal-Mart's side and filing supporting materials with the court, since this case could have major precedent in how similar cases proceed against other large companies.

If the case proceeds and Wal-Mart loses, the company could be forced to pay billions of dollars to the aggrieved plaintiffs. However, even worse outcomes could await the company.

Whatever the court decides, national headlines now trumpet accusations that Wal-Mart let managers in stores nationwide block their female employees from equal pay and well-earned promotions -- yet another blow to Wal-Mart's already rotten reputation for worker treatment. The Supreme Court may go easy on the company, but the court of public opinion will more likely throw the book at it.

Of all retailers, Wal-Mart should flourish in recessionary times, since low prices are its core business. However, the company's been having a difficult time drumming up increased customer traffic (and sales) here in the U.S. Negative publicity -- including photos of women protesting its policies outside the Supreme Court -- certainly won't help.

These days, mighty Wal-Mart seems like it's slipping, in grave danger of losing market share to rivals. Legal wrangling over the latest stain on its reputation is the last thing Wal-Mart needs right now.

To keep your eye on Wal-Mart, add it to your watchlist. You can also discuss whether you think this lawsuit is founded or not in the comment box below.

Intel, Microsoft, and Wal-Mart are Motley Fool Inside Value picks. Wal-Mart is a Motley Fool Global Gains choice. Wal-Mart is a Motley Fool Income Investor selection. The Fool owns shares of and has bought calls on Intel. Motley Fool Options has recommended a diagonal call position on Intel. Motley Fool Options has recommended a diagonal call position on Microsoft. Motley Fool Options has recommended a diagonal call position on Wal-Mart. The Fool owns shares of Altria Group, Bank of America, Microsoft, and Wal-Mart. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned; for more on this and other topics, check back at Fool.com, or follow her on Twitter: @AlyceLomax. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 29, 2011, at 3:45 PM, pythag580 wrote:

    Not knowing anything good to say about Walmart (including their alleged low prices), I find it hard to challenge the women's position.

  • Report this Comment On April 07, 2011, at 1:32 PM, AVISELIZABETH wrote:

    What's the problem here? Walmart is just following in their overlords footsteps in how it treats its workers and citizens.

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