Discrimination Charges Tarnish Jewelry Company’s Image

Allegations in arbitrated case took years to emerge into public view

By Robert Teachout, SHRM-SCP Mar 13, 2017
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The private arbitration of discrimination claims against the management of Sterling Jewelry Co. has ballooned into a class action encompassing more than 69,000 employees and the claims being made public. 

​Sterling Jewelry executives and managers led a workplace culture that demeaned women, according to the claims against the company. The claims, filed beginning in 2008, include allegations of sex-based pay and promotion discrimination to, according to The Washington Post, sexual harassment, including groping and demands of sex for promotions and prime store assignments.

Sterling Jewelry is the parent company of jewelry store brands Zales, Kay Jewelers and Jared Galleria of Jewelry and has about 18,000 employees in 1,500 stores around the United States. Sterling Jewelry is a subsidiary of Signet Jewelers Limited. Following report of the charges in The Washington Post on Feb. 27, the company's stock value plummeted 13 percent and it briefly halted trading. 

The company denies the allegations. David Bouffard, a company spokesman, said, "There are not allegations of sexual harassment in the class action--it's gender discrimination." Sterling also issued a press release calling press accounts of the case as "distorted and inaccurate." The release added, "Despite years of litigation, millions of pages of documentation and numerous depositions, claimants' counsel have chosen not to file sexual harassment claims. These allegations publicized by claimants' counsel and reported in the media create a distorted, negative image of the company."

It took years of requests from the employees' attorneys and The Washington Post to make the records in this case public. Agreement was reached with Sterling's attorneys to release the records with the names of managers accused of harassment redacted, although it is not clear why the attorneys agreed to make the records public.

Mandatory Arbitration Agreements

A key issue of this case is that it is being pursued in the arbitration system instead of the courts.

The first arbitration claims were filed in 2008 by more than a dozen women. They accused the company of widespread gender discrimination, mostly for pay and promotions. In 2013, the employees' attorneys filed a motion seeking class-action status for a group of women with similar claims. The class now numbers more than 69,000 former and current Sterling employees. The employees are seeking punitive damages and back wages.

Many employers require employees to sign an agreement prior to employment to arbitrate any employment claims. For the most part, said Donna Ballman, a Fort Lauderdale, Fla., employee-side attorney and arbitrator, courts uphold arbitration agreements and force employees out of the court system and into private arbitrations.

Arbitration has its pros and cons, Ballman said. Arbitration proponents argue that arbitration is quicker and less expensive than the court system. "Since arbitrations generally aren't appealable, an employee who wins at arbitration could get justice more quickly," she noted. On the other hand, arbitration opponents claim some arbitration agencies stack the deck against employees with pro-employer arbitrators and do not give employees adequate opportunities to discover evidence.

Critics of arbitration say companies prefer it because it also offers a forum where disputes remain confidential and out of the public view.

Increasingly, mandatory arbitration agreements have included class and collective action waivers. However, the National Labor Relations Board has taken the position that it is a violation of the National Labor Relations Act (NLRA) to make such waivers a condition of employment because they interfere with employees' Section 7 right to engage in protected concerted activity.

The circuit courts have split on this issue, with the 2nd, 5th and 8th Circuits holding that class and collective action waivers do not violate the NLRA, while the 7th and 9th Circuits have ruled the opposite. The U.S. Supreme Court recently granted review in and consolidated three cases (Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013 (5th Cir. 2015), Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016), and Morris v. Ernst & Young, 834 F.3d 975 (9th Cir. 2016)) to resolve the split.

Alleged Harassment Claims

While the complaints focus on pay- and promotion-based gender discrimination, the most shocking allegations are those claiming Sterling allowed a widespread culture akin to sexual harassment.

[SHRM members-only toolkit: What are the different types of sexual harassment?]

Approximately 250 women and men who worked at Sterling filed declarations alleging female employees were routinely groped, demeaned and urged to provide sexual favors to their managers and company executives to stay employed and be promoted.

Many of the sexual harassment accusations center on the annual managers' meetings, a mandatory event that former employees described to The Washington Post as a boozy, no-spouses-allowed "sex-fest." The meetings included daytime work seminars but were widely known for wild parties at night, employees reported. Female employees were aggressively chased, encouraged to strip, and molested and harassed by managers and executives, including CEO Mark Light, according to multiple witnesses. Other statements detail instances of managers basing promotion decisions on whether women acquiesced to demands for sexual favors.

The employees' attorneys say the sworn statements describe a corporate culture of rampant sexual harassment in which women were undervalued or demeaned. Joseph Sellers, a partner at Cohen Milstein in Washington, D.C., and lead counsel in the case, said the unrebutted evidence shows widespread mistreatment of women. "Whether or not it legally qualifies as a claim for classwide sexual harassment is irrelevant," he said.

Attorney Allison Feldstein, of Saul Ewing's Pittsburgh office and not affiliated with the case, noted that although the sexual harassment allegations have caused the most outrage, they occurred from 1999 to 2000, well outside of the 300-day statute of limitations for filing charges with the Equal Employment Opportunity Commission.

The complaints involve allegations of sex discrimination and sex-based pay discrimination. "Those are the claims that will be most costly to Sterling, as they are likely the timely allegations which prompted filing of the arbitration," she said. Feldstein believes the sexual harassment evidence is intended to prove how the company treats women, as opposed to actionable claims in and of themselves.

Company Response

Bouffard said company officials "have thoroughly investigated the allegations and have concluded they are not substantiated by the facts and certainly do not reflect our culture." He pointed out that Sterling "has created strong career opportunities for many thousands of women working at our stores nationwide" and takes allegations of pay and promotion discrimination seriously.

The company has in place multiple processes to address allegations of misconduct, Bouffard said, and encourages all employees to report any workplace concerns so officials can investigate and respond appropriately. He added that the discrimination allegations "involve a very small number of individuals" and those claims were included by employees' attorneys in the arbitration filings "to paint a negative and distorted picture of the company." The complaints that were reported to the company were thoroughly investigated and action was taken where appropriate, he said.

Robert Teachout, SHRM-SCP, is a writer in Washington, D.C., who covers employment law and HR issues. 

 

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