The 10 Biggest Costco Lawsuits in Company History


Costco is a large membership chain retailer. The company specializes in selling a little bit of everything at its numerous outlets throughout the United States. Although the company, in general, has a solid reputation for operating under ethical guidelines, like many other large retailers, it has made its share of mistakes, resulting in several lawsuits. Here is a list of the ten of the most impactful Costco lawsuits filed in its history.

10. Costco Drug Company payments scandal

Mashed reports that Costco experienced some legal problems in 2013. The issue involved pharmacy rebates. The company demanded payments from drug companies for the privilege of having their brand of medication stocked on Costco shelves. The result was higher charges for the pharmacy items to the consumers. In Canada, the price of drugs escalated to become the highest on the planet. To combat the high price of medications, the province of Ontario voted to make the practice of pharmacy rebates illegal. The goal was to lower the cost of medications to the public. Although the practice of charging the fees was ruled illegal, Costco executives refused to suspend them in violation of the law. Costco executives stated that companies were still required to pay the fees. Recordings of the conversations served as evidence of the wrongdoing. Professional investigators discovered that the allegations were substantiated. Costco was found guilty of the charges. The company had taken about $1.2 million in illegal fees from pharmacy companies, although Costco claimed their actions were in the best interests of consumers. The Ontario judges hearing the case disagreed with Costco’s philosophy about the matter and fined them more than $7 million in the lawsuit that concluded in February of 2019.

9. J&J Costco Settle Lawsuits Over Recalled Sunscreen

US News reported on the Johnson & Johnson and Costco Lawsuit over Neutrogena sunscreen. The products were voluntarily recalled along with a few other aerosol sunscreen products. Cancer-causing chemicals were detected in some samples of these products. Even though they represented a danger to the public, some Costco stores allowed them to remain on the shelves for sale to the public. A lawsuit was filed against both companies in a Florida Federal court. Although neither company admitted liability, and disputed the merits of the lawsuits, a voluntary recall was issued. J&J called it an abundance of caution because small amounts of benzene were found in the products at exceptionally low levels, not believed to pose a public health risk. They also pulled several lots of the products and offered consumers refunds. Several lawsuits filed because of this situation were consolidated into one massive lawsuit, opening the door for tens of thousands of consumer claims.

8. Costco Hourly Employees lawsuit in California

Gibbs Law Group reports that a lawsuit was filed against Costco by employees who claim to have suffered damages because of the unfair practices of the company. The workers put in hours that were not compensated for. Workers were forced to spend time waiting for a security inspection or to stand in customer receipt-check lines after clocking out. The workers are not allowed to leave immediately after their shifts, nor during a lunch break, without waiting in a line. Costco did not compensate their employees for this, in violation of California labor law. A class-action lawsuit was filed against Costco, to demand compensation for damages. The employment lawyers filed a lawsuit to recover damages for the workers who were required to wait, on their own time, to fulfill the requirements of Costco, asserting that they were entitled to compensation for the time that they were detained by the company, in line with California laws that require companies to pay workers for such requirements. Costco made it impossible for workers to leave the building for breaks, or at the end of their shift without long waits, which is illegal under the labor laws of California. The company was in clear violation of the law and workers were justified in filing the legal action. Costco was required to change its procedures to come under compliance with local laws protecting workers’ rights.

7. Costco wage law abuse lawsuit

The New York Times reported that Costco was sued by a California worker for false imprisonment. She alleged that all Costco employees remain locked in stores against their will for a full fifteen minutes daily after they clock out. The allegations were lodged by mary Pytelewski in 2009. She is a cash register clerk at San Marcos, California who claims that Costco refused to let workers clock back in to get paid for the time they were locked in the store while the management closed the stores. this was their usual practice and it required a manager to let them out. The store implemented this measure as loss prevention and security measure. Several hundred Costco workers demanded $50 million in back pay along with damages that took place from 2005 forward. When complaints were filed, Costco management is claimed to have retaliated against the worker. Costco declined to comment on the situation.

6. Costco sued for lax pharmacy controls

Maryland Politics reveals that Costco was accused of improperly filling prescriptions in 2017. The suit claims that prescriptions filled were not correctly written, and were released without proper identifying marks. Some prescriptions were filled for substances not allowed by prescribing physicians to legally prescribe. The lawsuit turned into a big scandal for the Costco pharmacy. It is suspected that the failure of the control resulted in Costco’s contribution to the black market for drugs. The Orange County Register investigated allegations of pharmacy protocol breaches and discovered record-keeping deficiencies. Multiple violations were discovered upon the conclusion of the investigation. Costco stores were also investigated in Michigan and Washington State. Costco was fined and ordered to change its procedures to prevent the issues from happening again.

5. Costco Gender Bias Lawsuit

Costco became the defendant in a 2004 lawsuit filed by 700 female employees over practices of promotion within, that passed over women for management jobs and put men in the jobs instead. Nor did Costco advertise the positions when they opened. The suit took several years to settle, finally, concluded in 2013. Costco agreed to pay a settlement of $8 million for actions deemed gender bias. Costco had to change the procedures for promoting employees and could no longer use an informal method for moving workers up the chain of command. Jobs are now required to be posted for a minimum of ten days before being filled.

4, Discrimination against deaf employees at Costco

Costco fired employee Christine D’Onofrio in 2013, alleging that she was loud and aggressive. She was a 24 -year employee at the company and had repeatedly asked Costco to provide her with accommodations for her disability so she would receive fair treatment. Costco provided an interpreter once, but then informed her that she was being fired for being loud and aggressive. There were no complaints about her until after she requested the interpreter. The courts weighed the evidence and found that the problem was with the management team. They awarded her $775,000 in damages. Costco was found guilty of discriminating against her because of her condition of deafness.

3. Costco’s Michael Kors bait-and-switch

Costco was sued in 2013 for advertising Michael Kors handbags without being an authorized seller. The allegations claimed that Costco ran a false advertising campaign advertising the handbags to get customers to come into the store, to sell them a different product. The handbags Costco sold were offered at a far lower price than the Michael Kors brand. It was a classic case of the old bait and switch. Customers were so incensed that they lodged complaints against Costco that resulted in federal lawsuits being filed. It’s illegal to use the bait and switch method of advertisement to get customers into an establishment. Costco knew that it didn’t have any of the designer bags to sell, yet it advertised them at a ridiculously low price. The lawsuit was settled in 2014 but the details were not disclosed and Costco had no comment on the situation.

2. Costco lawsuit for selling fake Tiffany rings

Costco was sued by Tiffany & Co., for allegations that they sold fake Tiffany rings. Costco’s advertisements lured customers into advertising Tiffany rings, but the rings they advertised were not genuine Tiffany rings. Costco did not have an agreement with Costco to even sell these products. Costco tried to get out of the suit by alleging that the term “Tiffany” was only used to represent the style of the ring and that they didn’t intend to infer that it was from the famous brand. The courts viewed the actions of Costco a bit differently. The evidence pointed to a clear-cut case of trademark infringement and false advertising. The case was settled in 2015 when Costco was found guilty of trademark counterfeiting and trademark infringement. They were also found in the practice of deceptive advertisement.

1. Costco sued for discrimination in hiring

According to Maryland Politics, Costco was sued by a former employee who became the victim of retaliation when he complained of discriminatory treatment because he is HIV positive and gay. He was the subject of taunts and slurs, called “queer” by the General Manager, who answered his pleas for help by doubling his workload and cutting his pay. He was also demoted to cashier, and stripped of his employee benefits. Without health insurance, his health would decline and he would die without the medications that kept his HIV in check. He was awarded $420,000 in damages in a court of law. This was a weighty case that not only resulted in emotional and psychological damage to the worker, but it put his life in jeopardy. The actions of the manager were callous and could have resulted in the death of the worker because of his bias against gay people.

This case is just the tip of the iceberg. Costco has been sued by many people alleging discrimination against protected groups. A Seattle employee alleged that she was sexually harassed by a male co-worker and management did nothing to stop him from making disgusting gestures and comments to female co-workers. He even exposed himself to her, but nothing was done by Costco to stop the behavior. After hearing the case, a judge determined that Costco was in the wrong for allowing these activities to continue. A 2009 Annual Report details multiple lawsuits alleging that Costco engages in practices that are not in the best interests of its workers. These are cases that the public needs to be aware of to protect themselves from becoming the next victims.

Final thoughts

Costco has been on the bad end of multiple lawsuits in the history of the company. We’ve highlighted just ten of them. Employees have been subjected to criminal wait times without pay to ensure that they were not trying to steal from the workplace, undergoing individual inspections to ensure they weren’t trying to take merchandise home. Costco’s inefficient systems were found in violation of wage laws in California and they were required to compensate workers for the time and money loss. Costco has been found guilty of multiple bait and switch and trademark infringement violations. The company has also been held accountable for not protecting its employees from discriminatory practices or sexual harassment. It has a long history of unfair treatment and deceptive advertising practices, yet it remains one of the leading membership retail establishments in the country. Workers have also sued the company for unfair labor practices and gender bias and won. Hopefully, the legal actions have resulted in meaningful change within its administration, but only time will tell.

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