U.S. District Judge Yvonne Gonzalez Rogers said the company violated anti-discrimination laws when it fired Hani Khan from its Hollister store in San Mateo, Calif., in 2010. Rogers issued the ruling on Tuesday.
The company claimed the head scarf violated its policy governing the look of its employees, which it said was part of its marketing strategy. The store argued that deviating from its look policy would affect sales.
But the judge said Abercrombie & Fitch offered no "credible evidence" that Khan's head scarf cost the company any sales.
"Abercrombie only offers unsubstantiated opinion testimony of its own employees to support its claim of undue hardship," Rogers said.
The U.S. Equal Employment Opportunity Commission filed a lawsuit on Khan's behalf in 2011.
"Abercrombie & Fitch does not discriminate based on religion and we grant religious accommodations when reasonable," spokesman Bruce MacKenzie said. "It is our policy not to comment on pending litigation."
A trial on the company's liability is scheduled for later this month. The judge said the jury is free to award punitive damages if it chooses.
It's the latest employment discrimination charge against the company's so-called "look policy," which critics say means images of mostly white, young, athletic-looking people. The New Albany, Ohio-based company has said it does not tolerate discrimination.
Abercrombie has been the target of numerous discrimination lawsuits, including a federal class action brought by black, Hispanic and Asian employees and job applicants that was settled for $40 million in 2004. The company admitted no wrongdoing, though it was forced to implement new programs and policies to increase diversity.
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