Workforce.com

Employment Law Landscape Changes With Wal-Mart Ruling

June 20, 2011

By Rita Pyrillis
The Supreme Court’s dismissal on June 20 of a huge sexual discrimination class-action lawsuit against Wal-Mart Stores Inc. is a major victory for the retail giant and employers across the country, say employment lawyers, and sets guidelines for the way similar lawsuits can be structured and litigated.

“It’s a big win for employers because it sets new ground rules for the way in which class actions are constructed and defended,” said Gerald Maatman, a Chicago-based lawyer with Seyfarth Shaw, an employment and labor law firm. “The bar has been raised and tightened making it harder for plaintiffs to marshal the evidence needed for a class-action suit. In this case, the plaintiffs failed to establish a pattern or practice of unwritten discrimination.”

In a 5-4 ruling in the case of Wal-Mart Stores Inc. v. Betty Dukes, et al., the high court reversed a lower court decision that would have allowed as many as 1.5 million female workers to sue the nation’s biggest private employer for back pay and punitive damages that could have totaled billions of dollars.

The decision makes it more difficult for employees to file such lawsuits unless they are able to clearly identify a common injury, such as a companywide discriminatory policy, Maatman said.

The plaintiff’s key evidence was Wal-Mart’s policy of allowing local supervisors discretion over pay and promotion decisions, “which in and of itself was not evidence sufficient to raise an inference of discrimination,” Maatman said. The justices also deemed anecdotal evidence in the form of 120 affidavits as insufficient proof.

“The Supreme Court says there’s nothing sinister about subjective decision-making,” Maatman said. “It doesn’t lend itself to discrimination, which is what the plaintiffs asserted.”

Katherine Kimpel, a partner at the Washington, D.C.-based law firm Sanford Wittels and Heisler, which filed a friend of the court brief on behalf of the plaintiffs, said that the ruling marks “a significant departure from previous cases in terms of what the Supreme Court will and will not countenance as actionable claims. It significantly limits the way individuals can stand up to Goliath corporations and effect change in policies and procedures. This decision takes away the possibility that through a lawsuit you can actually bring down Goliath.”

Wal-Mart’s executive vice president of people Gisel Ruiz said in a written statement: “Clearly today’s ruling in the Dukes case has important legal implications, but just as important, it pulls the rug out from under the accusations made against Walmart over the last 10 years. Every female associate and every customer can feel even better about the company as a result of today’s decision.”

Alison Davis, CEO of employee communications consulting firm Davis & Co., said companies’ initial reaction to the ruling may be to breathe easier. But, she said, “It doesn’t mean that they can relax.”

To avoid a lawsuit in the first place, business leaders she has spoken with have been trying to do a better job of communicating their policies, sharing job opportunities and listening to employee concerns.

An active, thorough approach to good employee relations is all the more important in today’s climate of workers who use Facebook and Twitter, Davis said. Complaints voiced by an employee in one location can grow into a groundswell quickly, she said.

“Social media has meant that these things go viral very fast,” she said.  

Workforce Management Senior Editor Ed Frauenheim contributed to this story.