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Wal-Mart Ruling Convolutes Class-Action Landscape

July 5, 2011

As employers and employees process the U.S. Supreme Court’s June 20 ruling in the Wal-Mart Stores Inc. gender bias case, experts agree that proving systemic workplace discrimination will be much harder.

“It’s a big win for employers because it sets new ground rules for the way in which class actions are constructed and defended,” says Gerald Maatman, a partner with the Chicago-based law firm Seyfarth Shaw. “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 current and former female Wal-Mart workers to sue the nation’s biggest private employer for back pay and punitive damages that could have totaled billions of dollars.

The justices ruled that the women did not legally constitute a “class.” In order to receive class-action certification, federal rules require that plaintiffs meet certain procedural requirements, says Rob Friedman, a Dallas-based shareholder with the law firm Littler Mendelson. One of those requirements is showing that the plaintiffs share a common legal complaint, according to the Federal Rules of Civil Procedure that govern class-action lawsuits.

Wal-Mart employees’ key evidence was the retailer’s policy of allowing local supervisors to have discretion over pay and promotion decisions. But that discretion undermines the argument that the company fostered a culture of discrimination, Friedman says. “On the local level, supervisors had great discretion to make employment decisions so it didn’t satisfy the commonality test.”

Commonality is “a prerequisite to class-action certification,” Friedman says, pointing out that “it’s more than just a common claim—it’s a claim that can be resolved by a common answer.”

But the court was divided on that point along ideological and gender lines. The five male and, for the most part, more conservative Supreme Court justices agreed with Justice Antonin Scalia who said in his opinion that “the respondents have identified no ‘specific employment practice,’ much less one that ties all their 1.5 million claims together.”

Sarah Crawford, director of Workplace Fairness Programs at the not-for-profit National Partnership for Women and Families, says that the four dissenting justices agreed the women of Wal-Mart had ample evidence of discrimination.

“The plaintiffs offered not only anecdotal and sociological evidence establishing a corporate culture of discrimination, but also provided statistics that established that the women were promoted less and paid less even though some of them had greater seniority than the men,” she says. “In taking all this together, we decided that the justices dissenting saw that the women had a common claim of discrimination.”

The court deemed anecdotal evidence in the form of 120 affidavits from women who said they experienced workplace discrimination as insufficient proof of a larger problem. The ruling makes it harder for employees at large companies with centralized policies and practices to challenge widespread discrimination, Crawford says. “Our concern is that this decision could be cited by some employers that they are too big to be held accountable.”

Katherine Kimpel—a partner at the Washington, D.C.-based law firm Sanford Wittels & Heisler, which filed a friend of the court brief together with the National Partnership for Women and Families on behalf of the plaintiffs—says 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.”

But Peter Cappelli, a management professor at the University of Pennsylvania’s Wharton School and director of Wharton’s Center for Human Resources, says the Wal-Mart case, however significant, doesn’t mean much for the average employer.

“It’s a technicality ruling on what constitutes a class action,” he says. “If you’re a big employer, this is some comfort. If you have lots of decentralized operations where HR practices vary, then it’s really hard to have a class-action case brought against you.”

Workforce Management, July 2011, p. 10 -- Subscribe Now!