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DISCRIMINATION: Class action discrimination claims

08.01.2011

In a decision eagerly awaited by employers and employees, the U.S. Supreme Court has decided a sex discrimination case that Wal-Mart has fought for the last 10 years. The federal trial and appeals courts had both determined that a group of 1.5 million women could proceed on their claims that the retail giant had engaged in systematic sex discrimination at their U.S. stores. If the claims could be pursued as a class action, the implications for employers would be enormous.

Supreme Court refuses to loosen courthouse doors

In June, the U.S. Supreme Court decided Wal-Mart Stores, Inc. v. Dukes, a class action involving approximately 1.5 million female past and present Wal-Mart employees from all over the country. The women alleged that the employer’s female employees received less pay and fewer promotions than their male counterparts. The trouble was the class failed to identify a common, unlawful cause for the pay and promotion disparities.

Wal-Mart maintains an anti-discrimination policy and does not expressly limit the pay and promotion opportunities of its female employees. Absent evidence of overt sex discrimination, the women were required to search for an unlawful cause of the alleged “disparate impact” on their pay and promotion opportunities. However, unlike most employees alleging disparate impact, the class didn’t contend that Wal-Mart used a uniform testing procedure or job qualification that caused pay or promotion disparities. Instead, it alleged that the company’s organizational structure constituted a uniform “pattern or practice” that unlawfully caused pay and promotion disparities throughout its 3,400 domestic locations.

Like many large employers, Wal-Mart uses a decentralized method of decision making that affords local store supervisors great discretion (within specified ranges set by upper management) in making promotion and pay decisions. The women in the class contended the widespread discretion, in conjunction with the assertion that gender stereotypes exist in many social settings, created a “corporate culture” of workplace discrimination based on sex. This theory, however, didn’t convince the Supreme Court that they were entitled to litigate so many individual claims in a single lawsuit.

Under federal law, it is generally understood that courts will not certify a class and allow litigation to proceed as a class action unless, among other things, the class and its claims include the “requisite numerosity, commonality, typicality and adequacy of representation.” In a 5-4 decision, the U.S. Supreme Court reversed two lower federal courts and held that the class was improperly certified under federal law because its claims lacked sufficient commonality.

In this case, the class sought “to sue [over] literally millions of employment decisions at once,” with relevant employment decisions spread among thousands of supervisors in stores throughout the United States. With so many different employment decisions bearing on whether each individual class member actually suffered discrimination, the class was unable to present sufficiently common questions of law or fact. The court further observed that Wal-Mart’s decentralized decision-making process is “a very common and presumptively reasonable way of doing business” that “should itself raise no inference of discriminatory conduct.” Wal-Mart Stores, Inc. v. Dukes, 2011 WL 2437013 (U.S., 2011).

Bottom line

This case is a big loss for employees seeking to pursue class action litigation. Class actions have been a popular method by which to pursue discrimination claims, particularly when each individual claim might not generate large damages on their own. For that reason, class and collective actions have been the preferred method of litigation for large numbers of employees to collectively pursue wage and hour claims. The court’s decision suggests that closer scrutiny will be given to whether or not class action claims actually meet the various certification factors.

The takeaway for employers is that a decentralized decision-making process across various business locations may actually reduce the threat of employee class actions. Nevertheless, in some business circumstances, decentralizing employment decisions may result in policies being inconsistently applied – leading to other related discrimination claims. Given this reality, you should carefully weigh the benefits and burdens associated with centralizing or decentralizing employment decisions. The risks and rewards vary with each employer’s particular business model.

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If you have any questions or need help, please contact any member of the Bingham Greenebaum Doll LLP Labor and Employment Department. Find us online at www.bgdlegal.com. 

Copyright 2011 M. Lee Smith Publishers LLC 
KENTUCKY EMPLOYMENT LAW LETTER does not attempt to offer solutions to individual problems but rather to provide information about current developments in Kentucky employment law.  Questions about individual problems should be addressed to the employment law attorney of your choice.

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