|June 22, 2011|
Previously published on June 2011
The Supreme Court has rejected the attempt of a group of 1.5 million current and former Wal-Mart employees to obtain certification for the largest-ever group of plaintiffs to sue an employer. Wal-Mart, the largest retailer in the world (with 3,400 stores globally), has been accused of sex discrimination in its promotion and compensation policies by a group of female employees. The case, Dukes v. Wal-Mart Stores, was filed in 2001, and no ruling on the merits of the case has yet occurred. The litigation so far has centered on whether the courts will allow the plaintiffs to pursue the case as a class action. The trial and appellate courts had ruled in favor of class certification, but a majority of Supreme Court justices rejected that outcome and the lower courts’ reasoning. Had the Court permitted the case to go forward as a class action, it would have been the largest lawsuit of its kind in history.
The majority opinion was written by Justice Scalia, a portion of which all of the justices joined. The three female justices, joined by Justice Breyer, disagreed with one part of the majority opinion in a dissent written by Justice Ginsberg. The Court was unanimous only on the determination that class certification was not appropriate for the plaintiffs’ claims for back pay. That ruling turned on the Justices’ determination that the plaintiffs’ back pay claim had relied on the wrong section of the Federal Rule that permits class-wide litigation. Because the unanimous Court agreed that Wal-Mart was entitled to individualized determinations of each plaintiff’s eligibility for back pay, rather than with the plaintiffs’ assertion that a formula could have calculated each plaintiff’s entitlement without individual hearings, certification of the class on the back pay issue was inappropriate. However, four justices disagreed with the majority’s view that class certification was inappropriate for the plaintiffs’ other claims for injunctive relief and a ruling that Wal-Mart had engaged in class-wide sex discrimination.
The plaintiffs relied on three types of evidence to support their quest for class certification. First, they pointed to statistical disparities in pay and promotion rates between male and female employees. Second, they provided anecdotal evidence from 120 current and former female employees of alleged discriminatory treatment. And third, they offered the testimony of an expert witness, a sociologist, who provided a “social framework analysis” of Wal-Mart’s corporate culture and employment practices.
Under the Federal Rules of Civil Procedure, plaintiffs who seek class action certification must satisfy four requirements:
- a sizable number of plaintiffs (not a problem in this case);
- common questions of law or fact;
- similar or common claims or defenses by the class representatives; and
- a representative plaintiff who will adequately protect the interests of all members of the class.
The primary issue before the Court was the second prong of the test: whether Wal-Mart’s promotion and compensation policies are sufficiently similar or common across the company to meet the test of “commonality” under the Federal Rule. In order to satisfy this portion of the test, the plaintiffs must identify one or more corporate policies that result in pay and promotion decisions that, in this case, are less favorable to women than to men.
The majority ruled that the plaintiffs did not meet the commonality standard for a class action claim. The majority commented that the plaintiffs “wish to sue about literally millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the question ‘Why was I disfavored’.” In order to show commonality, said the majority, plaintiffs would have to show “’significant proof’ that Wal-Mart ‘operated under a general policy of discrimination.’” And they were unable to do so; the expert on whom they relied for showing an alleged corporate culture of sex bias, could not determine how many pay and promotion decisions were affected by sex bias; the majority dismissed his testimony as “worlds away from the ‘significant proof’” that the commonality requirement demanded. The majority noted that the company has an official policy forbidding sex discrimination. Giving discretion to local managers to make pay and promotion decisions, said the majority, will result in mostly gender-neutral decisions and some discriminatory decisions, but a policy of managerial discretion is not a corporate policy that requires or permits sex discrimination.
The majority simply did not believe that the plaintiffs’ allegations of a common approach to making biased employment decisions was credible. “In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction.” And despite the fact that the plaintiffs’ statistical experts had found some gender-related pay differences in certain Wal-Mart regions, the majority noted that the plaintiffs needed to point to a specific employment practice that led to these disparities, which they had not done. Similarly, the 120 anecdotal instances of alleged discrimination, when compared with the size of the plaintiff class, resulted in one allegation of discrimination per 12,500 class members—hardly an indication that there was a company-wide policy that encouraged sex discrimination, according to Justice Scalia’s opinion.
Justice Ginsberg and her three dissenting colleagues took issue with the majority’s determination that the plaintiffs had not met the commonality test. They read the technical requirements of the commonality requirement differently than the majority, and noted that the majority “train[ed] its attention on what distinguishes individual class members, rather than on what unites them.” The dissenters asserted that the majority had used a test for commonality that was more appropriately used under a different section of the Federal Rule; they also argued that the trial court had ruled that there was at least one “significant issue” of fact or law common to the class, and that one issue was sufficient to support class certification on the matter of discrimination in pay and promotions. The plaintiffs had given the trial court sufficient evidence, said the dissenters, to suggest that there was a “corporate culture” that reinforced stereotypes of women and led to gender bias. The dissenters noted that “the practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to produce disparate effects . . . The risk of discrimination is heightened when those managers are predominantly of one sex and are steeped in a corporate culture that perpetuates gender stereotypes.”
The Court’s ruling neither approved nor criticized Wal-Mart’s policy of local managerial discretion in making pay and promotion decisions. The case turned on the majority’s interpretation of the requirements for class certification rather than on the merits of the plaintiffs’ allegations. Although the case turns on technicalities in determining whether a class of plaintiffs meets the requirements of class certification, the litigation suggests some strategies for avoiding either individual or class claims of discrimination in employment decisions, whether the company is large or small.
- Even if a company's employment statistics on a company-wide basis suggest that its employment practices are lawful, it is prudent for employers to review employment data on the basis of individual stores (if a retail operation) or business units. A company may be held responsible for the allegedly biased decisions of one manager, even if there is no pattern of alleged bias overall.
- Management training should avoid the use of stereotypes about characteristics of protected classes, even if there is research to demonstrate that, as a group, those stereotypes may be true. Attributing to an individual a characteristic alleged to be common to a class is potentially inaccurate and could be evidence of illegal bias.
- Companies committed to diversity, with a strong anti-discrimination policy, such as Wal-Mart’s, can improve the representation of diverse employees by making special efforts to encourage members of underrepresented groups to apply for promotions, assume additional responsibility that will earn them additional compensation, or take other steps to communicate to diverse employees that they are valued by the company and would be welcome in management and leadership positions.
- Although in this case the Court did not allow the class action to go forward, other fact situations and other courts may permit discrimination cases to be built primarily on statistics—rather than on evidence of individual employment decisions alleged to be biased. Employers, particularly those with numerous locations where employment decisions are decentralized, should monitor their employment statistics to ensure that they support the company’s policy of nondiscrimination.