• Wal-Mart Decision Illustrates Class Action Risk Potential
  • August 9, 2004 | Author: Matthew R. Williams
  • Law Firm: Pepper Hamilton LLP - Philadelphia Office
  • On June 21, 2004, in a decision that illustrates the risk potential inherent in employment discrimination class actions, a federal district court in San Francisco certified a class of 1.5 million Wal-Mart employees for injunctive relief, lost pay and punitive damages. This is by far the largest class ever certified in the employment discrimination context.

    The class claims rest on two interrelated theories of gender discrimination. First, the plaintiffs assert that Wal-Mart's policy of subjective decision-making in setting levels of compensation for employees and in promoting employees allows gender discrimination. The court found that subjective criteria dominated compensation and promotion decisions in both managerial levels and hourly employment, providing a means for gender bias to affect all class members in a similar fashion. Second, the court found the plaintiffs presented sufficient evidence that Wal-Mart cultivates and maintains a strong corporate culture that includes gender stereotyping. The court also found that Wal-Mart's corporate culture of uniformity provides a sufficient nexus between the subjective decision-making and the alleged discrimination suffered by all class members.

    The court certified claims for declaratory and injunctive relief under Federal Rule of Civil Procedure 23(b)(2), including lost pay claims for many class members. The court also certified the claim for punitive damages under Rule 23(b)(2), holding that the equitable relief sought by plaintiffs predominates over the claims for punitive damages. Nevertheless, the court ordered that the class be given notice and an opportunity to opt out, which are not required by the terms of Rule 23(b)(2), to satisfy due process concerns.

    Wal-Mart is certain to appeal this decision to the Ninth Circuit under Rule 23(f). Pending any appellate ruling, however, the trial court's holding will not sit well with employers. Despite instituting extensive diversity and equal opportunity policies over the past few years, Wal-Mart not only faces the possibility of being forced to completely overhaul its employment policies, but it could also be on the hook for over $1 billion in liability. To avoid facing class action liability, employers would be wise to carefully review the subjective aspects of their employment decision-making processes and consider whether their corporate culture may be viewed as fostering gender stereotyping.