Supreme Court Wal-Mart Ruling Good News To Employers

Last week, the United States Supreme Court announced that Wal-Mart Stores Inc. will not have to fight class action claims for sex discrimination by as many as 1.5 million of its current and former female employees. Coming on the heels of last month’s important ruling allowing business owners to enforce class action waivers in arbitration agreements, the high court’s decision is another bit of welcome news for lawsuit weary employers. The Supreme Court’s decision also contains some very broad language that will make it much more difficult for employees and job applicants to bring class action lawsuits against large businesses — especially in job bias cases. However, the ruling, which was decided under federal law, may not have the same sweeping impact on class action cases brought in state court. Wal-Mart is the largest private employer in the United States. It operates approximately 3,400 stores and currently has more than one million employees nationwide. The class action against Wal-Mart was led by three women who are current or former employees at Wal-Mart stores in California. Although Wal-Mart had a well-publicized written anti-discrimination policy, the plaintiffs claimed that Wal-Mart’s “corporate culture” tainted managers’ decision making throughout the company. The plaintiffs claimed that local managers used their discretion over pay and promotion decisions in a manner that had an unfavorable disparate impact against all of Wal-Mart’s female employees. The plaintiffs also accused Wal-Mart of intentional discrimination against women. The plaintiffs sought backpay, punitive damages and an injunction against Wal-Mart. The plaintiffs sought to certify the case as a class action so the case could proceed utilizing the favorable class action court procedures. The class was defined as all women employed at any Wal-Mart retail store in the United States “at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” If approved, it would have been the largest class action ever in an employment case. The trial judge certified the case as a class action and the appellate court agreed. A unanimous U.S. Supreme Court decided in favor of Wal-Mart and ruled that the plaintiffs’ case could not proceed as a class action. Although all nine High Court justices agreed that the lower court rulings were incorrect, the justices were divided on their own reasoning. A narrow 5-4 majority found that the class members’ claims did not have enough in “common” with one another for the case to proceed as a class action. In this case, the plaintiffs “wish to sue about literally millions of employment decisions at once.” The Court determined there must be “some glue holding the alleged reasons for all those decisions together” in order for the case to proceed as a class action. The Court offered two ways in which class members’ job bias claims might be “glued” together. One would be if the employer used the same biased testing procedure for all class members. However, the plaintiffs made no such claim in this case. The other way would be “significant proof” that Wal-Mart had “a general policy of discrimination.” However, the Court found that the plaintiffs did not meet this standard either, and noted that Wal-Mart’s written policy actually prohibited gender discrimination. In fact, the plaintiffs’ only evidence of a discriminatory policy was an expert witness who testified that Wal-Mart’s “strong corporate culture” makes it “vulnerable” to “gender bias.” However, this expert admitted he was unable to calculate “whether 0.5 percent or 95 percent” of Wal-Mart’s decisions resulted from “stereotyped thinking.” For this reason, the Supreme Court “disregard[ed]” the expert’s opinions. The Court also rejected plaintiffs’ statistical evidence that Wal-Mart’s managers made discretionary decisions in a manner that disfavored women. The Court noted that these numbers fail to account for possible gender-neutral, performance-based reasons for the decisions, “whose nature and effects will differ from store to store.” Lastly, the plaintiffs offered “anecdotal” testimony from 120 women who reported various incidents of alleged discrimination by Wal-Mart. However, the Court said that that this was only a tiny percentage of all 1.5 million class members and related to fewer than 10 percent of Wal-Mart’s stores. Even if all this testimony was true, the Court ruled it was not enough to support a class action. The Supreme Court’s Wal-Mart decision will make it extremely difficult – if not impossible – for plaintiffs to pursue nationwide job bias class action lawsuits in federal court. The decision also might make it more difficult for plaintiffs to prove so-called “disparate impact” discrimination, even in cases which are not class actions. However, employers should not overestimate the impact of the Wal-Mart decision — especially California employers. Plaintiffs’ lawyers might instead look for smaller class actions where it might be easier to find truly “common” claims among class members. More importantly, the Wal-Mart decision is not binding on California state courts, because it only involved federal rules of procedure and federal job bias law. Although some California courts might choose to follow the Wal-Mart decision, they also are free to ignore it. A listing of the daily court filings in Los Angeles county state courts show that there is new shortage of new filings against employers, especially in the wage and hour area. We do not expect the Wal-Mart decision to stop this trend. However, the Wal-Mart decision does illustrate the need for all employers to adopt and enforce a written policy against job bias and harassment. Wal-Mart’s own anti-discrimination policy, and the lack of evidence of an informal policy of sex bias, helped the company avoid one of the largest class action lawsuits in American history. Employers who already have anti- discrimination policies should use the Wal-Mart decision as an occasion to review their anti-discrimination policies and train managers on the importance of adhering to this policy. Richard S. Rosenberg is a founding partner of Ballard Rosenberg Golper & Savitt LLP, a management side labor law firm in Glendale. Rosenberg was selected as one of the 25 best lawyers in the San Fernando Valley. He may be reached at (818) 508-3700 or [email protected].