Arguably one of the United States Supreme Court’s most significant decisions for employers in years was handed down recently, when the high court made it substantially more difficult for employees to sue their employer on a class basis.

By reversing a decision by the United States Court of Appeals for the 9th Circuit which both permitted certification of a class approximating 1.5 million people and allowed a lawsuit against the nation’s largest employer to go forward, the Supreme Court in Wal-Mart v. Dukes actually did not determine that the many women who wish to sue the United States’ largest employer on claims of disparate impact discrimination could not proceed.  Rather, the Court decided simply that they could not proceed together as a class.

In the case, the Plaintiffs alleged that Wal-Mart maintained a company-wide policy which had the effect of discriminating against women in pay and promotions.  However, Justice Antonin Scalia, writing in a highly-anticipated opinion for the 5-4 Supreme Court majority, agreed with Wal-Mart, indicating that there was insufficient evidence of such a policy and, in fact, that the discretion Wal-Mart provided to managers to make individual employment decisions on a case-by-case basis nationwide mitigated against any such finding.  A common issue tying the class members together wasn’t all that’s required, according to the Court; a common question with a common answer also is required.  Because of that, the matter could not be certified to go forward as a class action.

Interestingly, the Supreme Court also rejected the Plaintiffs’ attempt to rely on statistical evidence from a sociologist who asserted that Wal-Mart’s culture could lead to discriminatory disparities.  Essentially, the sociologist felt that discretionary employment decisions throughout the corporation were affected by individual stereotypes and biases.  Calling it “worlds away” from sufficient evidence to help certify the class, Justice Scalia instead pointed to the “literally millions of employment decisions” involved and believed there was just no singular “glue” holding the reasons for all those decisions together.

The Court’s evaluation of the Plaintiffs’ sociological evidence was notable on many levels, not the least of which was that it signified a willingness to inquire deeper than courts historically have into the merits of the claims at the class certification stage.  In doing that, the United States Supreme Court analyzed the commonality requirement as required under the Federal Rules of Civil Procedure in order to proceed with a class action as a threshold matter.  In the past, many courts often paid only casual mind to the merits in evaluating commonality of a proposed class, and some even have accepted similar sociological theories to support class certification.  In this case, the Supreme Court took that aspect of its evaluation to a different level and examined the strength of the Plaintiffs’ evidence supporting it.  According to the Court, “significant proof” of a “common contention” is required to move forward.

The implications of this decision are enormous for businesses all across the country.  Some of those were discussed on this blog HERE when the Supreme Court first agreed to take the case.  While employers may face more individual lawsuits now (or even smaller class actions), they will have a greater opportunity to defend those cases by focusing on their particular merits without having to worry about the disadvantages which would come with not being able to single out specific circumstances in a large class.  In addition, if there are any damages – and attorney fees – recoverable in such suits, neither likely will rise to the level in individual cases as they would have in a class case.

On the other side of the coin, had the employees in the Dukes case been permitted to go forward, it likely would have resulted in an avalanche of employment class action litigation against employers all over the country who operate in multiple locations because it would have been easier to treat individual, fact-specific decisions which may happen to be discriminatory as some sort of mass bias held by the employer as a whole.

After this decision, Wal-Mart’s competitors – and employers everywhere – can finally look at the retail giant and do something many probably haven’t done too often before:  thank Wal-Mart for not putting them out of business.

Mario Bordogna represents clients in all aspects of labor and employment law in state and federal courts. Mr. Bordogna concentrates his practice in the areas of employment litigation, employment discrimination, workers’ compensation, employment counseling, and labor–management relations.
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