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Wal-Mart ruling raises the bar for class actions

If you’re part of a group of employees working for a major U.S. corporation with a gripe about unfair treatment, your collective voices were potentially muffled Monday.
Image: File photo of protesters holding signs in front of the Supreme Court while class action lawsuit Dukes v. Wal-Mart is being argued inside the court in Washington
Protesters hold signs in front of the Supreme Court building in Washington, D.C., last March. The Supreme Court ruled for Wal-Mart Stores Monday in the largest sex-discrimination lawsuit in history, saying class-action status for female employees seeking billions of dollars had been improperly granted. Larry Downing / Reuters

If you’re part of a group of employees working for a major U.S. corporation with a gripe about unfair treatment, your collective voices were potentially muffled Monday.

A key attempt to tackle inequality in the U.S. workforce suffered a major blow when the U.S. Supreme Court ruled that Wal-Mart — with its thousands of stores and millions of employment decisions — was too massive for a group of employees to sue for discrimination using class-action status.

Wal-Mart, according to a 5-4 decision by the high court, is just too big to sue. The court's decision is a direct hit to women seeking parity in particular. Women now make up about half the U.S. workforce and that means no other minority group seeking a class action would likely constitute such a big block of employees at any one employer.

“When you get a company that’s as huge as Wal-Mart and then try to get an all-encompassing class-action suit, it’s not going to go,” said Robert Langran, a Supreme Court expert and a V illanova University political science professor. “But it raises the question: What is too big? Where do you draw the line?”

Corporations are lauding and workers’ rights groups are bemoaning the Supreme Court's much-anticipated decision, which derailed what would have been the biggest gender bias class action suit in U.S. history.

The case, which was brought on behalf of 1.6 million women who work or had worked at Wal-Mart, had been seen as an important step toward leveling the playing field for women throughout the workforce when it comes to wage equity and chances to move up the corporate ladder.

But the high court found that there wasn’t enough evidence to prove Wal-Mart had a policy or common standard of evaluating workers at the 4,000 or so stores the retailer operates around the country. Because of that, the justices overturned a lower court’s ruling that the women in the case could sue en masse.

According to the ruling in Wal-Mart Stores, Inc. v. Dukes, et al.:

“Respondents wish to sue for 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 crucial discrimination question.”

While Wal-Mart is the target of the suit, worker advocates had hoped the case against the retail giant would serve as a wakeup call to businesses throughout the land to stop discrimination. Businesses feared such a massive suit would set a chilling precedent and end up costing companies big bucks in legal fees.

“Employers should rejoice [for] the practicality and fairness of this ruling,” said Patricia Thompson, an employment attorney with Carlton Fields, a law firm in Tampa.

“It would have been close to impossible to defend against such a claim, as each employee’s circumstances would be particular to her, her managers and the other allegedly similarly-situated male employees to whom she wanted to be compared in her argument that they were treated more favorably,” she added.

The inclusion of so many different female Wal-Mart workers from disparate locations and jobs, however, was exactly the point of the case because anti-discrimination groups were hoping to show just how pervasive alleged gender bias was throughout Wal-Mart and corporate America at large.

More than 70 percent of Wal-Mart’s hourly workers are female, but women represent less than 10 percent of store managers and 4 percent of district managers, according the lawsuit. And only six of the 36 senior management executives listed on the retailer's site are female.

“It wasn’t just about Wal-Mart,” said Lisa Maatz, director of public policy and government relations for the American Association of University Women.

A class-action suit would have acted as a “sharp detriment” for other businesses. It would get employers thinking that “if Wal-Mart can be held accountable for breaking the law, then maybe they ought to dust off their [own] policies,” she added.

The court’s decision essentially raised the burden of proof for a class-action suit for employees trying to band together when trying to prove discrimination was company-wide.

In an opinion affirming the court’s majority ruling, Justice Antonin Scalia wrote that the women did not prove that Wal-Mart “operated under a general policy of discrimination,” and that “Wal-Mart has no testing procedure or other companywide evaluation method that can be charged with bias. The whole point of permitting discretionary decision-making is to avoid evaluating employees under a common standard.”

Most employers have anti-discrimination policies, but they still discriminate, countered Maatz. And she said the court’s ruling regarding a lack of homogeny among the group of women suing was ironic given that “Wal-Mart is the great homogenizer of the retail world.”

Indeed, a dissenting opinion of Justice Ruth Bader Ginsburg on whether the class action should proceed notes that “the practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects. Managers, like all humankind, may be prey to biases of which they are unaware.” The opinion added that 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 may also impact class action discrimination lawsuits brought by the federal through the Equal Employment Opportunity Commission. The agency has made no secret out of its increased focus on class action lawsuits as a way to fight workplace discrimination more effectively. In a statement to, the EEOC said:

"The Commission is currently reviewing the Court's Wal-Mart decision to determine whether it will have any consequences for the EEOC's administrative or litigation work load."

However, the Wal-Mart ruling will come as great comfort to businesses, according to Elise Bloom, co-chair of the labor and employment department of the law firm Proskauer.

“If you have good equal employment opportunity policies and enforce that policy and make efforts to train employees on that policy,” but give authority to local managers to make hiring and promotions-type decisions, “you won’t automatically be faced with a class action,” she said.

“I don’t think it’s that Wal-Mart is too big to sue,” she continued. “I think if you want to try and sue someone as large as Wal-Mart you have to show a common mode of exercising discretion and have to show more than statistics.”

There is individualized decision-making at large corporations when it comes to local management, she noted.

“It’s impossible for someone in corporate headquarters to decide who’s hired at a store manager in Wyoming,” she added.

The court’s decision does not preclude the Wal-Mart women from suing the retailer individually or as part of regional groups, but many legal experts say that such pared down legal actions would be difficult, time-consuming and not as far-reaching.

“This raises the bar for everyone who wants to be treated fairly at work,” said Portia Wu, vice president of the National Partnership for Women and Families. “They are looking at creating a potential large corporation exemption to our civil rights laws.”