U.S. Supreme Court Rules: No Nationwide Class for Discretionary Decisions
Employers around the country have been awaiting the U.S. Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes, et al., potentially the largest employment discrimination class action in history. The Supreme Court issued its decision on June 20, 2011. The case involved a request to certify a class of 1.5 million current and former Wal-Mart employees from across the country for alleged violations of Title VII. Specifically, the plaintiffs alleged that Wal-Mart discriminated against females in decisions related to pay and promotions. In a decision favorable to the business community, the Court held that the case could not proceed as a class action.
The three named plaintiffs in the action alleged that Wal-Mart managers used their discretion over pay and promotions in a manner that negatively affected females over males. The plaintiffs claimed that Wal-Mart's failure to control its managers' authority amounted to unlawful discrimination against females. They asked the courts to allow them to proceed with an action on behalf of all females employed by Wal-Mart throughout the country during a specific time period and to award the class an order prohibiting further discrimination along with punitive damages and back pay.
The District Court (the federal court that first reviewed the request) approved the class action. Wal-Mart appealed that decision to the Ninth Circuit, which agreed, in large part, with the District Court and ruled that the case could proceed as a class. Wal-Mart then appealed that decision to the Supreme Court.
In reversing the Ninth Circuit and rejecting a class action, the Supreme Court determined that the plaintiffs failed to show that Wal-Mart operated under a general policy causing discrimination. Wal-Mart's policies forbid sex discrimination and penalizes its employees for failing to provide equal opportunities. The only corporate "policy" that the plaintiffs could establish related to the alleged pattern of discrimination was Wal-Mart's policy of giving its local management discretion over employment decisions. The Court found it to be unlikely, given Wal-Mart's size and geographical scope, that all managers exercised their discretion in a common way to cause discrimination.
The plaintiffs attempted to bolster their claim for class certification by introducing statistical evidence related to pay and promotion disparities, reports of alleged discrimination by about 120 female employees, and testimony of a sociologist. The Court reviewed each piece of evidence and determined that they were insufficient to show a question of common law or fact. None of the evidence supported a conclusion that the managers were engaged in a common course of conduct and discrimination was not the only possible explanation for the statistical results. Instead, the allegations required an individualized assessment of the reasons behind each decision. In Justice Scalia's words, there was no "glue holding the alleged reasons for all [the] decisions together." For this reason, the Court determined that it could not certify the requested class under the requirements of the federal rules.1
This decision is a significant victory for the business community because it will limit the ability of individual employees (and their attorneys) from bringing an action on behalf of a larger group of employees (who may not be interested in bringing an action on their own) for alleged discrimination. Class actions generally are more attractive to plaintiffs' counsel because they involve higher monetary claims. The Court's holding heightens the standards for the certification of class actions and requires a significant showing of a common course of conduct. This decision does not preclude class actions founded on specific policies and procedures that have a discriminatory effect – or individual complaints of discrimination – but employers now are less likely to be faced with class actions related to the alleged effects of the conduct of a variety of decision makers.
If you have questions about these or any other employment-related matters, please contact Tami A. Earnhart at tami.earnhart@icemiller.com or (317) 236-2235, or any other member of our Labor and Employment Group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
1 In a secondary holding, the Court also determined that the plaintiffs' claim for back wages could not be certified as a class action under the specific federal rule used by the plaintiffs.
June 22, 2011