Walmart v. Dukes

Four months after the Supreme Court decertified the nationwide class of more than a million female employees who attempted to sue Wal-Mart for gender discrimination, the plaintiffs have attempted an end run around the Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (June 20, 2011) decision by filing new federal complaints in California and Texas. The plaintiffs have narrowed their claims by limiting the proposed classes to female Wal-Mart employees in California and Texas, making them significantly smaller than the nationwide class the Supreme Court rejected. However, the size of the class was not the only problem cited by the Supreme Court, and the new complaints do not seem to resolve many of the main issues and concerns raised in the Supreme Court'fs opinion.

Background

In Wal-Mart v. Dukes, the Supreme Court found that the plaintiffs failed to satisfy the class certification requirement that “there are questions of law or fact common to the class.” In their original complaint, the plaintiffs argued that Wal-Mart'fs policy of giving local managers significant discretion in making pay and promotion decisions had a negative impact on women, especially when combined with a “corporate culture” that allegedly permitted bias. However, this allegation fell short of satisfying the commonality requirement, because the policy of giving wide discretion to local managers did not affect every class member in the same way. Similarly, the plaintiffs failed to connect the employment decisions concerning more than a million plaintiffs to any company-wide corporate policy. Moreover, the plaintiffs failed to put forward any proof that the managers involved exercised their discretion in any common way. The plaintiffs'f anecdotal evidence of discriminatory statements, statistical evidence of pay and promotions patterns, and expert testimony regarding the impact of Wal-Mart'fs corporate culture was not enough to prove commonality between plaintiffs situated across the country in the absence of some uniform, discriminatory policy concerning pay and promotion decisions.

The Supreme Court decision in Wal-Mart v. Dukes also established that classes cannot be certified under Rule 23(b)(2) of the Federal Rules of Civil Procedure when the class members are seeking an award of monetary damages or individualized declaratory or injunctive relief.

Allegations of the New Complaints

In the new complaints, filed at the end of October in the Northern District of California (No. 01-2252) and the Northern District of Texas (No. 11-2954), the plaintiffs claim they have been subjected to gender discrimination “as a result of specific policies and practices” in Wal-Mart'fs California and Texas regions. The California complaint alleges gender discrimination in both compensation and promotion, while the Texas complaint alleges discrimination in promotion only.

The California plaintiffs allege that Wal-Mart managers are not required to use job-related criteria such as performance or experience when setting, adjusting, or approving compensation for individual employees, and are not required to document the reasons for their compensation decisions. The plaintiffs claim that Wal-Mart'fs failure to require managers to base compensation decisions on job-related criteria has had an adverse impact on female employees in the California region.

In both new complaints, the plaintiffs allege that although Wal-Mart provides managers with uniform guidelines setting minimal eligibility criteria for promotions, it does not provide managers with any job-related criteria for making selections among those who meet the minimum criteria. The plaintiffs identify a number of “policies” and practices that have allegedly had an adverse impact on female employees, including lack of consistent job posting, the requirement of relocation as a condition of entry into and promotion through management, reliance on stereotypes in making pay and promotion decisions, lack of objective criteria for making promotion decisions, and lack of consistent and reliable scheduling for management level employees.

Potential Roadblocks to Certification of the New State-Specific Classes

Although the new state-specific class action complaints have significantly reduced the size of the proposed class, they do not solve many of the problems identified by the Supreme Court in Wal-Mart v. Dukes. The new complaints do not seem to address the Supreme Court'fs concerns that Wal-Mart'fs policy of giving discretion to local managers means that every class member is not affected in the same way. Similarly, the complaints fail to identify a common, regional policy, practice or procedure utilized by every store in the putative class. The plaintiffs continue to rely on anecdotal evidence and statistics to support their claims that Wal-Mart managers rely on discriminatory stereotypes in making compensation and promotion decisions. This does not appear to be enough to prove commonality.

Moreover, the statewide claims filed in federal court are still subject to the restrictions on class actions imposed in Wal-Mart v. Dukes, which may allow trial courts more latitude to question the merits of a class action claim at the certification stage. The large proposed classes covering many different stores and 90,000 employees in the California action alone do not seem to eliminate the problems of proof for injunctive or monetary relief for thousands of diverse employees who are not similarly situated or subject to the employment decisions of the same manager.

It remains to be seen whether the California and Texas District Courts will certify the Wal-Mart plaintiffs'f new state-specific classes. However, the California District Court previously certified the nationwide class action against Wal-Mart and the Ninth Circuit affirmed, so California may be a friendly forum for the new action. If these actions are certified and create some precedent for plaintiffs'f counsel to grasp on to, other corporations may be susceptible to similar large-scale, statewide or regional class actions.

Lessons for Corporate Counsel

Prior to Wal-Mart v. Dukes, it was generally accepted that best employment practices included the uniform enforcement of clear employment policies in order to avoid disparate treatment claims from disgruntled employees who were passed over for promotion or subject to other adverse employment action. However, Wal-Mart was able to avoid a nationwide class action precisely because of its lack of a uniform, corporate policy to guide local managers'f compensation and promotion decisions. Moreover, the Supreme Court has already rejected the plaintiffs'f argument that the absence of a policy is itself a policy of discrimination that satisfies the commonality requirement for class certification. The Wal-Mart plaintiffs do not seem to have overcome this issue in their new state-specific complaints.

In light of the Wal-Mart case and the filing of these statewide federal claims, employers may want to avoid establishing nationwide, regional or state-wide policies regarding compensation and promotion, and allow local managers wide discretion in making employment decisions for the employees in that manger'fs store, department or location. Companies should continue to have strong anti-discrimination policies, but specific corporate policies that sweep across states and subsidiaries and dictate how lower-level managers make employment decisions will make it easier for plaintiffs to obtain class certification. Similarly, the use of high-level, national or regional managers, HR personnel or equal employment compliance officers to make employment decisions for large groups of employees or to take action on claims of employment discrimination will make it easier for classes to assert that a common policy or practice binds their individual claims together.

Employers can mitigate the risk of large class action litigation by explicitly granting discretion over employment decisions to local managers, and limiting the number of employees working under any one particular decision-maker. In addition, even if a central HR or EEO compliance officer investigates claims of discrimination, local managers who are not involved in the charge of discrimination should make decisions and implement employment actions stemming from such investigations.

While these strategies may help employers avoid large-scale class actions, it is important to note that they may not thwart the certification of smaller classes or prevent individual plaintiffs from bringing their own lawsuits. Companies must still manage the managers. Granting the wrong manager unfettered discretion in the absence of general equal employment policies and training may lead to increased individual lawsuits or the successful certification of smaller class actions. For example, if a regional manager consistently fails to promote female employees and there is evidence of discriminatory animus and action by that manager (or claims of discrimination against that manager that are ignored by the company), those facts may be sufficient to successfully assert a class action involving all of the employees under that manager'fs supervision. A large volume of smaller class actions can be as debilitating to a company as a singular nationwide class action. Therefore, employers must establish clear anti-discrimination policies, and must train and educate decision makers regarding such policies. By establishing clear anti-discrimination policies and properly training managers, employers can raise defenses to potential class claims of a uniform policy of discrimination.

Conclusion

Ultimately, the true test of the viability of federal class actions against Wal-Mart and other large corporations may well be the ability of plaintiffs'f counsel to strike the delicate balance between a class that is big enough to be financially viable, yet small enough that a true commonality between the plaintiffs can be demonstrated at the class certification stage. While the plaintiffs in the Wal-Mart action may be closer to the mark, it is uncertain whether the state-based actions hit the target.

Windy Rosebush Catino is a partner in the Labor and Employment Practice Group at Edwards Wildman Palmer LLP, resident in the Boston office. She can be reached at [email protected] or 617-951-2277. Elizabeth A. Peters is an associate in the firm'fs Chicago office.

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Four months after the Supreme Court decertified the nationwide class of more than a million female employees who attempted to sue Wal-Mart for gender discrimination, the plaintiffs have attempted an end run around the Wal-Mart Stores, Inc. v. Dukes , 131 S. Ct. 2541 (June 20, 2011) decision by filing new federal complaints in California and Texas. The plaintiffs have narrowed their claims by limiting the proposed classes to female Wal-Mart employees in California and Texas, making them significantly smaller than the nationwide class the Supreme Court rejected. However, the size of the class was not the only problem cited by the Supreme Court, and the new complaints do not seem to resolve many of the main issues and concerns raised in the Supreme Court'fs opinion.

Background

In Wal-Mart v. Dukes, the Supreme Court found that the plaintiffs failed to satisfy the class certification requirement that “there are questions of law or fact common to the class.” In their original complaint, the plaintiffs argued that Wal-Mart'fs policy of giving local managers significant discretion in making pay and promotion decisions had a negative impact on women, especially when combined with a “corporate culture” that allegedly permitted bias. However, this allegation fell short of satisfying the commonality requirement, because the policy of giving wide discretion to local managers did not affect every class member in the same way. Similarly, the plaintiffs failed to connect the employment decisions concerning more than a million plaintiffs to any company-wide corporate policy. Moreover, the plaintiffs failed to put forward any proof that the managers involved exercised their discretion in any common way. The plaintiffs'f anecdotal evidence of discriminatory statements, statistical evidence of pay and promotions patterns, and expert testimony regarding the impact of Wal-Mart'fs corporate culture was not enough to prove commonality between plaintiffs situated across the country in the absence of some uniform, discriminatory policy concerning pay and promotion decisions.

The Supreme Court decision in Wal-Mart v. Dukes also established that classes cannot be certified under Rule 23(b)(2) of the Federal Rules of Civil Procedure when the class members are seeking an award of monetary damages or individualized declaratory or injunctive relief.

Allegations of the New Complaints

In the new complaints, filed at the end of October in the Northern District of California (No. 01-2252) and the Northern District of Texas (No. 11-2954), the plaintiffs claim they have been subjected to gender discrimination “as a result of specific policies and practices” in Wal-Mart'fs California and Texas regions. The California complaint alleges gender discrimination in both compensation and promotion, while the Texas complaint alleges discrimination in promotion only.

The California plaintiffs allege that Wal-Mart managers are not required to use job-related criteria such as performance or experience when setting, adjusting, or approving compensation for individual employees, and are not required to document the reasons for their compensation decisions. The plaintiffs claim that Wal-Mart'fs failure to require managers to base compensation decisions on job-related criteria has had an adverse impact on female employees in the California region.

In both new complaints, the plaintiffs allege that although Wal-Mart provides managers with uniform guidelines setting minimal eligibility criteria for promotions, it does not provide managers with any job-related criteria for making selections among those who meet the minimum criteria. The plaintiffs identify a number of “policies” and practices that have allegedly had an adverse impact on female employees, including lack of consistent job posting, the requirement of relocation as a condition of entry into and promotion through management, reliance on stereotypes in making pay and promotion decisions, lack of objective criteria for making promotion decisions, and lack of consistent and reliable scheduling for management level employees.

Potential Roadblocks to Certification of the New State-Specific Classes

Although the new state-specific class action complaints have significantly reduced the size of the proposed class, they do not solve many of the problems identified by the Supreme Court in Wal-Mart v. Dukes. The new complaints do not seem to address the Supreme Court'fs concerns that Wal-Mart'fs policy of giving discretion to local managers means that every class member is not affected in the same way. Similarly, the complaints fail to identify a common, regional policy, practice or procedure utilized by every store in the putative class. The plaintiffs continue to rely on anecdotal evidence and statistics to support their claims that Wal-Mart managers rely on discriminatory stereotypes in making compensation and promotion decisions. This does not appear to be enough to prove commonality.

Moreover, the statewide claims filed in federal court are still subject to the restrictions on class actions imposed in Wal-Mart v. Dukes, which may allow trial courts more latitude to question the merits of a class action claim at the certification stage. The large proposed classes covering many different stores and 90,000 employees in the California action alone do not seem to eliminate the problems of proof for injunctive or monetary relief for thousands of diverse employees who are not similarly situated or subject to the employment decisions of the same manager.

It remains to be seen whether the California and Texas District Courts will certify the Wal-Mart plaintiffs'f new state-specific classes. However, the California District Court previously certified the nationwide class action against Wal-Mart and the Ninth Circuit affirmed, so California may be a friendly forum for the new action. If these actions are certified and create some precedent for plaintiffs'f counsel to grasp on to, other corporations may be susceptible to similar large-scale, statewide or regional class actions.

Lessons for Corporate Counsel

Prior to Wal-Mart v. Dukes, it was generally accepted that best employment practices included the uniform enforcement of clear employment policies in order to avoid disparate treatment claims from disgruntled employees who were passed over for promotion or subject to other adverse employment action. However, Wal-Mart was able to avoid a nationwide class action precisely because of its lack of a uniform, corporate policy to guide local managers'f compensation and promotion decisions. Moreover, the Supreme Court has already rejected the plaintiffs'f argument that the absence of a policy is itself a policy of discrimination that satisfies the commonality requirement for class certification. The Wal-Mart plaintiffs do not seem to have overcome this issue in their new state-specific complaints.

In light of the Wal-Mart case and the filing of these statewide federal claims, employers may want to avoid establishing nationwide, regional or state-wide policies regarding compensation and promotion, and allow local managers wide discretion in making employment decisions for the employees in that manger'fs store, department or location. Companies should continue to have strong anti-discrimination policies, but specific corporate policies that sweep across states and subsidiaries and dictate how lower-level managers make employment decisions will make it easier for plaintiffs to obtain class certification. Similarly, the use of high-level, national or regional managers, HR personnel or equal employment compliance officers to make employment decisions for large groups of employees or to take action on claims of employment discrimination will make it easier for classes to assert that a common policy or practice binds their individual claims together.

Employers can mitigate the risk of large class action litigation by explicitly granting discretion over employment decisions to local managers, and limiting the number of employees working under any one particular decision-maker. In addition, even if a central HR or EEO compliance officer investigates claims of discrimination, local managers who are not involved in the charge of discrimination should make decisions and implement employment actions stemming from such investigations.

While these strategies may help employers avoid large-scale class actions, it is important to note that they may not thwart the certification of smaller classes or prevent individual plaintiffs from bringing their own lawsuits. Companies must still manage the managers. Granting the wrong manager unfettered discretion in the absence of general equal employment policies and training may lead to increased individual lawsuits or the successful certification of smaller class actions. For example, if a regional manager consistently fails to promote female employees and there is evidence of discriminatory animus and action by that manager (or claims of discrimination against that manager that are ignored by the company), those facts may be sufficient to successfully assert a class action involving all of the employees under that manager'fs supervision. A large volume of smaller class actions can be as debilitating to a company as a singular nationwide class action. Therefore, employers must establish clear anti-discrimination policies, and must train and educate decision makers regarding such policies. By establishing clear anti-discrimination policies and properly training managers, employers can raise defenses to potential class claims of a uniform policy of discrimination.

Conclusion

Ultimately, the true test of the viability of federal class actions against Wal-Mart and other large corporations may well be the ability of plaintiffs'f counsel to strike the delicate balance between a class that is big enough to be financially viable, yet small enough that a true commonality between the plaintiffs can be demonstrated at the class certification stage. While the plaintiffs in the Wal-Mart action may be closer to the mark, it is uncertain whether the state-based actions hit the target.

Windy Rosebush Catino is a partner in the Labor and Employment Practice Group at Edwards Wildman Palmer LLP, resident in the Boston office. She can be reached at [email protected] or 617-951-2277. Elizabeth A. Peters is an associate in the firm'fs Chicago office.

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