Supreme Court’s Gender Bias Decision in Walmart Deemed Great for Employers, “No Shocker,” and “Painful” for Plaintiffs

Supreme Court’s Gender Bias Decision in Walmart Deemed Great for Employers, “No Shocker,” and “Painful” for Plaintiffs

The recent decision by the U.S. Supreme Court reversing certification of a nationwide class of 1.5 million female Walmart employees who alleged that the company’s policies were discriminatory against women will most likely have a huge impact on the way that companies communicate their discrimination policies as well as the way class actions are litigated in the future, experts say.

A split U.S. Supreme Court handed down the highly anticipated ruling on June 20, 2011 (Walmart Stores v. Dukes, et al., No. 10-277, U.S. Sup.).Justice Antonin Scalia wrote the opinion on behalf of the 5–4 majority, which reversed the 9th Circuit’s ruling that the District Court did not abuse its discretion in certifying the class. The plaintiffs alleged that the local managers of Walmart stores disproportionately favor men in their decisions regarding pay and promotions and that the corporation’s failure to cabin its managers’ authority amounts to disparate treatment.

No Express Corporate Policy

“These plaintiffs, respondents here, do not allege that Walmart has any express corporate policy against the advancement of women. Rather, they claim that their local managers’ discretion over pay and promotions is exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees,” Justice Scalia wrote in the opinion.

The majority held that common questions did not predominate in the class, pursuant to Federal Rule of Civil Procedure 23(b)(2).

“The only corporate policy that the plaintiffs’ evidence convincingly establishes is Walmart’s ‘policy’ of allowing discretion by local supervisors over employment matters,” said Justice Scalia. “To be sure, we have recognized that, ‘in appropriate cases,’ giving discretion to lower-level supervisors can be the basis of Title VII [of the Civil Rights Act of 1964] liability under a disparate-impact theory.”

“But the recognition that this type of Title VII claim ‘can’ exist does not lead to the conclusion that every employee in a company using a system of a discretion has such a claim in common,” he said.  

Justice Scalia dismissed the evidence presented by the plaintiffs supporting their contention that all the managers in the company exercised their discretion in a common way.  “Other than the bare existence of delegated discretion, respondents have identified ‘no specific employment practice’—much less one that ties together all their 1.5 million claims together. Merely showing that Walmart’s policy of discretion has produced an overall sex-based disparity does not suffice,” he said.

Dissent

Justice Ginsburg wrote the opinion concurring in part and dissenting in part from the majority’s opinion. She wrote that she agreed with the majority’s opinion that the class should not have been certified under Federal Rule of Civil Procedure 23(b)(2); however, she held that the case should have been remanded for ruling on class certification under Rule 23(b)(3).

She cited evidence presented by the plaintiffs demonstrating that although 70 percent of the hourly jobs at Walmart are held by women, only 33 percent of those are management positions. Justice Ginsberg said that the plaintiffs’ evidence showed that Walmart’s compensation policies do nothing to counter unconscious bias on the part of the supervisors and that “gender bias suffused Walmart’s corporate culture.”

“The District Court’s identification of a common question, whether Walmart’s pay and promotions policies gave rise to unlawful discrimination, was hardly infirm. 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 risk of discrimination is heightened when those managers are predominantly of one sex, and are steeped in a corporate culture that perpetuates gender stereotypes,” Justice Ginsburg said.

Not a ‘Real Surprise’

Deborah Kelly, who heads up the Employment Practice at Dickstein Shapiro in Washington, D.C., said in an interview that the decision will make it more difficult for plaintiff employment lawyers to bring class action cases “especially when back pay is part of the damages that they seek.”

“I don’t think this case was a real surprise though. I mean, I know it was all over the media because it was gigantic—1.5 million people and it’s Walmart. But the fact that the plaintiffs lost I don’t think is a real shocker because there wasn’t a real company-wide policy,” Kelly said.

She said that as a result of the decision, plaintiffs’ attorneys will need to prove commonality at an earlier stage in the class-action litigation than before and that employers can “breathe a little bit of a sigh of relief.”

Company-Wide Policies

“So, I think what employers should do to make clear that they are not going to be subject to the dangers of what remains of this class-action piece is to make clear that they have company-wide policies and practices that absolutely express intolerance for discrimination and tell their employees exactly who to talk to if he or she sees something that’s inconsistent with these company policies against discrimination,” said Kelly.

“You have to have an employee-friendly internal complaint procedure,” Kelly advised employers. “I would tell your employees at least once or twice a year, ‘Hey remember, don’t put up with any kind of discrimination. And if you encounter any, whether it’s from anyone within our group or third parties with whom you regularly deal—you know, consultants who you deal with a lot, contractors, etc.—this is your menu of people you can go talk to. And then we will investigate, and we will investigate in a prompt, timely fashion, and you’ll be protected from retaliation.’”

Kelly said she is interested in seeing whether the Supreme Court will apply Walmart reasoning to wage and hour suits.

“They’re different than discrimination class-action suits; the collective action has different rules than a class action, so whether some of the logic of that walks its way into these big wage and hour cases will be interesting to see. And I think people will watch to see whether or not these cases are a deterrent to all class actions, not just employment law class actions,” Kelly said.

‘A Great Place for Women to Work’

“Walmart has a long history of providing advancement opportunities for our female associates and over the years we have made tremendous strides in developing women throughout the organization. In fact, we have created specific training and mentoring programs to help prepare women for opportunities at all levels in our company. As a result of our efforts, Walmart is often recognized as a great place for women to work,” Gisel Ruiz, Executive Vice President, People, Walmart U.S., was quoted as saying in a June 20 press release.

Debra L. Ness, President, National Partnership for Women & Families, also issued a press release on June 20 and called the decision a “deep and painful disappointment to all of us who care about ending employment discrimination in this country, and a setback for the women of Walmart and women workers everywhere.”

“By ignoring the clear common questions at stake in this case, the Court could insulate large corporations from complying with our laws and allow them to hide behind written policies of nondiscrimination, even when a company fosters a culture of bias and stereotypes,” said Ness.

“Today’s ruling sets a dangerous precedent that will make it easier for employers—especially large ones—to discriminate against their employees while, at the same time, making it harder for workers to come together to challenge it. This creation of a potential ‘large company’ exception to our civil rights laws is a perversion of justice,” said Ness.

Attorney Daniel Weick of Wilson Sonsini Goodrich & Rosati in New York commented on the impact of the case in an article published on the American Bar Association’s website. “While the case arose in the context of employment law, its holdings—especially its rejection of random sampling as a tool for aggregate claims valuation, its express approval of examining the merits of the claims as part of the class certification procedure, and insistence that class members have suffered the “same injury” as a threshold matter for certification of any class—will likely shape class certification decisions going forward in all manner of complex civil cases, including antitrust cases,” Weick said.