United States Supreme Court Rejects Gender Bias Class Action Against Wal-Mart: Lessons for Employers

July 1, 2011

(Published in Mass Lawyers Weekly, July 2011)

The United States Supreme Court, on June 20, 2011, issued another opinion in a line of long awaited employment decisions from this past term.  In Wal-Mart Stores, Inc. v. Dukes, the Court in a 5-4 decision rejected certification of a class of approximately 1.5 million current and former female employees alleging gender discrimination in violation of Title VII of the Civil Rights Act of 1964.  The plaintiffs sought injunctive and declaratory relief, as well as punitive damages and back pay. 

Although these plaintiffs may not have represented the largest group seeking class certification, this is the largest number ever in an employment discrimination case, and the decision may have far-reaching implications to future class action cases.  The Supreme Court provides important clarification of the standards by which class actions are to be evaluated under Rules 23 of the Federal Rules of Civil Procedure.  In addition, the facts of this case and the majority decision and dissent give helpful guidance to employers about how to guard against allegations of discrimination.

The plaintiffs alleged that Wal-Mart’s management decisions were unlawfully influenced by gender stereotypes and unconscious bias against women.  They argued that the corporate culture of Wal-Mart permits bias against women to infect the admittedly discretionary decision making of Wal-Mart’s thousands of managers and that, consequently, all female employees of the company are victims of discrimination.  According to the plaintiffs, the company promoted and/or did not take steps to combat the impact of unconscious bias among managers who had broad discretion relating to employee compensation and promotions. 

The plaintiffs claimed that the alleged discrimination is common to all of Wal-Mart’s female employees. The suit alleged that the local managers’ discretion over pay and promotions was exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees.   

The District Court and the Ninth Circuit Court of Appeals certified the class made up of current and former female employees of Wal-Mart alleging that the company discriminated against them on the basis of their sex by denying them equal pay and promotions.  The differences among the allegations of the named plaintiffs, however, highlight the issue before the Court on class certification.

Betty Dukes began working in the Pittsburg, California Wal-Mart in 1994.  She started as a cashier and was later promoted to customer service manager.  She received a number of disciplinary warnings and was demoted back to cashier and then greeter.  Although she admitted violating company policy, she argued that the warnings were in retaliation for invoking internal complaint procedures and male employees were not disciplined for similar violations.  She also alleged that two male greeters in the same store were paid more than she.

Christine Kwapnoski worked at Sam’s Club stores in Missouri and California.  She held a number of positions including a supervisory position.  She alleged that a male supervisor yelled at her frequently and screamed at female employees.  She claimed that the same manager told her to “doll up,” wear some make-up and dress a little better.

Edith Arana worked at a Wal-Mart store in Duarte, California from 1995-2001.  Her allegation was that she approached a store manager more than once in 2000 asking about management training but was ignored.  She believed she was denied the opportunity to advance to a management position because of her gender and initiated a complaint pursuant to Wal-Mart’s internal procedures.  She was told to appeal directly to the District Manager if she felt she was being treated unfairly, but did not do so.  She was terminated in 2001 for noncompliance with the company’s timekeeping system.

The District Court found that women constitute 70 percent of Wal-Mart’s hourly workforce but only 33 percent of management and, further, that the  higher the level of management, the fewer  women. The District Court also reported that the plaintiff’s “largely uncontested descriptive statistics” showed that women were paid less than men in every region and that the salary gap widens over time for men and women hired for the same job at the same time.

The District Court also found that the discretionary decisions of managers with respect to pay and promotions were made in a “carefully constructed…corporate culture,” including frequent meetings to reinforce common ways of thinking, regular transfers of managers among stores to create uniformity, and close and constant monitoring of stores.  Among the evidence presented was the fact that senior management at Wal-Mart often refer to female associates as “little Janie Qs.”

Class certification is governed by Federal Rule of Civil Procedure 23. The plaintiff class must satisfy the requirements of both Rule 23(a) and Rule 23(b).  Under Rule 23(a), the threshold burden on the party seeking certification is to show that: (1) the class is so numerous that joinder of all members is impracticable,“(2) there are questions of law or fact common to the
class, “(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and “(4) the representative parties will fairly and adequately protect the interests of the class.”

With respect to the second prong of Rule 23, the common question identified by the District Court in this case was whether Wal-Mart’s pay and promotions policies gave rise to unlawful discrimination.  However, the Supreme Court in its majority decision emphasizes that the element of commonality in Rule 23(a)(2) requires a showing that the class members “have suffered the same injury” and that the common contention of the class members “must be of such a nature that it is capable of class wide resolution… in one stroke.”  Justice Scalia, who authored the majority opinion, notes that alleged discrimination by one particular supervisor would satisfy this standard.

The Court reviewed substantial statistical evidence about pay and promotion disparities between men and women, anecdotal reports of discrimination from approximately 120 female employees, and testimony from an expert in sociology who conducted an analysis of Wal-Mart’s culture and personnel practices.  The majority concluded that the plaintiffs presented insufficient evidence of commonality to meet the threshold burden under Rule 23(a)(2).  Justices Alito, Kennedy, Roberts and Thomas joined Justice Scalia in the majority opinion.

The dissenting opinion in this case, authored by Justice Ginsburg, criticizes the majority for focusing on the differences among the would-be class members, rather than their similarities.  The dissent stresses that Rule 23(a)(2) does not require that all questions of law and fact be common to all class members, but rather that a single question of law or fact among the plaintiffs will meet the threshold requirement of Rule 23(a)(2). 

The dissenting justices note that it is well established that the practice of delegating to supervisors substantial discretion in employment matters can result in disparate impact.  The dissent recognizes that “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 perpetrates gender stereotypes.”

With respect to Rule 23(b), the Court concluded unanimously that the plaintiff’s claims were not appropriately brought under Rule 23(b)(2) which provides class-wide injunctive or declaratory relief.  The Court found that the individualized circumstances of the plaintiffs and the back pay sought precluded application of Rule 23(b)(2).  The dissent would have had the case remanded for determination of whether the class qualified for certification under Rule 23(b)(3).  Concurring with respect to Rule 23(b) and dissenting with respect to Rule 23(a), along with Justice Ginsburg, were Justices Breyer, Kagan and Sotomayor.

With heightened awareness and training around the issue of discrimination, employers will increasingly find that discriminatory bias has gone below the surface and appears in less obvious and explicit ways than in the past, making it more difficult to detect and address.  Although the class in the Dukes case may have been too large and diverse for certification under Rule 23, smaller classes of workers making similar claims of a corporate culture unfavorable to women (or other protected workers) might more readily pass muster, especially if the class members work in the same state or region and have been subject to the same middle or upper level management. 

In-house and employment counsel should carefully assess current anti-discrimination policies, practices and training to see whether they adequately address not only obvious bias but also unconscious or implicit bias.  It is also important for employers to maintain accurate records for periodic review of the recruitment, retention, training and promotion of minorities and women.  Likewise, it is critical to keep data and conduct comparisons of compensation and performance appraisals.  

Claims of unconscious bias are on the rise, and statistical analysis will continue to be used as evidence in discrimination cases along with anecdotal information and expert testimony.  It is now more important than ever that employers maintain clear policies, increase anti-discrimination training, reduce discretion among decision-makers and regularly monitor workforce data.  With more information about the way in which employment related practices and decision-making are impacting women and minority workers, employers can identify and address potential problems and reduce the risk of litigation.   

Charla Bizios Stevens is a Director with the McLane Law Firm.  Ms. Bizios Stevens practices in New Hampshire and Massachusetts, concentrating in employment, private school and health  law.