Lessons from the Wal-Mart Case

Massive Employee Class Actions Are More Difficult to Maintain

By AMY B. ROYAL, Esq. and BENJAMIN A. BRISTOL, Esq.

The U.S. Supreme Court’s recent decision that halted the Dukes v. Wal-Mart 11-year litigation saga appears to signal an end to certain types of employee class actions.
A class action is a lawsuit that is brought by an individual plaintiff, or small group of individual plaintiffs, who represent a larger group of plaintiffs. Many in the media have reported that this decision will frustrate a majority of class actions. However, in reality, this decision will likely have a much narrower scope, and may prove effective only against class actions involving a very large number of plaintiffs.
In the Dukes case, 1.5 million female employees and ex-employees of Wal-Mart — the “nation’s largest private employer,” according to Justice Antonin Scalia — from across the country claimed that their local managers, who had discretion in making pay and promotion decisions, favored men in making those decisions, and that such actions had an unlawful, disparate impact on women in violation of Title VII of the Civil Rights Act of 1964.
The female workers claimed that they were entitled to various forms of relief, including back pay and punitive damages. The workers claimed that the discrimination was common to all female employees at Wal-Mart due to a strong and uniform corporate culture that permits bias against women and infects the discretionary decision-making of every Wal-Mart manager. The class initially received certification at the federal trial-court level, which was then affirmed in the appellate court.
The general question before the Supreme Court was whether this ‘class’ of 1.5 million female workers had enough facts in common to join together as a legal class to sue Wal-Mart. The court concluded that it did not.
Rule 23 of the Federal Rules of Civil Procedure governs class certification and provides that a party seeking class certification must demonstrate the following:
• the class is so numerous that joinder is impracticable;
• there are questions of law and fact common to the class;
• the claims and defenses of the representative party are typical of the claims or defenses of the class; and
• the representative parties will fairly and adequately protect the interests of the class.
In reaching its decision, the Supreme Court found that this megaclass could not meet the commonality prong as required under the rules. Specifically, the court noted that the female workers failed to point to a common corporate policy that led to gender discrimination against all of them. “The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters,” the court explained. “On its face, of course, that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.”
This ruling was procedural in nature, i.e., this particular class did not meet the definition for certification as defined under the rules. There was no substantive ruling on the merits of any of these claims, i.e., whether or not discrimination actually occurred. This means these cases are not necessarily over. Although they cannot be brought in this massive form because of the lack of commonality among the individuals, they could be brought in smaller classes or as individuals.
Class actions can arise in numerous employment contexts due to the abundance of laws that apply to the relationship between an employer and its employees. For instance, wage-and-hour laws can provide fertile ground for class actions because violations of such laws can be committed uniformly against a group of employees, or even an entire workforce.
Some examples of wage-and-hour violations that could form a basis for class actions include failing to provide employees with the statutorily mandated meal period, minimum wage, overtime compensation, or compensation for certain types of time spent traveling. Misclassifying employees as exempt or paying nonexempt employees on a salary basis are some other missteps that may lead to class actions. Such actions may also arise where employees are misclassified as independent contractors.
Wage-and-hour class actions can be particularly expensive for Massachusetts employers because the Massachusetts Wage Act awards successful plaintiffs with treble damages, or three times the amount they are owed, for certain violations. Independent-contractor misclassification can result in additional costs due to the numerous laws that are implicated besides wage and hour laws, such as workers’ compensation laws.
In light of these considerations, employers are well-advised to remain vigilant and routinely review their policies and practices for compliance with applicable laws, even in light of the Dukes decision. For, even if a group of employees fails to become certified as a class, that result may prove to be an empty victory if each class member elects to proceed on their own, and a single lawsuit begins multiplying into many more.

Amy B. Royal, Esq. and Benjamin A. Bristol, Esq. specialize exclusively in management-side labor and employment law at Royal LLP, a woman-owned, boutique, management-side labor- and employment-law firm; (413) 586-2288; [email protected]; [email protected]