In a 5-4 decision issued June 20, 2011, the Supreme Court ruled that 1.5 million current and former female workers were not a proper class for certification in a gender discrimination lawsuit against Wal-Mart.  The good news for Wal-Mart – it is no longer facing the largest gender discrimination class action lawsuit in history.  The bad news – it potentially will have to defend itself against 1.5 million individual complaints of gender discrimination.

The case underscores the importance for employers of all sizes to take a proactive approach toward preventing employee discrimination complaints. A number of easily implemented preventative measures are outlined below.

The plaintiffs in the Wal-Mart case, led by named plaintiff Betty Dukes, claimed that although Wal-Mart did not have an express corporate policy against the advancement of women, “the local managers’ discretion over pay and promotion [was] exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees.”  The plaintiffs claimed that “the discrimination to which they ha[d] been subjected [was] common to all Wal-Mart’s female employees.” According to the plaintiffs, the strong and uniform corporate culture promoted bias against women and affected the “discretionary decision making” of each manager throughout Wal-Mart’s 3,400 stores, thereby making each female employee a victim of an overall discriminatory practice.

Justice Antonin Scalia, writing for the majority, held that the plaintiffs failed to show that they shared a common question of law or fact.  Justice Scalia found it imperative that there was no “‘significant proof’ that Wal-Mart ‘operated under a general policy of discrimination.’”  Rather, Wal-Mart’s policy expressly prohibited sex discrimination and imposed “penalties for denials of equal employment opportunity.”  He explained that “[t]he only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters,”  which is the exact “opposite of a uniform employment practice that would provide the commonality needed for a class certification. Scalia went on to state that “[i]n a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction.”  Therefore, by a narrow majority, the Supreme Court reversed the decision certifying this class.

Justice Ruth Bader Ginsburg concurred in part and dissented from Scalia’s position that the plaintiffs had failed to establish a common question of law or fact.  Ginsburg stated that “[t]he plaintiffs’ evidence, including class members’ tales of their own experiences, suggests that gender bias suffused Wal-Mart’s company culture” and were sufficient to raise an inference of discrimination.

Although the Court’s decision may dissuade potential class action lawsuits in employment actions, that is likely only good news for employers that rival Wal-Mart in size.  Many of the individual plaintiff’s in Dukes have strong prima facie cases based on allegations such as:

• Training a less-senior male employee for a position that Wal-Mart would not promote the female employee to.
• Not promoting a female to higher-paying positions in the Tire, Oil, and Lube Department as it is perceived to be more masculine.
• Requiring female employees to transfer to a store far from their home for a promotion without imposing the same requirement on males.
• Paying a female employee less than a male employee in the same position because he had a wife and children to support.

The strength of those claims at an employer the size of Wal-Mart is very surprising. It indicates that while there may have been anti-discrimination policies in writing, it does not appear that the policies were adhered to in practice.  It may even be that managers and directors were not even aware of the policies or applicable legal requirements.  Wal-Mart may be able to afford hundreds of multimillion dollar settlements; however, most employers cannot afford to have any claims.

It is therefore crucial for employers to take proactive steps to ensure anti-discrimination policies are not only properly prepared, but also communicated effectively and adhered to across the company. A sampling of preventative measures that can easily be implemented include:

1. Developing and reviewing on a frequent basis a company-wide policy that expressly prohibits discrimination and retaliation against any employee.
2. Training all employees on the company’s policy and complaint procedure for reporting any instance of inappropriate conduct including discrimination, harassment, etc.
3. Training managers on the company’s policy and how to handle any employee complaints.
4. Periodically auditing employment decisions, such as promotions and pay rates.
5. Investigating any and all complaints immediately.
6. Documenting all investigations and taking the appropriate action in response to any complaint.

Even though you may not be at risk of a class action, all employers must be mindful of the best practices to prevent employee discrimination complaints.

If you have questions about this case or about implementing preventative anti-discrimination measures in your business, please contact Sean P. Beiter (716.566.5409; sbeiter@goldbergsegalla.com), Matthew C. Van Vessem (716.566.5476; mvanvessem@goldbergsegalla.com), or another member of the Goldberg Segalla Labor and Employment Practice Group.