Case Study

Wal-Mart Sex Discrimination Class Action Lawsuit –

Supreme Court 2011 Decision

The U.S. Supreme Court in June of 2011 dismissed a massive sex discrimination lawsuit against Wal-Mart Stores, Inc., ruling that the approximately 1.6 million women in the class, who allegedly were discriminated against in pay and promotions, had too little in common to form a class of plaintiffs for a lawsuit pursuant to federal procedural law. The key question was whether the lawsuit met the requirements for a class action lawsuit, specifically that there were questions of law and fact common to the class of women employee plaintiffs.

In a 5-4 decision, with Justice Antonin Scalia writing for the majority, the Court concluded that the allegations against Wal-Mart were too vague and the evidence too weak to establish a common injury, which is an essential requirement for a class action lawsuit. The 1.6 million women bringing suit had worked at Wal-Mart since 1998 in the approximately 3,400 Wal-Mart stores in the United States. Justice Scalia stated that the statistical data that the plaintiff women presented allegedly showing pay and promotion differences were not sufficient proof of discrimination. Rather, the Justice said, the women must identify specific employment practices, such as a biased testing procedure, that unlawfully discriminated against the women.  Wal-Mart has an express policy prohibiting discrimination but the company granted local managers substantial discretion.

Yet it is important to note that the Supreme Court decision did not decide whether the women were discriminated against based on their gender at Wal-Mart. Rather, the women could not proceed as a class constituted for the lawsuit.

The original lawsuit filed against Wal-Mart occurred in 2001. The women plaintiffs accused the company, which is the world’s largest retailer, of systematically paying female workers less than their male counterparts and providing women employees with fewer opportunities for promotion. The suit was based on the company’s personnel policies, which granted individual managers wide discretion over promotions and raises, which allowed sex biases and stereotyping that pervaded the corporate culture, and which denied fair opportunity to women. As a consequence, the women plaintiffs argued that women employee remain concentrated on the retailer’s low wage “rank and file,” while men were paid more and dominated the managerial ranks.  Yet Justice Scalia said that “merely” demonstrating that Wal-Mart had a policy of managerial discretion overall produced sex-based disparity was insufficient. Actually, the fact that Wal-Mart did not have uniform employment policies and allowed its managers considerable discretion worked against the women plaintiffs, since the lack of uniform policies militated against any finding of commonality critical to a class action lawsuit.

If the lawsuit was successful, Wal-Mart could have faced damages in the billions of dollars for back pay and other damages. Wal-Mart consistently stated that it has a policy against discrimination; and the company has steadfastly denied the allegations of wrongful conduct.

The Court decision emerged as a major victory for Wal-Mart, of course, but the decision will have a significant impact on other pending class action lawsuits, especially those regarding gender discrimination, for example, a current class action lawsuit against Costco Wholesale Corp. alleging that Costco has a “glass ceiling” discriminating against women.

As a result of the decision, the women plaintiffs can still sue individually for discrimination by bringing actions to the Equal Employment Opportunity Commission, or they could try to form a smaller and more focused class action suit, with more elements of fact and law in common to the class members, perhaps by targeting smaller geographic regions or groups of stores.

The Wall Street Journal noted that many companies, especially those heavily regulated by the government, such as utilities, as opposed to Wal-Mart, use rigid formulas for personnel decisions that are more likely to be attacked by means of a class action lawsuit if they have a disparate or disproportionate or adverse impact of employees of a particular race or gender. Wal-Mart, however, had a decentralized policy, thereby allowing local managers a great deal of discretion in making determinations on pay and promotions. As a result, said, Justice Scalia, literally millions of employment decisions were at issue in the decision. However, the Federal Rules of Civil Procedure, which establish the criteria for class action lawsuits, require that the plaintiff class members must show the facts and law at issue are common to the class. Justice Scalia emphasized that there was “no glue” holding the alleged reasons for all these decisions together. Thus, the Justice said that it would impossible for all the women to provide a common answer to the critical question of why they were discriminated against by the company. Furthermore, said Justice Scalia, there was no significant evidence of a general policy of discrimination at the company. Furthermore, Justice Scalia that the anecdotal evidence of discrimination was also insufficient. The Justice pointed out that only 1 out of 12,500 class members reported discrimination. Finally, he stated that there could be other reasons for the gaps in pay and promotions between men and women employees, for example, the availability of women, qualified women, or interested women in the stores’ geographic areas.

In the dissenting opinion, Justice Ruth Bader Ginsberg said that the evidence indicated that Wal-Mart managers, who were granted considerable discretion, determined who to promote based on their own subjective impressions, and consequently could make employment decisions based on discrimination and stereotyping. Justice Ginsberg also stated that the evidence indicated that gender bias “suffused” the company’s corporate culture.

Wal-Mart said it was a good place for women to work, that the company had worked hard to expand opportunities for women since the lawsuit was originally filed, and that the company will continue to expand its efforts to promote women employees to positions of leadership in the company.  A Wal-Mart spokesperson was quoted in the New York Times saying that the Supreme Court decision was an important victory for all companies – large and small - doing business in the United States.

Bibliography: Bravin, Jess, and Zimmerman, Amy, “Justices Curb Class Actions,” The Wall Street Journal, June 21, 2011, pp. A1, A4; Liptak, Adam, “Supreme Court tightens Rules in Class Actions,” The New York Times, June 21, 2011, pp. A1, B4.

Questions for Discussion:

1.      Do you agree with the majority or dissenting opinion in the case? Why?

2.      Is the decision a moral one pursuant to Utilitarian ethics? Why or why not?

3.      Is the decision a moral one pursuant to Kantian ethics? Why or why not?

4.      What should Wal-Mart be doing to expand employment opportunities for women, to increase the number of women in leadership positions at the company, to ensure fair wages and working conditions for all employees, and to achieve a corporate culture of equality and diversity?