On June 20, 2011, the U.S. Supreme Court issued its much-anticipated opinion in Dukes v. Wal-Mart Stores, Inc., holding that 1.5 million current and former female employees cannot proceed with a class action suit alleging gender discrimination. The plaintiffs had argued that Wal-Mart’s policy of permitting local managers to exercise discretion in personnel decisions led to a disparate impact on women.

The Court unanimously held that the requirements of Federal Rule of Civil Procedure 23(b)(2), addressing injunctive and declaratory relief, cannot be met where putative class members each may have monetary claims that require individualized analysis. Under Rule 23(b)(2), a class can be certified if the employer “acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” The Court determined that this rule does not permit recovery of individualized money damages (in this case, back pay) unless incidental to injunctive or declaratory relief. A claim for monetary damages, the Court explained, falls under a different Rule (Rule 23(b)(3)), which contains more procedural safeguard and is, therefore, harder to satisfy. The Court also ruled that individualized damages cannot be determined via a “Trial by Formula” procedure in which Wal-Mart would not have the opportunity to raise defenses to individual employees’ claims.  

The Court’s 5-4 majority further held that the commonality requirement of Rule 23(a)(2) requires a determination that each of the class members have suffered the same injury that can be addressed by a classwide remedy, and not merely that the class members all suffered a violation – actual or alleged – of the same law. In addition, the Court noted that merely pleading the elements of commonality is not enough. Class action plaintiffs must actually demonstrate that they satisfy all elements of Rule 23, which may involve delving into the merits of the lawsuit at the very early stage of class certification.  

On the commonality issue, the Court concluded that “it would be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the critical question” at issue in the lawsuit. The Court searched for “some glue holding the alleged reasons for all [adverse employment] decisions together” and found none. The Court explained that significant proof that the employer had a general policy of discrimination, or proof of an evaluation mechanism or test that results in biased decisionmaking – neither of which the Court found – could satisfy the commonality requirement. In this case, the plaintiffs pointed to a company policy of giving discretion to local managers to make employment decisions, which, plaintiffs alleged, had a disparate impact on women. Such a policy, however, is not in and of itself discriminatory. In addition, Wal-Mart has a written policy that specifically forbids gender discrimination. The plaintiffs needed to, but did not, point to a specific employment practice that tied all their claims together.

Recommendations for Employers

The Dukes decision provides employers with some insights into “best practices” that might help avoid or defend against a class action lawsuit:

  • Train supervisors and other decisionmakers regarding the relevant criteria for hiring, firing, promoting, etc., and regarding company policy governing evaluation processes.
  • Stress with supervisors and decision-makers the importance of individualized decisions and documentation of the bases for such decisions.
  • Review policies and practices regarding all stages of the employment relationship, from hiring through separation, to determine whether any policy or practice negatively impacts a protected group.
  • If you do not already have a written antidiscrimination policy, consider adopting one. You might also take this opportunity to update your existing policy.