In Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (U.S. June 20, 2011), the Supreme Court vacated class certification of a gender discrimination lawsuit brought by 1.5 million current and former Wal-Mart employees because the plaintiffs failed to identify a specific, company-wide policy or practice of discrimination. Additionally, the Court held unanimously that the employees’ backpay claims could not be certified as a class action because Wal-Mart was entitled to individual proceedings so that it could present defenses as to each claim.

In Wal-Mart, three former and current female employees alleged that Wal-Mart discriminated against them on the basis of gender in denying them equal pay or promotions, in violation of Title VII.  The named plaintiffs sought class certification on behalf of the approximately 1.5 million female employees who currently do or have worked for Wal-Mart since December 1998. To establish that all putative class members were subjected to discriminatory policies and practices, the plaintiffs relied upon statistical evidence of gender-based pay and promotion disparities, anecdotal evidence of gender discrimination, and expert testimony from a retained sociologist that Wal-Mart’s culture and personnel practices made it vulnerable to gender discrimination. 

In today’s ruling, the Supreme Court, held the class could not be certified because plaintiffs failed to establish a specific, company-wide policy or practice of discrimination. Under Federal Rule of Civil Procedure 23(a)(2), there must be “questions of law or fact common” to the class, which means that the putative class members’ “claims must depend upon a common contention of such a nature . . . that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims.” Specifically as to pattern or practice Title VII claims, where the crux of the inquiry is “the reason for a particular employment decision,” the Court held plaintiffs must show “significant proof that Wal-Mart operated under a general policy of discrimination” or otherwise prove “a common answer to the crucial discrimination question.”   

Here, the Court concluded proof of such a policy or practice was lacking. The Court held that discretionary employment decisions can – but do not necessarily – support discrimination. The Court noted that plaintiffs provided no proof as to the number of employment decisions influenced by gender bias and that plaintiffs’ statistical and anecdotal evidence failed to prove common direction.

The Court unanimously held that the employees’ claims for backpay could not be certified pursuant to Federal Rule of Civil Procedure 23(b)(2), because those claims were not incidental to the injunctive and declaratory relief sought. The Court reserved judgment on whether claims for “incidental” monetary relief could ever be certified under Rule 23(b)(2), explaining that certification under Rule 23(b)(2) is appropriate only when a “single, indivisible remedy would provide relief to each class member,” and that claims seeking individualized monetary relief should generally be certified instead under Rule 23(b)(3). 

The Supreme Court’s ruling is very good news for employers. Justice Scalia’s repeated references to the need for a “common policy” that is unlawful – not just common – reinforces that not only must there be a question of fact or law common to all class members, but there must also be a common answer that supports the class members’ claims. As such, the ruling should be very helpful in all putative class action cases. 

The Court’s ruling is especially good news for employers who operate in multiple locations and delegate discretion on employment decisions to local managers. As the ruling makes clear, a company-wide policy cannot be established by statistical disparities, anecdotal evidence, and/or vague expert testimony concerning an employer’s culture. Accordingly, employers who establish company-wide equal opportunity policies and leave discretionary employment decisions to local managers should be less vulnerable to company-wide class actions in the future.