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Companies urged to examine employment practices


The class certification approved by a federal appellate court of 1.5 million current and former female Wal-Mart Stores Inc. workers is the largest U.S. employment class action ever, but the ruling breaks no new legal ground, say most observers.

The lawsuit alleges gender-based discrimination in pay and promotions.

Even so, experts say it behooves employers to re-examine their own employment practices.

Last week's 2-1 ruling by a panel of the 9th U.S. Circuit Court of Appeals in San Francisco in Betty Dukes vs. Wal-Mart Inc. focuses on whether the lower court abused its broad discretion in granting class action status.

Brad Seligman, executive director of the Berkeley, Calif.-based Impact Fund, who represents the plaintiffs in the Wal-Mart case said, "We weren't trying to create new law here. We're trying to apply well-established rules and laws dealing with discrimination."

"What the decision does from a legal standpoint may not be new at all," said Michael Kun, an employer attorney with Epstein Becker & Green P.C. in Los Angeles. "What it does is serve as a reminder" of the trial court's broad discretion in deciding whether a case is a class action.

"It's unclear whether the legal issues are so novel that it will attract enough votes to garner an en banc review" by the appeals court, said D. Gregory Valenza, an employment attorney with Shaw Valenza L.L.P. in San Francisco.

However, Anthony J. Oncidi, an employer attorney with Proskauer Rose L.L.P. in Los Angeles, said Judge Andrew J. Kleinfeld's strong dissent indicates "there are probably other judges in the 9th Circuit who believe as he does, that this is not really the appropriate ruling in this case," and could lead to a re-examination by the full appellate court.

The U.S. Supreme Court ultimately may respond to business community demands that it "tighten up class certification" in the same way it tightened rules on punitive damages, said Anthony J. Sebok, a professor at Brooklyn Law School in New York.

Regardless of its legal significance, observers say the decision means employers may want to reconsider their practices.

"The huge potential liability of this case represents an expansion of the class action vehicle as a weapon of attack against employers, and it should cause all companies of any size to review their own hiring and promotional practices," said Susie Gibbons, an attorney with Poyner & Spruill L.L.P. in Raleigh, N.C. "If I were a risk manager at a company, I would want to analyze this case to look at what the vulnerabilities were that ended up causing this problem for Wal-Mart."

Observers noted that the district court in its ruling relied heavily on the use of statistical evidence presented by plaintiffs to determine that all 1.5 million female workers had enough "commonality" to be considered a class.

Cary G. Palmer, an attorney with Jackson Lewis L.L.P. in Sacramento, said the decision "underscores for employers that they would be well-advised to carefully assess statistical data for evidence of an inference of disparate-impact discrimination."

"Any large employer is going to have to be much more mindful of statistics" as a result of the ruling, said Lloyd C. Loomis, an attorney with Lewis, Brisbois, Bisgaard & Smith L.L.P. in Los Angeles.

The subjective decision-making allegedly permitted by Wal-Mart managers was a factor in the decision as well, say observers. Because of this, "employers would be well-advised to strive to eliminate, or at least minimize as much as possible, subjective decision-making in the workplace" in pay and promotion decisions, said Mr. Palmer.