Wal-Mart Verdict May Hamper Future Class Action Suits

July 14th, 2011

The recent outcome of a high-profile employment discrimination lawsuit against Wal-Mart may have a chilling long-term effect on similar class action claims.

The Wal-Mart lawsuit, which was originally filed in 2001, alleged that the retailing giant systematically underpaid female workers while also offering more promotion opportunities to male employees.

The lawsuit never reached trial, as Wal-Mart’s defense attorneys challenged the plaintiffs’ ability to bring the claim, saying that the vast number of plaintiffs could not have suffered a common injury.

Supreme Court Weighs In on Allegations of Wal-Mart Discrimination

The Supreme Court agreed with this argument, observing that the allegations of discrimination against the company were too weak and too vague to establish a common injury among the 1.6 million women who have worked at Wal-Mart stores since 1998.

The Wall Street Journal cited a few important cases that may be affected by this decision, including:

  • A lawsuit against Costco that alleges a “glass ceiling” in compensation for women. A lawyer for the plaintiffs, though, claims that this lawsuit focuses on a much narrower range of employees, and thus is not changed by the Wal-Mart decision.
  • A discrimination claim against Best Buy was recently settled after the plaintiffs alleged systematic racial and gender discrimination against the electronics store. Observers speculated that the plaintiffs were prompted to settle after receiving news of the Supreme Court’s Wal-Mart decision.

In the Wal-Mart case, the Supreme Court observed that the company allowed its managers a lot of autonomy in personnel decisions. If the company had strict, universal personnel policies, the plaintiffs would have had a stronger argument that they suffered similar injuries.

Previous class action lawsuits have had success in the past when companies used rigid formulas when making hiring and firing decisions. Some commentators noted that Wal-Mart’s relaxed policy towards local personnel decisions is a bit old-fashioned, but it may have saved them from legal consequences in this particular suit.

Wal-Mart Denies Wrongdoing

As for the merits of the complaint itself, Wal-Mart consistently denied having discriminatory hiring practices, despite the plaintiffs’ claims that it fostered a culture that allowed widespread discrimination against women.

The plaintiffs had claimed that men dominate managerial positions at the company, while women are stuck in low-level retail jobs with allegedly poor prospects for promotion.

Wal-Mart’s victory was a boon for the company, as it likely saved it billions of dollars in back pay and punitive damages. Thus, the lofty legal fees Wal-Mart likely paid to challenge the lawsuit proved to be well worth the investment.