As discussed previously here on the Blawg, yesterday the U.S. Supreme Court rejected a nationwide class action brought on behalf of 1.5 million women against Wal-Mart.

The Ruling Made Simple

So, what does this historic ruling really mean? Here’s my take:

• Does it mean the end of all class actions as we know them? Not even close.
• Does it mean the end of all mega-humongous-nationwide-one-size-fits-all class actions? Maybe. Possibly. Potentially. It depends.

The Court stopped far short of condemning all class actions. It also stopped short of prohibiting nationwide class actions such as the one facing Wal-Mart. Instead, the Court ruled that for a nationwide class action to survive it must offer clear evidence of a nationwide policy or practice that actually damaged the class.

The Court found no such policy or practice on Wal-Mart’s part. Like most companies, Wal-Mart’s corporate policy officially forbade discrimination. And, like most companies, managers were given considerable discretion in enforcing the policy and making pay, promotion and other decisions.

The key sentence in the opinion (in my opinion): “In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction,” Justice Scalia wrote. For that reason, a single class action was deemed inappropriate.

What Others Are Saying

Here are some other reactions from around the nation . . .

The New York Times offered up seven different op-ed pieces expressing varying views. In its main article on the ruling (Wal-Mart Case Is a Blow for Big Cases and Their Lawyers), it offered a nice summary of the Court’s reasoning behind the decision. In short, the problem with allowing massive class actions is that plaintiffs don’t have to show real injury but instead get paid based on a formula:

In his opinion, Justice Scalia said it was unacceptable to allow employment discrimination lawsuits to proceed as huge class actions when monetary awards would be based on a broad formula per plaintiff, without having an individual assessment of how much each plaintiff had suffered.

He wrote that to allow that to happen in the Wal-Mart case, the largest employment class action in American history, would have been hugely unfair to Wal-Mart because it might have had to pay out damages without many of the plaintiffs demonstrating how much they were injured.

The Associated Press called the ruling a “blow to class actions” and opined that “mounting a large-scale bias claim against a huge company will be more difficult.

Not surprisingly, business groups (many of which filed briefs in support of Wal-Mart’s position in the case) heartily embraced the decision. “We applaud the Supreme Court for affirming that mega-class actions such as this one are completely inconsistent with federal law,” said Robin Conrad of the U.S. Chamber of Commerce. She added: “Too often the class-action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin.”

Others were decidedly less enthusiastic. Marcia Greenberger of the National Woman’s Law Center said that the ruling “strikes a blow to those who face discrimination in the workplace to be able to join together and hold companies, especially large companies, accountable for the full range of discrimination they may be responsible for.”

Joseph Sellers, the lead lawyer for the plaintiffs in the Wal-Mart case, noted that the decision would likely result in even more class actions at the store/regional level. He predicted the decision would hurt both his clients and Wal-Mart because it “will be splintered into many cases that may take longer and be harder to resolve” based on “checkered” legal standards that vary from jurisdiction to jurisdiction.

Law scholars generally agreed that the ruling will discourage plaintiffs’ lawyers from pursuing large-scale class actions. Columbia University professor John Coffee said the ruling “significantly changes the balance between employers and employees. And it largely eliminates the monetary threat facing big employers.” “Lawsuits are expensive to bring,” he said, “and if there is no money relief at the end of the road, there is no incentive to bring the suit.”

Several bloggers weighed in as well. Daniel Schwartz of The Connecticut Employment Law Blog has a nice summary here. Jon Hyman of the Ohio Employer’s Law Blog has a detailed legal analysis here. And Evil HR Lady has a piece entitled Why the Wal-Mart Ruling Is Good for Women.

The Court’s full opinion is available here.

What Should Employers Do?

Here are some lessons employers should learn from this ruling:

1. Implement company-wide policies and practices prohibiting discrimination.
2. Communicate the policies and practices to all employees on a regular basis.
3. Train managers on proper enforcement of the policies and practices.
4. Promptly and thoroughly investigate any and all complaints.
5. Take appropriate steps to address any violations.
6. Never ever retaliate against any complainant.

Yesterday, the U.S. Supreme Court ruled that the Federal Arbitration Act preempts state laws that limit class action waivers in arbitration agreements (AT&T Mobility LLC v. Concepcion).

What Does This Mean?

While Concepcion isn’t an employment law case, it could have a significant impact on the workplace. Employment lawyers will no doubt argue that employers can now avoid class actions by requiring employees to sign arbitration agreements that require resolution of claims on an individual basis.

Should We Change Anything?

Should employers rush off and require all employees to sign arbitration agreements? Maybe. Many have refrained from doing so because arbitration is getting more and more expensive and more and more like actual court litigation. However, this ruling could be the tipping point for companies concerned about the recent class action crescendo described previously here.

Many employers will wait to see how the Supreme Court rules in the mammoth Dukes v. Wal-Mart class action before making sweeping changes. Some are speculating that the Court’s ruling in Concepcion signals that it may use Dukes to impose further restrictions on the class action process. That decision is expected in July.

What About the Arbitration Fairness Act?

The Concepcion decision could reopen debate on passage of the Arbitration Fairness Act, previously discussed here. The AFA would prohibit agreements mandating arbitration of employment disputes (as well as franchise and consumer disputes). Most believe that passage of the AFA remains a long shot, however.

Stay tuned.

It’s LITIGATION WEEK here on the Blawg, where all week we’re taking a deep dive into the wonderful world of workplace lawsuits.

Today’s topic: CLASS ACTIONS.

Few things get the heart of an HR professional or employment lawyer racing faster than the mention of those two little words. A single class action can easily be the equivalent of 100 (or more) individual suits in terms of potential liability as well as effort, resources and defense costs.

So, what’s the latest? According to Seyfarth Shaw’s new 2011 Workplace Class Action Litigation Report, employers can expect 2011 to be a “tipping point for workplace-related class actions, with major Supreme Court decisions expected, a crescendo in wage-hour class actions, plus stepped-up enforcement litigation by the Obama Administration.” Yikes.

Here are the major trends identified in the report . . .

1. Record $$$. Class action settlements increased four-fold in 2010 over 2009 and the top ten settlements increased to a whopping $1.16 billion, the highest amount ever.

2. Workplace Class Actions Waaaay Up. While securities and commercial class actions remained stable, workplace class actions spiked considerably. 2010 saw one of the largest employment discrimination verdicts ever: $253 million in the Velez v. Novartis case previously described here on the Blawg (eventually settled for a mere $175 million).

3. Wage & Hour #1. Wage & hour cases continue to be most companies’ #1 exposure. “We expect to see even more and bigger cases brought in 2011,” said Jerry Mattman, Seyfarth’s resident class action guru. Continuing effects of the downturn and layoffs continue to fuel overtime class actions under the Fair Labor Standards Act and various state laws (especially California). Seyfarth dubbed 2010 the “Year of the Misclassified Employee” in light of the government crackdown (and resulting high number of cases) claiming that employers misclassified employees under exempt/non-exempt rules.

4. Increased Enforcement. As we discussed here yesterday, the Obama Administration is stepping up enforcement actions – particularly in systemic “pattern and practice” cases – through increased budgets, hiring, investigation and employee education activity.

5. Beware Copy-cat Filings. Recent class action successes (see the Novartis case above) are likely to inspire copy-cat filings and drive up settlement demands by plaintiffs and their attorneys. Plaintiffs’ attorneys continue to pursue creative new methods to expand the dimensions of classes and the scope of damages.

6. Supreme Court Busy. In March, the Supremes will hear arguments in the Dukes v. Wal-Mart action that could be the largest discrimination case in history with more than 1.5 million class members (described previously here on the Blawg). The Court will also decide whether arbitration agreements can bar class actions and the extent to which one court’s refusal to certify a class is binding on another court.

What should employers do? Take proactive steps to reduce litigation exposure NOW. As Maatman says, “Clearly, the dominant lesson of 2010 is that shoring up potential weaknesses in compliance and identifying class action vulnerabilities should remain a priority” for all employers. 

In other words, imagine what the world’s toughest plaintiffs’ firm would sue you for and fix it before they get a chance.

Stay tuned for more.

On Monday, a New York jury found Novartis Pharmaceuticals Corporation liable for discriminating against female employees and awarded more than $3.3 million in compensatory damages. Yesterday, after further deliberations, the jury imposed an additional $250 million in punitive damages.

The damages will be apportioned among a class of as many as 5,600 women who alleged discrimination between 2002 and 2007. Individual awards will be capped at a total of $300,000.

In addition to pay discrimination, the plaintiffs alleged that male supervisors mistreated female employees, urged female sales reps to seduce doctors and discriminated against pregnant employees.

Plaintiffs’ counsel David Sanford had asked the jury of five women and four men to award punitive damages of between 2-3% of Novartis’ $9.5 billion in revenue for 2009, telling them that the company “tolerated a culture of sexism, a boys’ club atmosphere.” The jury obliged, awarding the plaintiffs close to 3%.

“The women of Novartis have had their day in court,” Sanford said. “We are absolutely delighted the jury has done the right thing.”

Novartis President Andy Wyss said the company was “disappointed in the jury’s verdict,” insisting that “for more than 10 years the company has developed and implemented policies setting high standards with regards to diversity and inclusion for the development of our employees.”

Novartis could end up paying even more, as well as being required to implement sweeping policy and process changes to deter future discrimination. The judge still has to decide whether to award as much as $37 million in backpay and/or whether to impose injunctive relief.

Various experts are already predicting that this case and the recent certification of the largest class action employment lawsuit in history are likely to spur even more big-ticket employment lawsuits.

Stay tuned.

First, there was the certification of the largest class-action employment lawsuit in U.S. history. Then, a college agreed to pay $1 million to settle a sex harassment lawsuit. Then another employer agreed to pay $263,360 to settle age discrimination claims. Even a union got into the act, settling a retaliation suit for relatively big dollars.

Here are some of the details . . .

Wal-Mart Makes History

On Monday, a federal court in San Francisco certified the largest class-action employment lawsuit in U.S. history. That means that a case that could involve several hundred thousand plaintiffs demanding billions of dollars in damages may now proceed to trial.

The suit was first filed in 2001 by a greeter named Betty Dukes who worked in Wal-Mart’s Pittsburg, California store. Dukes and others claim that female employees are paid less and given fewer opportunities than their male counterparts. They also contend that women make up more than 70% of Wal-Mart’s hourly workforce but less than a third of store management, saying that the company’s “strong, centralized structure fosters or facilitates gender stereotyping and discrimination.” The plaintiffs seek back pay and punitive damages.

Wal-Mart has objected to the size of the suit, calling it “historic” in scope and arguing that it would be too difficult to litigate. Judge Susan Graber of the appeals court disagreed, ruling that although “the size of this class action is large, mere size does not render a case unmanageable.”

Wal-Mart has indicated that it may appeal the court’s sharply divided 6-5 decision to the Supreme Court, saying “We do not believe the claims alleged by the six individuals who brought this suit are representative of the experiences of our female associates.”

College Pays $1 Million

Lafayette College in Easton, Pennsylvania agreed to pay $1 million and furnish significant remedial relief to settle a sex harassment lawsuit filed by the EEOC.

The EEOC alleged that Lafayette’s supervisor of loss prevention engaged in repeated harassment of five female public safety employees, including groping, forcible kissing, lewd comments, explicit gestures and pornographic e-mails. One employee was forced to quit due to the harassment, according to the EEOC.

“No one should have to endure the abuse these women faced at work,” said EEOC Chair Jacqueline Berrien. “This significant settlement shows that the EEOC will insist on meaningful relief for workers who are victims of harassment.”

Each of the five plaintiffs will receive $200,000 under the terms of the settlement.

Fire Department Pays $263,360

The Selden Fire District in Long Island, New York agreed to pay a total of $263,360 to 23 firefighters to settle a class-action age discrimination suit brought by the EEOC.

The EEOC alleged that the district refused to let volunteer firefighters over age 55 accrue credit toward a length-of-service award due to their age. As a result, the EEOC contended, older firefighters lost pension amounts after they turned 55 in violation of the Age Discrimination in Employment Act.

“Older workers, like these firefighters, should not be deprived of valuable pension benefits simply because of their age,” EEOC Chair Berrien said. “This settlement ensures that these highly valued public servants will finally receive fair compensation.”

Union Settles Retaliation Suit

The Maryland Classified Employees Association (MCEA) agreed to pay $80,000 to settle an EEOC retaliation suit. The EEOC charged that MCEA (1) fired an employee for her “perceived involvement” in a prior EEOC investigation of MCEA’s alleged unlawful employment practices and (2) unlawfully denied a promotion to another employee who filed a discrimination charge against the union. The MCEA also agreed to various anti-retaliation remedial efforts in a two-year consent decree.

“Title VII depends for its enforcement upon the cooperation of employees who are willing to oppose or report employment discrimination,” said EEOC Acting Regional Attorney Debra Lawrence.

Stay tuned.

A new study by the law firm of Seyfarth Shaw confirms what we’ve been seeing in the headlines in recent months:  when the economy goes down, lawsuits go up.

The firm’s Fifth Annual Workplace Class Action Litigation Report identifies several major trends in the world of employment lawsuits:

1.  Class Actions Up.  The financial meltdown is resulting in increased class action litigation, including ERISA class actions seeking recovery for 401(k) losses and post-RIF discrimination and WARN Act cases.  In fact, employment-related class actions are the #1 exposure driving corporate legal budget expenditures.

2.  Wage & Hour Up.  The volume of wage and hour suits continues to “increase exponentially.”  The number of Fair Labor Standards Act (FLSA) class actions outnumbered all other employment-related private suits.  The biggest wage and hour explosion is at the state level, particularly in California, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Texas.

3.  $$$ Up.  Settlements/damages paid out on workplace class actions continues to rise, especially in ERISA cases.  The top ten settlements alone in 2008 totaled more than $18 billion.

What will 2009 bring?  Probably more of the same, unfortunately.  Each of the above trends is expected to continue to grow in 2009.  “The findings in this year’s report illustrate that the trend we’ve analyzed for the past few years continues unabated:  there is an explosion in class action and collective litigation involving workplace issues,” said J. Stephen Poor, Seyfarth’s Managing Partner.

The lesson?  Take proactive action NOW.  Identifying and addressing class action vulnerabilities should be at the top of every employer’s list of 2009 priorities. 

In other words, imagine what the world’s toughest plaintiffs’ firm would sue you for and fix it before they get a chance.

There are two things most HR professionals strive to avoid:  (1) class actions and (2) jail.  An HR professional at an Iowa meat-packing plant managed to find her way into both.

Agriprocessors Inc. was hit with nearly $10 million in fines for violating various wage and hour laws.  Among the alleged violations:

• $9,643,600 for 96,436 unlawful clothing deductions affecting 2,001 employees (reducing their wages by $192,597)
• $339,700 for 3,397 unlawful “sales tax/miscellaneous” deductions affecting 1,073 employees (reducing their wages by $72,190)
• $4,900 for failing to pay 42 employees their final paychecks

In other words, by attempting to unlawfully save about $270,000, the company now must pay more than 37 times that amount.

In a separate matter, Laura Althouse, one of the company’s HR professionals, pled guilty to charges of conspiring to harbor undocumented aliens and aggravated identity theft in connection with a May 2007 raid that uncovered nearly 400 undocumented workers.  Althouse faces up to 12 years in prison and up to $500,000 in fines.  Similar charges are pending against another Agricprocessor HR professional.

The Lessons

They’re pretty obvious here.  Know and follow the law, especially the nuances of wage and hour and immigration law.  Failure to do so could be hazardous to your career and — possibly — your freedom.

To avoid this happening to you, check out the handy materials under the “Tools & Tips” Section of the Blawg.

A federal judge has ordered Manhattan’s Saigon Grill to pay more than $4 million to three dozen $2-an-hour delivery workers.

The case is truly one of the most egregious I’ve ever seen.  Here are some of the findings from Judge Michael Dolinger’s 79-page decision.

• The delivery workers were paid only $520 a month despite the fact that many of them worked more than 260 hours apiece.
• The employer unlawfully deducted pay (sometimes as much as $200) for infractions such as letting the door slam on the way out of the restaurant and failing to log in deliveries.
• The employer failed to reimburse the employees for buying and maintaining bicycles used for the deliveries.
• Records kept by the employer were woefully incomplete and wrongfully destroyed.  The records that were kept contradicted sworn testimony from the owners that the employees worked less than they claimed.
• The employer retaliated against several employees by firing them after they notified the company of their intent to file a complaint.

In short, the judge found that owners Simon and Michelle Nget “showed no regard whatsoever for legal requirements in connection with their wage policies.”

Some of the delivery workers will receive as much as $328,000 as a result of the judgment.  “I’m very, very happy about this decision,” said Yu Guan Ke, one of the plaintiffs.  He said he plans to use the funds to buy health insurance for his family.

More money could be coming the plaintiffs’ way.  A hearing in December will determine whether the Ngets must pay the plaintiffs’ attorneys fees and costs.  In addition, the judge has yet to rule on the retaliation claims, for which the plaintiffs are seeking more than $1.5 million plus punitive damages.

Stay tuned.  Click here to read more on this case from the New York Times.

Fulbright & Jaworski’s always-fascinating annual Litigation Trends Survey was released this week.  Here are some of the key findings:

• Employment law disputes remain the #1 legal headache for U.S. businesses.
• 1 in 4 companies has at least one lawsuit with more than $20 million at stake.
• 1 in 10 companies spends more than $10 million on litigation each year.
• Arbitration ain’t cheap either:  1 in 4 companies spends more than $100,000 per dispute.
• 1 in 4 companies is facing a class action (a dramatic drop from 6 in 10 last year).
• Race, gender and wage & hour claims are the most costly.
• The education, financial services and engineering/constsruction sectors are facing the biggest increases in employment claims.
• The #1 area of dissatisfaction with outside attorneys is cost management.

Click here to download the full report.