Over the last 24 hours, there’s been a lot written about the Supreme Court’s decision yesterday in Wal-Mart Stores v. Dukes.  Frankly, all of them are starting to say the same thing:  The decision is going to hamper all class-action discrimination cases going forward.

But that statement tends to simplify the decision a bit too much.  In my view, what the decision stands for is that it will be increasingly unlikely that the mega-class action (the one that covers an entire company) will be able to proceed without a very specific and tangible practice or policy that the plaintiffs can point too. 

What types of things are we talking about? Well, it would be unlikely, but suppose a company had a mandatory retirement age of 60 but without a legitimate basis for doing so. In essence, it was a company-wide practice of discriminating against older workers.  That type of class action will probably survive.

Why did the court set up a barrier to these types of broad suits? Because, as the The New York Times suggests, each plaintiff is merely getting an amount per a formula, instead of showing specific damages: 

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.

Combined with the AT&T Mobility case from a few weeks ago, this Court has tended to show reluctance to let class actions proceed as is.  But it would be mistake to say that the court doesn’t think all discrimination cases should proceed. Indeed, the court has expanded individual claims of retaliation and discrimination this year as well. 

Wal-Mart is still not out of the woods. It could potentially face smaller class actions, including ones based on certain stores or regions, and may have to litigate in many different courts.  But the age of the huge class actions, at least in employment discrimination cases, appears to be over for now.

For employers, the decision has some important takeaways:

  • It remains more important than ever to have company-wide policies and practices that reflect a strong prohibition on discrimination.  This can be accomplished through vigilence and internal enforcement mechanisms.
  • These practices should be communicated with some frequency (at least once or twice a year) not only to various regions or divisions, but also to employees as well. 
  • Stay tuned to see further developments in the wage and hour collective actions — which differ from discrimination class actions. Will courts apply the logic of Wal-Mart to these types of cases? That’s a question we’ll see answered in the next few years.