Supreme Court’s Decision in Wal-Mart Class Action – Likely Benefits for Small and Mid-Sized Businesses

U.S. Supreme Court │ Wal-Mart │ Class Action Lawsuit │ Employment Law

The United States Supreme Court’s recent decision disallowing the nation’s largest ever employment-based class action lawsuit has received significant attention in the press —and with good reason. The decision, in the case of Wal-Mart Stores, Inc. v. Dukes, prohibits several Wal-Mart workers from representing a nationwide class of approximately 1.5 million current and former female Wal-Mart employees. As expected, much of the press coverage thus far has focused on the expected impact the decision will have on “big business” in America by making it more difficult for employees to bring large-scale class actions against their national or international corporate employers.

However, we would like to highlight the potential beneficial impact that the case could also have on small and mid-sized businesses. In denying the employees class action certification, the Court found that they could not establish that every potential class member was subjected to the same discriminatory employment practice by Wal-Mart. The female employees alleged that the company’s managers disproportionately favored male employees when exercising their discretion over pay and promotion decisions. Because Wal-Mart delegated such decisions to each of its local store managers, the employees could not prove that there was a general policy of discrimination that was applied to every aggrieved female employee nationwide.

The same reasoning could apply with equal force to employers of any size. For instance, a local retail or restaurant business with only a handful of locations could be similarly protected from a company-wide workplace discrimination class action if the employer could prove that employment decisions were delegated to managers at each individual branch. Whatever the size of a business, the Supreme Court’s decision certainly underscores a potential benefit of the “decentralized control” of personnel decisions regarding hiring, firing and promotion.

Employers of all sizes should carefully consider all of the possible impacts and repercussions that could result from a particular human resources decision. For assistance evaluating the legal implications of a particular human resources issue, call us at (718) 275-6700 or email us to arrange a consultation to find out how our attorneys can help you.

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