Wednesday, April 4, 2012

Some Important Class Action Guidance for Discrimination Cases

As previously predicted (you read it here first!!), plaintiffs’ lawyers are moving from litigating individual plaintiff discrimination cases to attempting to craft wide-ranging class actions based on disparate treatment claims. Despite the Supreme Court’s decision in the Dukes v. Walmart case last summer, we are seeing more and more attempts to link hundreds of plaintiffs together in huge cases that will be expensive nightmares to defend.

Of course, that’s the point.  Most employers, when confronted by a lawsuit that will cost them more than a million dollars just to prepare for trial, will immediately settle. That’s why it is so important to understand what the courts consider to be valid classes, and think about how a company’s employment practices can be structured and make it as difficult as possible to create such a class.

A recent federal case (note:  Pacer needed for viewing) out of Illinois provides some useful guidance in the creation of disparate treatment and class actions. Twelve construction workers originally filed a case against a large construction company alleging race discrimination across the company. In a shotgun approach, the Plaintiff sought to certify four separate classes – a hostile work environment class, (which encompassed all black employees over a period of approximately 10 years), a hiring and promotion class (comprising all black employees denied hiring , rehiring, or promotions), a work hours and compensation class (made up of black employees denied opportunities to work, not afforded overtime hours, or premium pay hours), and a layoff and termination class (comprising all black employees laid off or terminated). The potential class size ranged in the thousands of employees, and because of the extended duration of the case, presumed to be a litigation hornets nest for the company.

There are several variations of class actions at play in this case, all under Rule 23 of the Federal Rules of Civil Procedure. Class actions have two key requirements – numerosity and commonality. Specifically, there must be so many potential plaintiffs affected by a common practice or procedure that adjudication of all the claims together is more efficient and proper than try each claim separately. In disparate treatment discrimination cases, class certification traditionally has been very difficult because each employment decision tends to be the result of highly specific factual considerations by an individual manager. Disparate impact class actions are far easier to fit into the class action scheme because a plaintiff doesn't have to prove discriminatory intent – the only inquiry the court makes is whether there is a legitimate basis for the employment policy that has an unintentional impact on a protected class.

With respect to the question of commonality – i.e. is there a question of law or fact that is common to all of the black construction workers – the court looked at the company’s practice of delegating to individual jobsite superintendents discretionary authority to make employment decisions. In assessing the propriety of the class claim, the trial court determined that distinguishing characteristics of the Walmart decision was that the size of the potential class (over 1 million employees) overwhelmed any potential common issue based on delegation of authority. Because the numbers in this case were not nearly so significant, the court determined that there could be a class affected by the company’s policy of delegating discretionary authority to job site superintendents, if the plaintiffs can show evidentiary basis  for their class definition.

I don’t think the court did a good job of differentiating Walmart from this case, but the issue was not significant because the court determined that the plaintiff’s statistical evidence discrimination was insufficient to certify the class. Although the plaintiffs pointed to some evidence that there was a company wide difference in the distribution of jobs and overtime for African Americans, it could not refine that evidence down  to show there was a common practice of intentional discrimination at the individual work sites. In fact there was only limited anecdotal evidence of discriminatory work hours and overtime practices at 7 of the 262 construction sites that the company operated.  Discriminatory layoff and termination practices contained anecdotes from only 5 construction sites. This was not enough to show that there was a common question as to whether the delegation of authority to supervisors at all of the company’s sites resulted in discrimination against African American employees and so the court did not certify the disparate treatment class.

As alluded to above, the disparate impact class, which included a claim focusing on assignment of work hours, overtime, and terminations, faired better in the court’s analysis. Because the plaintiffs did not have to show that there was an intent to discriminate, the wide discretion allowed to site managers appeared to result in significantly lower overtime and work hours to black employees and created an issue for class resolution.  The court certified a class with respect to the work hours claims, but gave no credence to the statistical analysis relating to hiring and termination data. The court’s discussion of the shortcomings of the Plaintiffs’ statistical expert are noteworthy because they highlighted the fact that the Plaintiffs’ expert failed to properly assess the availability of qualified black construction workers in the target metropolitan area. The court removed that evidence from its consideration and the resulting limited anecdotal evidence of hiring and termination was not sufficient to show a class wide pattern.

The court certified a class subject to hostile work environment because it found that the record contained “voluminous” evidence alleging that supervisors at two work sites engaged in overtly racist conduct that was likely known to company management . This fact alone, even though it was only identified at two sites, was enough for the court to find that there was sufficient evidence to certify a common issue of fact for all black construction workers throughout the company.

The court next determined that the claims of the identified class representatives were sufficient to allow them to proceed under the disparate impact and hostile work environment claims although the court determined that there were no remaining plaintiffs that were denied a promotion so that this claim was invalid. The court then ruled that the parties could not certify a Rule 23(b)(2) class (which is typically an easier class to certify) because there was no overriding claim for injunctive relief. Instead, the court determined that money damages were the major remedy sought by the class, and held the employees to a stricter Rule 23(b)(3) class standard. Under this analysis, the court determined that the disparate impact claims with respect to work hours and compensation were proper, as were the hostile work environment claims. Those claims would be allowed to go forward  as class claims through discovery and trial.

What are the lessons here?

The first is that, for better or worse, the courts are not enamored of so called “push down” management styles in which a company provides general guidance and unlimited discretion to low level managers to run their own operations. Systematic and regular reviews of hiring practices, promotion practices, and terminations and lay offs are absolutely essential for large companies that provide little in the way of continuing oversight of their remote operations. Second, companies absolutely can not turn a blind eye to potential discrimination issues in their supervisory work force. The main reason why the hostile work environment claim was certified here, even though it was only identified at 2 work sites, is that there was evidence that management was aware of what was going on. Management’s tolerance of blatant racist conduct (or at least alleged racist conduct) at two sites meant that the court could certify the hostile work environment across all the work sites, because of the presumption  such conduct wasn't an issue for the company management.

In other words, the Dukes v. Walmart legacy is going to be limited to cases where there are huge numbers of employees that make a system wide adjudication almost impossible. In all other circumstances, companies need to look carefully at what’s coming out of the employment policy pipeline when they are giving large amounts of discretion to local management officials.

No comments:

Post a Comment