A trend toward a boom in class-action and collective litigation over workplace issues is expected to continue in 2007–starkly defined by circuit location. Pay and promotional practices continue to interest the plaintiffs' bar, as well as a wide variety of payroll practices attached under federal and state wage-and-hour laws.

One case that continues to dominate is Dukes, et al. v. Wal-Mart Stores Inc. (N.D. Cal. 2004). Here, on behalf of female employees of Wal-Mart, equal rights advocates charged Wal-Mart with denying promotions, training opportunities and equal pay to women. This is the largest sex discrimination case ever litigated against a private employer.

The plaintiffs' bar has increasingly used the theories in Dukes to seek certification of “punitive damages”-only classes under Rule 23(b)(2), as well as pressing for certification of mega-classes involving pay and promotion claims of employees in multiple facilities on a nationwide basis.

In fact, employers fought these theories with good success, as 2006 witnessed many pro-employer victories in class certification battles.

The leading defense decisions in 2006 include Gutierrez, et al. v. Johnson & Johnson (a decision from the federal court in New Jersey); Colindres, et al. v. Goodman (a decision from the federal court in Texas); and Reeb, et al. v. Ohio Department of Rehabilitation (an appellate decision from the 6th Circuit).

In each of these decisions, courts rejected “Dukes-like” theories, where plaintiffs sought to certify broad classes involving multiple divisions of a company and/or damages recoveries for classwide compensatory damages and punitive damages.

Gutierrez, Colindres and Reeb provide strong precedent for employers to fight off class actions where the pay and promotional systems of companies vary by facility or division, or where plaintiffs seek damages recovery, which is dependent upon individualized examination of each class member's circumstances.

Fair Labor Standards Act collective action wage-and-hour litigation increased again in 2006 and outpaced employment discrimination class-action filings.

While plaintiffs continued to achieve certification of wage-and-hour claims, employers also secured several significant victories in defeating conditional certification and obtaining decertification of ? 216(b) collective actions.

Leading decisions for employers in 2006 include Himmelman, et al. v. Continental Casualty (a decision from the federal court in New Jersey); Carlson, et al. v. C.H. Robinson (a decision from the federal court in Minnesota); and Honojos, et al. v. The Home Depot (a decision from the federal court of Nevada).

Under the test of “similarly situated” for certifying a wage-and-hour collective action, each of these rulings either denied a plaintiffs' motion or “decertified” an existing collective action because of the differences in the circumstances of the various workers in terms of their pay, supervisors and working conditions.

In 2006, employers used these types of defenses to stem the tide of certification of wage-and-hour collective actions which were more one-sided in favor of plaintiffs in 2005.

The two most important rulings from the past few months impacting corporations include the 2nd Circuit's decision in the case of In Re Initial Public Offering Securities Litigation in December 2006 and the 9th Circuit's decision in Dukes, et al. v. Wal-Mart Stores Inc. in February 2007.

While In Re IPO Securities Litigation is not an employment-related class action, its holdings impact directly upon class-action exposures for employers.

In this case, the 2nd Circuit addressed significant legal questions about the quantum of proof a party must present to certify a class action. The case involved thousands of lawsuits filed in 2001 against issuers and underwriters of initial public offerings alleging that a group of companies had manipulated hundreds of IPOs.

In granting class certification, the district court applied a standard that plaintiffs needed only to make “some showing” of each of the required elements for certification under Rule 23.

On appeal, the 2nd Circuit reversed the order granting class certification, and in doing so, it clarified the proof requirements which parties must make at the time of a class certification hearing.

The 2nd Circuit held that during the hearing a judge must resolve factual disputes and make findings with respect to the underlying Rule 23 requirements, even if proof of those requirements overlaps with issues on the merits.

This holding, in effect, allows defendants to cut off class certification at an earlier stage of the litigation in appropriate cases.

The 9th Circuit's ruling in Dukes, in a 2-1 opinion, upheld a district court's certification of a massive and diverse class encompassing an estimated 1.5 million women who have worked in a wide range of hourly and salaried positions in Wal-Mart's 3,400 stores across the U.S.

The six named plaintiffs seeking to represent this huge class contended that Wal-Mart engaged in a pattern or practice of sex discrimination with regard to pay and promotion practices.

There are many aspects of the case which are important for employers, as the theories are tantamount to a “plaintiffs' blueprint” for litigation of nationwide class actions against large employers.

Unlike the 2nd Circuit's view of the class certification process as determined in IPO Securities Litigation, the 9th Circuit indicated that any issues involving the merits or the weight of offered proof on certification requirements should not be the focus in a class certification hearing.

In addition, it endorsed the “classwide punitive damages” theory–that punitive damages could be assessed against Wal-Mart based on a formula approach, without any consideration of actual harm to particular class members–which courts outside of the 9th Circuit have rejected to date in employment discrimination class actions.

Wal-Mart filed a request for a full en banc review of the appeal in the 9th Circuit on Feb. 20 (which is still pending), so the last chapter in the case is far from written at this juncture.

Given the start of the year with the Dukes ruling, 2007 is apt to be another year filled with bet-the-company class-action litigation involving workplace issues. Employers also are likely to experience an increasing number of wage-and-hour class actions.

Such filings will be made throughout the federal system, as well as in “plaintiff friendly” jurisdictions with liberal wage-and-hour state laws such as California, Florida, Illinois, New Jersey, New York, Pennsylvania and Texas.

Large employers are also exposed to the “Dukes-like” theory recently affirmed by the 9th Circuit. As a result, the U.S. District Court for the Northern District of California (in San Francisco) is likely to remain “ground zero” for employers facing nationwide employment discrimination class actions.

“Given the start of the year…, 2007 is apt to be another year filled with bet-the-company class-action litigation involving workplace issues. Employers also are likely to experience an increasing number of wage-and-hour class actions.”

Gerald L. Maatman Jr.

Special Reports /

Wal-Mart EPL Case Sets Tone For 2007

Related Stories

Recommended For You