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In-house lawyers are still trying to assess the impact of the U.S. Supreme Court’s decision in a massive gender discrimination class action against Wal-Mart Stores, Inc. On Monday, the Court ruled 5-4 to reverse certification for the class, which could have included as many as 1.5 million female workers. Justice Antonin Scalia, writing for the majority, said that the plaintiffs hadn’t shown that they all suffered a common injury. The plaintiffs claimed that they had, because Wal-Mart’s practice of giving broad discretion to local managers had allowed the company’s mostly male supervisors to discriminate against women nationwide. But Scalia disagreed. Giving discretion to managers, he wrote, “is just the opposite of a uniform employment practice that would provide the commonality needed for a class action.” Indeed, he added, “It is a policy against having uniform employment practices.” Scalia’s reasoning raises the question: Could companies protect themselves from class actions by delegating broad responsibility to local managers? Lorene Schaefer, a former in-house attorney at General Electric Company, thinks that’s possible. “If your goal is to simply reduce the number of class actions, or the odds that they will prevail, that’s the position you might take,” she says. “For corporate counsel, the Court’s decision really poses a dilemma in terms of their efforts to prevent things like discrimination,” Schaefer adds. “It almost flies in the face of what you want to do, which is to take away discretion.” The former general counsel of GE’s transportation division, Schaefer is very familiar with gender discrimination class actions: she brought one herself in 2007, claiming that GE gave better pay and promotions to male lawyers. Schaefer reached a confidential settlement with the company in 2009. She is now a neutral arbitrator, mediator, and workplace investigator with One Mediation, Inc., in Atlanta. Michael Droke, a labor and employment partner in the Seattle office of Dorsey & Whitney, also thinks there’s something to be said for giving discretion to managers. “It could be a very good thing,” Droke says. He notes that in the Wal-Mart case, “It served as a basis for why there was no commonality.” But that doesn’t mean companies shouldn’t have guidelines on topics like discrimination, Droke adds: “The Wal-Mart decision says you should have a broad policy, but give managers discretion.” How might that work in practice? Droke suggests that a company could tell its managers: “It’s important to us that you follow the law—not allow harassment, not allow discrimination—and here are some ways you can do it. But it’s up to you to choose how you do it.” Gerald Maatman, Jr., a labor and employment partner at Seyfarth Shaw, emphasizes that the Supreme Court found that “there’s nothing sinister or untoward about subjective decision-making.” And in his view, giving discretion to managers definitely isn’t a way to reduce liability. “That was the Wal-Mart plaintiffs’ argument,” Maatman explains. “The plaintiffs’ theory was that when left to their own devices, male supervisors tend to favor male employees over female employees.” According to Maatman, the Supreme Court said that that wasn’t enough—the plaintiffs had to show that there was a companywide policy of discrimination. The flip side of the ruling, he says, is that a strong policy against discrimination can be used as a defense. A rigorous equal employment opportunity (EEO) policy by itself isn’t enough, Maatman adds. A company must also implement a “state-of-the-art” complaint system in which employee grievances can be easily filed and quickly resolved. And it must evaluate managers on their adherence to the EEO policy. Managers should be graded—and paid—on how well they address complaints and how well they provide opportunities to women and minority employees. “The Supreme Court is signaling to companies that if you do these things, you’ll lower your susceptibility to discrimination claims, and you’ll lower the odds that plaintiffs will be able to bring a class action,” Maatman says. “In essence, you’re demonstrating a policy of non-discrimination.” According to Droke, the Wal-Mart decision also reinforces the need for managers—and executives—to be on their best behavior at all times. Though the Court struck down a national class action in the Wal-Mart case, Droke says that “if you had a regional manager who permitted an atmosphere charged with sexual content—sex jokes, gender-based comments—then that could be the basis to bring a regional action.” Schaefer agrees: “Womens’ rights groups are saying that the sky is falling. I don’t think the sky is falling.” It will still be possible to bring gender discrimination class actions, she believes—they just need to be smaller. “If you use the Wal-Mart case as an example, they had over a million members. If they had brought 10 subclasses, they could have used the same experts, and the likelihood of prevailing would have increased substantially.” Wal-Mart general counsel Jeff Gearhart did not respond to requests for comment. But the company issued a statement by Gisel Ruiz, an executive vice president: “Every female associate and every customer can feel even better about the company as a result of [the Supreme Court's] decision. Wal-Mart has a long history of providing advancement opportunities for our female associates, and, over the years, we have made tremendous strides in developing women throughout the organization. . . . As a result of our efforts, Wal-Mart is often recognized as a great place for women to work.” See also: “How to Have It All,” from CorpCounsel.com, October 2010.

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