Workplace Class Action Litigation

By Rebecca Bjork and Gerald L. Maatman, Jr.

The class action lawsuits against retailer Wal-Mart alleging discrimination against female employees continue on, even though at one time, many in the plaintiffs’ bar warned that the Supreme Court’s 2011 ruling in its favor could be a death knell for employment class actions. We never subscribed to that view, and, no surprise to us, they did “re-boot” their claims and press ahead. 

A recent ruling in one of the follow-on regional class action suits filed against the employer proves the point. In Phipps, et al. v. Wal-Mart Stores, Inc., No. 12-CV-1009 (M.D. Tenn. June 13, 2013), the court granted the plaintiffs’ motion to certify for interlocutory review under 28 U.S.C. § 1292(b) its prior Order dismissing the plaintiffs’ class claims relating to Region 43 of the company (encompassing Tennessee and other states) as time-barred. We have been following this case, and previously have discussed it here and here. This new development definitely merits some attention. 

In this latest ruling, the court reiterated its prior statement questioning the validity of the Sixth Circuit’s decision in Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988). The court described the Andrews case as stating “categorically, that there was ‘unanimous agreement that the pendency of a previously filed class action does not toll the statute of limitations period for additional class actions by putative members of the original class.’” Phipps, slip op. at 2.

Notwithstanding this categorical and supposed unanimous agreement on tolling, the court quite directly asked the Sixth Circuit to reconsider the rule articulated in Andrews. Id., slip op. at 3. In so doing, the court noted a recent Sixth Circuit decision of In Re Vertrue Mktg. & Sales Pracs. Litig., 2013 WL 1607295 (6th Cir. Apr. 16, 2013), which “found an exception to Andrews” and allowed tolling of the statute of limitations in a follow-on class action under Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 554 (1974). 

More strikingly, in our view, is the court’s explicit reliance on notions of “fundamental fairness” and “substantial policy issues” which “flow from the Supreme Court’s landmark Dukes decision” because it could “impact the viability of many . . . putative class action lawsuits going forward.”  Phipps, slip op. at 7. Indeed, the Supreme Court’s interpretation of the commonality requirement of Rule 23(a) was a game-changer. But fairness for whom? And should notions of policy and fairness determine how courts decide legal issues like tolling?

Whether the Sixth Circuit will accept the appeal is unclear. Notably, on March 19, 2013, the Fifth Circuit declined to accept a similar interlocutory review, denying the Texas plaintiffs’ motion to review the adverse tolling decision in that follow-on case in the Northern District of Texas. But there is no mystery over the fact that statutes of limitations defenses are key to employers sued in workplace class actions. They can rule out claims altogether, or reduce the liability exposure figures substantially. Because of the importance of this issue, and the “fairness” factor as perceived by those on the defendants’ side of the “v”, we will continue to follow this case for our readers.      

By Christine Hendrickson and Annette Tyman

On today’s 50th anniversary of the signing of the Equal Pay Act, President Obama reiterated that pursuing equal pay for all remains at the forefront of the administration’s agenda. During his second inaugural address, President Obama said: “We, the people, declare today that the most evident of truths – that all of us are created equal – is the star that guides us still … It is now our generation’s task to carry on what those pioneers began. For our journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts.” Today, President Obama’s message remains the same, “[U]ntil equal pay truly is a reality, we’re also here to recommit ourselves to the work that remains to be done.”

President Obama’s focus on pay equity has echoed throughout the agencies charged with enforcing the nation’s equal pay laws. Today, the White House Equal Pay Task Force announced the administration commitment to “closing the gap – once and for all.” In its “Fifty Years After The Equal Pay Act” publication, the White House announced that 2013 and beyond would include a focus on a “broader framework of practices that may limit the full economic participation of women workers.” The Task Force identified three specific practices to target: (1) occupational segregation and barriers that exclude women from traditionally male dominated occupations; (2) the overlay of discrimination based on race, ethnicity and gender in compensation; and (3) addressing the wage gap for mothers and caregivers. The White House also launched a website with information about “Your right to equal pay and how to exercise it and what the administration is doing to close the gender wage gap.” 

Employers are wise to pay attention to the direction given by the administration. Although there were no substantive changes in the announcements today, they represent a continued commitment to pay equity issues – a commitment that is felt throughout the agencies. For instance, the EEOC has woven its promise to combat pay discrimination into its Strategic Enforcement Plan (“SEP”), which set “enforcing equal pay laws” as one if its six national priorities through 2016. The SEP expressly “encourages the use of directed investigations and Commissioner Charges to facilitate enforcement.” There is already anecdotal evidence that the EEOC is putting the SEP into action by proactively pursuing compensation audits without a charging party or a victim of alleged pay discrimination coming forward. Likewise, the OFCCP recently rescinded guidelines that it believed were “restricted” in favor of a new “fact specific case-by-case approach” to investigating fair pay for all.  

The good news for employers is that fairness in pay is one area in which early detection and intervention can reduce and/or eliminate an employer’s risk.    

• Get Proactive About Pay Equity: Conducting a proactive pay equity analysis is the first and best step employers can take to ensure fair pay and diminish legal risk. Even when employers are acting proactively, it is still critical for them to take steps to avoid putting the company at unnecessary risk. Any analysis should be conducted with the advice of counsel and under the attorney-client privilege. During this process, it is important to understand the factors that truly impact pay. 
• Have A Plan To Fix Unexplained Disparities: If you find unexplained differences after a thorough privileged investigation, have a plan for making any necessary adjustments to compensation. Due diligence is required to ensure that changes are fairly administered. 
• Review Your Compensation Policies And Practices: Ensure that your practices comply with your written policies. If you say that you are a pay-for-performance organization, ensure that your compensation practices support your compensation strategy.    
• Consider Beefing Up Sponsorship Programs: Sponsorship and mentorship programs may be a critical piece to ensuring pay fairness in the workplace. Employers who fail to correct perceived or actual disparities in the availability of sponsorship opportunities for women become targets for employment discrimination litigation. Differences in rates of sponsorship can also have an impact in pay so employers are wise to take a harder look at their sponsorship and mentorship programs. While creating new sponsorship and mentorship programs targeted at HiPo women can be highly effective, employers should be careful before jumping to implement these programs. Sponsorship programs aimed only at HiPo female talent should be undertaken only when the employer is correcting a “manifest imbalance” of women at the company, or at certain levels or certain departments within the company, and then only when the program is intended to be a time-limited and targeted fix. Determining whether there is a “manifest imbalance” is tricky and legally risky, and is best undertaken with the advice of counsel.

By Kate Birenbaum and Chris Palamountain

Last week, in Equal Employment Opportunity Commission v. Houston Funding II, Ltd. et al., No. 12-20220, 2013 WL 2360114 (5th Cir. May 30, 2013), the U.S. Court of Appeals for the Fifth Circuit handed the EEOC a nominal victory by holding that employment decisions based on lactation or expressing breast milk can provide a basis for discrimination claims under Title VII and the Pregnancy Discrimination Act (“PDA”).

The Underlying Case

The EEOC brought the underlying suit on behalf of an employee who was allegedly terminated because she was lactating and wanted to express breast milk at work. The employee worked for the defendant as an account representative/collector from March 2006 until February 2009. While on a leave of absence following the birth of her child, she twice asked whether she would be able to use a breast pump at work once she returned.  The employer responded “no” the first time and informed the employee that her position had been filled when she raised the issue again. The employer issued a termination letter indicating that she had been terminated for job abandonment. The District Court granted summary judgment in favor of the employer, holding that, as a matter of law, discharging an employee because she is lactating does not constitute sex discrimination. The EEOC appealed.

The Fifth Circuit Ruling

The Fifth Circuit vacated and remanded the grant of summary judgment, holding that the EEOC had presented facts that, if true, constituted a cognizable claim under Title VII of the Civil Rights Act of 1964 and the Pregnancy Discrimination Act. Id. at *2-*3. In reaching this decision, the Fifth Circuit observed that ever since Title VII was amended to include the Pregnancy Discrimination Act (“PDA”), courts have interpreted Title VII to cover a far wider range of employment decisions involving female physiology. Id. at *2. The Fifth Circuit also noted that the PDA prohibits discrimination “on the basis of pregnancy, childbirth, or related medical conditions.” Id. Unlike the District Court, the Fifth Circuit was not persuaded that PDA protection could not exist post-pregnancy, so it had little difficulty determining that lactation is an aspect of female physiology that is affected by pregnancy, and that it therefore falls within the definition of “pregnancy, childbirth, or related medical condition.” Id. at *3.

In her pointed concurrence, Judge Edith Jones stated that the Fifth Circuit had previously held that the PDA “does not mandate special accommodations to women because of pregnancy or related conditions” and that “it follows that if [the employee] intended to request special facilities or down time during work to pump or ‘express’ breast milk, she would not have a claim under Title VII or the PDA as of the date of her lawsuit.” Id. at *4.

Implications For Employers

Given the  significant media coverage surrounding this case, this ruling is likely to embolden the EEOC and private plaintiffs to pursue employers over lactation policies or practices, particularly because the Patient Protection and Affordable Care Act, amended Section 7 of the Fair Labor Standards Act to require employers with 50 or more employees to provide reasonable break time and facilities for nursing mothers to express breast milk during the work day, for one year after the child’s birth. When evaluating those policies, employers will want to keep in mind that the FLSA amendment does not prohibit discrimination based on lactation or expressing milk, that other district courts have held that employment decisions based on lactation or expressing milk cannot support a claim of sex discrimination, and that Judge Edith Jones’ concurrence explains the limited scope of the Fifth Circuit’s ruling.

By Gerald L. Maatman, Jr. and Laura J. Maechtlen

On May 30, 2013, the Sixth Circuit decided that class certification denial was proper in a proposed nationwide sex discrimination class action against Cintas Corporation brought by female applicants rejected for sales representative jobs. See Davis v. Cintas Corp., No. 10-1662 (6th Cir. May 30, 2013). Notably, the Sixth Circuit relied extensively on Wal–Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2562 (2011), demonstrating the applicability of the Wal-Mart decision’s reasoning in a hiring case. 

Background Of Davis v. Cintas Corporation

Tanesha Davis sued Cintas, individually and on behalf of a class of female job applicants denied employment as entry-level sales representatives. Davis v. Cintas Corp., No. 10-1662, at 2. The case focused on the company-wide “Meticulous Hiring System” used to hire Service Sales Representatives (“SSRs”), which requires Cintas to identify “must have” and “preferred” traits and competencies for hire, in addition to “additional preferred” traits identified by Division, Group or Location. Id. at 3-4. Further, the process requires sixteen steps, involving — among other activities — screening interviews, pre-employment testing, multiple “in-depth” interviews, “route rides,” a “final” interview, a conference among personnel involved in the interview process, criminal background, drug screening and reference checks, and driving-record and credit-record tests.  Id.  Although SSRs were historically male, after Cintas implemented the Meticulous Hiring System in 2003, the percentage of women hired rose significantly. Id. at 4.

Davis alleged that Cintas’s hiring practices led to gender discrimination, in violation of Title VII, and caused Cintas to reject her application for employment twice.  Id. at 4-5. The case was consolidated with another pending case, Serrano v. Cintas Nos. 04-40132, 06-12311 (E.D. Mich.) (discussed in part, here) for purposes of pretrial proceedings and plaintiffs in both cases made a joint motion to certify a class consisting of “all females who unsuccessfully applied for the SSR job...” Id. at 6. 

The district court denied Davis’s motion for class certification, and ultimately granted summary judgment for Cintas on her individual claims. Serrano v. Cintas Corp., Nos. 04-40132, 06-12311, 2009 WL 910702, at *1 (E.D. Mich. Mar. 31, 2009). It reasoned that the putative class did not satisfy Rules 23(a)(2), 23(a)(3), 23(a)(4), 23(b)(2), or 23(b)(3), because the case involved a “hiring process . . . conducted by thousands of Cintas managers at hundreds of Cintas facilities,”  there was a “conflict between the interests of the named and unnamed class members,” and “the damages sought by Plaintiffs would require individualized determinations inappropriate for a [Rule 23(b)(2)] class action [because she sought front and back pay].” Id. at *5, 9 and 10. Davis appealed, individually and on behalf of the gender- discrimination class, although our interest lies with the class certification aspects of the appeal.  

Sixth Circuit Opinion - Rule 23(a)(2)

Citing extensively to Wal–Mart Stores, Inc. v. Dukes, the Sixth Circuit determined that Davis failed to meet Rule 23(a)(2) because, under the Wal-Mart framework, Davis would have to show that Cintas “used a biased testing procedure” or “operated under a general policy of discrimination,” and she failed to do so.  Id. at 14-15. Indeed, like Wal-Mart, Davis did not argue Cintas's objective hiring criteria led to anti-female bias, but rather that “subjective decisions made by some of Cintas's managers favored males because of Cintas's male-dominated corporate culture.” Id. at 15.

While Davis submitted sociological, statistical, and anecdotal evidence, like the determination in Wal-Mart related to similar types of evidence, the Sixth Circuit determined that the evidence was “…not sufficient to show a uniform, companywide practice of exercising discretion in a way that favored men over women…” Id. Indeed, Cintas’s experts were found more persuasive, and moreover, there was evidence that Cintas had made “sincere attempts” to achieve greater diversity at the company.” Id.   

Similarly, the anecdotal evidence submitted by Davis of Cintas managers telling women that the job involved heavy lifting, entering male locker rooms and dealing with dirty laundry was insufficient because it could interpreted as some Cintas managers “giving applicants full disclosure of the demands and duties” of the job, and such comments “illustrate that the circumstances of discrimination are highly individualized and cannot be adequately treated in a generalized class action setting.” Id. at *16. 

In the end, the Sixth Circuit determined that there was no abuse of discretion by the district court. Id. at 16. Davis did not satisfy Rule 23(a)(2) because she could not show that a number of women, who failed to obtain employment at many places, over a long time, under a largely subjective hiring system, shared a common question of law or fact. Id.  

Sixth Circuit Opinion - Rule 23(b)(2)

Davis proposed a “shortfall-based model” for calculating damages to meet Rule 23(b)(2). Under this proposal, the district court could declare Cintas's hiring practices discriminatory and issue an injunction ordering Cintas to hire class members “randomly selected in numbers equal to the proven shortfalls” of women at each facility. Id. at 18. Davis would then calculate back pay liability by multiplying the proven shortfall times lost wages.  Id.  That calculation would be the limit of Cintas's liability for back pay, which then would be distributed pro rata among eligible class members. Id.

Continuing to rely on the Wal-Mart decision, the Sixth Circuit deemed the “shortfall-based model” “similar” to a “trial by formula” system that was rejected by the Supreme Court because it was found to have “abridged or modified Wal-Mart's statutory right” under Title VII of the 1964 Civil Rights Act to assert individual defenses to individual back pay awards. Id. at 18. Indeed, the Sixth Circuit noted that Davis's proposal “suffers from a similar, but even more troubling, infirmity,” noting that “Dukes made clear that Cintas has the right to present defenses before paying any person an award of back pay. Davis's system deprives Cintas of that right.  But worse, Davis's ‘shortfall-based' model, unlike the ‘trial-by-formula'  system, makes no attempt to individualize damages at all.” Id. Instead, under the “shortfall-based model,” a female class member denied a job in 1999 would “receive precisely the same recovery” as a class member Cintas failed to hire in 2004. Id. Under the trial by formula system, plaintiffs at least had “statistical similarity” when it came to allocating class-wide monetary awards.  Therefore, the proposed system was “worse” than the system “unanimously rejected in Dukes.” Id.  For that reason, the Sixth Circuit concluded that individualized monetary relief was not incidental to the injunctive and declaratory relief, and the district court was correct to deny certification. Id. 

Implications For Employers

In citing so extensively to the Wal-Mart v. Dukes decision, the Sixth Circuit in Cintas not only resoundingly endorsed the Wal-Mart decision itself, but also its applicability in cases involving allegations of discriminatory hiring practices (as compared to pay and promotion decisions like those challenged in Wal-Mart). Moreover, Cintas is instrumental for employers challenging the plaintiffs’ strategy of formulaic models for determining the amount of individualized damages in the form of front and/or back pay. The Cintas decision clearly rejected the “shortfall-based model,” it found similar to the “trial by formula” model asserted in the Wal-Mart case, which is useful to cite in cases where plaintiffs attempt to assert similar formulaic models to justify certification pursuant to Rule 23(b)(2). Finally, the Cintas decision can serve as a reminder to employers that workplace policies and procedures that provide guidelines for the hiring process remain a recommended best practice, especially when used in conjunction with a diversity and inclusion initiatives.

By Gerald L. Maatman, Jr. and Kathryn Palamountain

As discussed here, in the wake of the U.S. Supreme Court’s decertification of a nationwide class in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), former class members have filed a number of follow-on class actions against Wal-Mart. We have also blogged  here and here that district courts have dismissed class claims in a couple of those suits as untimely. In the past week, yet another court has dismissed a Wal-Mart follow-on class action, but this one reached the same result using a different analysis.  

This case, entitled Ladik, et al. v. Wal-Mart Stores, Inc., No. 13-CV-123, (W.D. Wis. Feb. 20, 2013), was filed by present and former female Wal-Mart retail store employees who were former members of the Dukes class. Their pay and promotion gender discrimination claims are substantially similar to those being litigated in Dukes, but these plaintiffs narrowed their class claims to “Region 14”— a region that includes stores in Wisconsin, Illinois, Indiana, and Michigan.

Shortly after the case was filed, Wal-Mart brought a motion to dismiss the class allegations. Wal-Mart based its motion on two independent arguments. First, Wal-Mart contended that, during the pendency of the Dukes action, the statute of limitations for the plaintiffs’ class claims was not tolled under American Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974). As a result, the claims were untimely. In American Pipe, the U.S. Supreme Court held “the commencement of a class action suspends the applicable statute of limitations as to all asserted members of the class who would have been parties had the suit been permitted to continue as a class action.” Id. at 554. The Supreme Court later clarified that this tolling rule applied to any class member who later filed an individual action, not just those who intervened in the same action. See Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983). The Supreme Court did not address whether the tolling rule would apply to class members who later filed class claims in a federal court. Wal-Mart argued that such subsequently filed claims are not entitled to tolling.

Rejecting Wal-Mart’s argument, the Court in Ladik stated that “once a plaintiff has filed a complaint that is timely under American Pipe, the tolling issue is resolved, regardless whether the plaintiff wishes to proceed individually or as a class.” Slip Op.. at 11. Reasoning that the tolling rule was designed to avoid the needless filing of repetitive claims, the Court found that limiting tolling to subsequently filed individual actions would simply encourage the filing of multiple collective actions. In an apparent effort to address arguments related to abuse of process, the Court noted that the “merits” of repetitive class claims “can be addressed through application of principles of stare decisis and issue preclusion.” Id. at 12. As Wal-Mart had not argued preclusion, the Court did not address it. 

The Court then addressed Wal-Mart’s second argument: that the class claims should be dismissed because plaintiffs failed to identify a common question of law or fact in their complaint. Attempting to distinguish their class claims from the ones in Dukes, plaintiffs pointed to the geographical limitations on their proposed class. The Court did not find this difference meaningful, stating that such limitations “simply have created a smaller version of the same problem.” Id.  at 16. Finding that plaintiffs “must show a policy or practice at the regional level that applies to the entire class,” the Court observed that “plaintiffs point to nothing in their complaint that is different from the allegations in Dukes.” Id. More specifically, the Court stated that the plaintiffs “do not even attempt to distinguish the common questions they identify from those found lacking in Dukes” and that “most of their alleged common questions still related to ‘nationwide policies,’ not any policies of Region 14.” Id. at 18-19. Given such substantial similarities, the Court found that plaintiffs could not distinguish their proposed class from the one the Supreme Court rejected, and dismissed the class claims. Id. at 22.  

Implications For Employers

The Ladik decision illustrates that courts are utilizing different approaches in addressing the “re-booted” cases filed in the wake of Wal-Mart Stores, Inc. v. Dukes, but this decision is particularly noteworthy for its distinct tolling analysis. The defense has continued a streak of successes with respect to the follow-on class claims by former class members, but some decisions leave room for plaintiffs in other stacked class actions to play ball.