In Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (U.S. June 20, 2011), the Supreme Court vacated class certification as to 1.5 million current and former Wal-Mart employees who failed to identify a company-wide policy or practice of gender discrimination.  Additionally, the Court held that backpay claims could not be certified as a class action, and rejected the “Trial by Formula” approach because Wal-Mart was entitled to individual proceedings on remedies and to present defenses as to each claim.

The Supreme Court’s ruling is very good news for employers, especially those who operate in multiple locations and delegate discretion on employment decisions to local managers.  Justice Scalia’s repeated references to the need for a “common policy” that is discriminatory, i.e., unlawful – not just common, should be very helpful in all class-based cases.  As the ruling makes clear, a company-wide policy cannot be established by statistical disparities, anecdotal evidence, and/or vague expert testimony concerning an employer’s culture.  Accordingly, employers who establish strong, company-wide equal opportunity policies, and enforce them through training and penalties, should be less vulnerable to company-wide class actions in the future.  It will also be interesting to see how the Supreme Court’s rejection of the “Trial by Formula” approach will play out, as it could affect a wide variety of cases.

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