Balkinization

Wal-Mart v. Dukes and the future of meritocracy

Joey Fishkin

First, a big thank you to Jack for inviting me to contribute to the blog.

The fulcrum of the 5-4 divide in Wal-Mart v. Dukes, which came down this morning, turned out to be the following question: was the plaintiffs’ case bolstered, or was it eviscerated, by the fact that Wal-Mart gave mid-level managers nearly unfettered discretion over whom to tap for promotions and what wages (within a range) to pay each employee? The majority today answered: it was eviscerated. This is a big change. In this post I’ll offer a couple of observations about where this change came from and what it might mean going forward.

First it is worth taking a step back. In 47 years, what has Title VII accomplished? In my view, it has worked not one, but two, major changes to the landscape of American employment. One change is the obvious one: Title VII brought some measure of racial and gender integration to the workforce. But a second, subtler change was in some ways equally profound. Title VII helped spur both public and private employers to replace subjective, non-meritocratic systems of hiring and promotion with systems that were fairer, more uniform, and more merit-based. Today it is hard to imagine, for example, a big-city police department deciding simply to hire only the sons and nephews of incumbent officers. But at one time such practices were common. What changed was that corporate leaders, HR professionals, public sector managers, and the many, many lawyers who advise all of these people learned that if one does not want to be accused of discrimination—and for that matter, if one does not want to discriminate—it helps, a lot, to adopt relatively rational, formalized, uniform, merit-based policies for hiring, performance evaluation, promotion, compensation, and termination. An employer that instead adopts policies of total subjectivity and discretion is needlessly painting a litigation target on its back, so why do it? Or so any competent employment lawyer would have advised, at least until this morning.

Is it still good advice? Probably. But Dukes raises the disquieting possibility that rather than inviting litigation, subjective and standardless policies might—for a large enough employer—have the perverse effect of insulating the employer from large-scale litigation by helping to defeat class certification. This possibility could have far-reaching effects on the landscape of American employment practices. We would only expect those far-reaching effects under certain conditions. Large employers would only have reason to switch (back) to more subjective, Wal-Mart-style employment practices if they valued a potential shield against class certification more highly than they valued either (a) the shield against individual discrimination lawsuits that more objective, meritocratic practices provide and (b) all the other salutary effects of more objective, meritocratic practices, which include having a workforce that is more qualified and more rationally compensated and promoted. (More after the jump.)

To see how Dukes marked a change in the Court’s approach to subjective discretion, one need only compare Dukes to (almost any of) the canonical cases of systemic disparate treatment discrimination. The plaintiffs’ case in Dukes consisted primarily of statistical evidence. At Wal-Mart, the plaintiffs alleged, women constituted the vast majority of all employees (about two thirds), but the further you went up the chain of command, the fewer women you saw. The plaintiffs alleged that 90% of the Store Managers were men; 96% of the District Managers were men; and of the top corporate executives, 19 out of 20 were men. These were fairly extreme numbers, especially in comparison to Wal-Mart’s competitors. The plaintiffs’ expert also crunched some numbers on pay and found substantial disparities between male and female Wal-Mart employees, after controlling for various variables, in every region of the country.

Okay. But what is a court to do with that? Even if a court credits such evidence, how does one tell whether it represents a company-wide pattern or practice of discrimination? In the canonical cases of systemic disparate treatment discrimination, such as Teamsters v. United States, courts reasoned that large company-wide statistical disparities had to come from somewhere. Plaintiffs and defendants offered competing explanations. (Plaintiffs offered anecdotes of specific instances of discrimination; defendants offered arguments about qualifications, lack of interest, etc.) If a court believed the plaintiffs, it concluded that the company—despite its protestations to the contrary, and despite the many independent decision-makers in charge of hiring decisions at its many sites—showed a company-wide pattern of race discrimination.

To put it simply, the Court in the 1970s and 1980s was willing to believe that pervasive bias throughout a company and its culture could explain extreme disparities based on race. In 2011, a five-justice majority of the Court is not willing to believe that anything similar could explain observed disparities based on sex. In a remarkable passage, Justice Scalia first acknowledges that the Court has, in the past, found employers liable for “giving discretion to lower-level supervisors,” then writes: “[L]eft to their own devices most managers in any corporation—and surely most managers in a corporation that forbids sex discrimination—would select sex-neutral, performance-based criteria for hiring and promotion that produce no actionable disparity at all.” Slip op. 15. Scalia found it so obviously true as to require no support that “left to their own devices most managers in any corporation” would not discriminate. They would not engage in disparate treatment; they would not choose practices with a disparate impact; they would not exhibit cognitive bias. Discrimination is something bad apples do.

In light of this factual assertion, it is unsurprising that Scalia was so utterly unmoved by the plaintiffs’ two strategies for persuading the trial court that the disparities represented some common, overall pattern or practice of discrimination. The plaintiffs had anecdotes; but those were presumably the bad apples. The plaintiffs offered a sociological expert, whose social framework evidence was an attempt to show how and why delegating all hiring and promotion decisions to a nearly all-male group of managers, whose leaders commonly referred to female employees as “little Janie Qs,” might not be the most unbiased way to make decisions. But how could any of that be convincing, if it is correct—so correct that one can take judicial notice of the fact—that most managers do not discriminate?

There are many things to be said about Dukes, including its effects on class certification, systemic discrimination litigation, backpay remedies, and the disparate treatment/disparate impact distinction. But it seems to me that the two most important questions the case raises are not so doctrinal. They are, first, what does this opinion mean for courts’ power to address forms of discrimination that are widespread and diffuse throughout an enterprise, rather than turning on the bias of a particular decision-maker? And second, as discussed above, what effect will this opinion have on the conversations among executives, HR departments, and the lawyers who advise them, about the use of subjective employment practices?

Labels: class actions, employment discrimination, implicit bias, Wal-Mart v. Dukes

Posted 3:07 AM by Joey Fishkin [link]

Comments:

The key to this decision is Scalia's dismantling of the rationale underlying disparate impact suits, which do not promote meritocracy, but rather racial and gender uniformity at the expense of other factors like merit.

# posted by

Bart DePalma : 8:57 AM

Thanks, Joey, for a very thoughtful post. I am not so sure about your conclusions regarding subjective hiring and promotion practices, however. You write: “But Dukes raises the disquieting possibility that rather than inviting litigation, subjective and standardless policies might—for a large enough employer—have the perverse effect of insulating the employer from large-scale litigation by helping to defeat class certification.” The specter of employers’ hiding behind subjective policies, in light of the Court’s decision yesterday, should be taken seriously, but there is a way out. Namely, the landmark disparate impact case cited in the Court’s opinion: Watson v. Forth Worth Bank & Trust. Where the plaintiffs’ novel theory of harm ran into trouble was in their inability to satisfy Watson’s requirement that “the plaintiff . . . begin by identifying the specific employment practice that is challenged.” Even if one’s statistics are sound (and I would take issue with the Court’s uncharitable reading of plaintiffs’ empirical evidence), without a sufficiently specific employment practice, the case is usually lost. To some, the centralized versus localized discretionary decision-making distinction was incoherent as a legal argument. Regardless of one’s views on that matter, had the Wal-Mart plaintiffs been able to identify more clearly a specific practice as required by Watson, the case might have come out differently. Equally important, this should serve as a helpful instruction to future potential classes dealing with non-objective decision-making criteria. Thus, while yesterday’s decision was a setback for Title VII class action plaintiffs, I remain hopeful that it hasn’t eviscerated the “pattern or practice” theory in the same way that I do not think Ricci sounded the death knell for disparate impact.

# posted by

CG : 11:38 AM

I welcome interesting guest commentary and think "CG" said some good stuff. To me, this Court on various issues is moving the law, but not quite as far as some fear.

The net result will depend on the nature of your claim.

# posted by

Joe : 2:29 PM

Bart may be right that the decision is driven by Scalia's dislike of disparate impact. But if so, that's a pretty strong indictment of Scalia and those who joined in his opinion. After all, disparate impact discrimination is undeniably illegal under Title VII. So I'm saddened to hear that the Court isn't willing to follow the law.

# posted by

Chef : 10:13 PM

Chef:

Disparate impact is a judicial creation which is not expressly required by Title VII. What the courts give, they can take away.

# posted by

Bart DePalma : 9:05 AM

Bart,

You're wrong. Disparate impact discrimination was explicitly banned and added to Title VII in the Civil Rights Act of 1991. It would be nice if Scalia took note of that fact.

# posted by

Chef : 9:26 AM

I think too much is made of the incentives created by this decision. Yes, maybe big corporations can insulate themselves from large-scale lawsuits by giving unfettered discretion to mid-level managers, but that assumes the worst thing in the world is to be a defendant in a large class action. This is not the case, for two reasons.

First, you are still exposed to death by a thousand cuts from small-scale class actions at the local and regional level. There are plenty of hungry lawyers willing to bring these cases even if they don't have a nationwide scope. Indeed, the Wal-Mart case was a bold experiement; the prototypical employment discrimination class action often involves no more than 20-25 employees. On the corporate level, the cost of defending a lawsuit every time one of your managers applies their discretion in a discriminatory way is something that adds up.

Second, no corporation loves to face a large-scale class action, but in some ways that type of case can be the company's best friend. (This is a dirty little secret of class-action litigation.) The key is that at the end of the day, when you settle that big case, you get a bar order that precludes subsequent lawsuits involving the same time period. So you may have paid a bunch of money to settle that class action, but you got a discount for paying in bulk, and now no one is allowed to bring an individual action or one of those smaller 20-25 employee class actions unless they immediately opt out, which most people will not do. The class-action settlement closes the courthouse door to all sorts of grievances that people might file in the future. You buy yourself complete peace by settling, which has its advantages.

The smarter move for corporate America is likely to remain standardized and centralized hiring policies. The benefit of insulating yourself from a large-scale class action is not great enough to justify abandoning such policies for a system of complete discretion.

# posted by

Steve M : 11:52 AM

Chef,

You're right (contra Bart) that disparate impact is statutory, but this wasn't a disparate impact case. The plaintiffs could have tried to argue that giving store managers discretion had a disparate impact on women -- although I still don't think much of that legal theory -- but they didn't.

# posted by

David Nieporent : 2:06 PM

Bart may be right that the decision is motivated by an aversion to Scalia different consequences. But if so, it's a fairly strong indictment of Scalia and those who joined his opinion. After all, undeniably disparate impact discrimination illegal under Title VII. So I'm sorry to hear that the Court is unwilling to follow the law.

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