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Today, the United States Supreme Court ruled in favor of Wal-Mart in its monumental sex discrimination lawsuit brought on behalf of all female employees. The court ruled unanimously that the lawsuit against Wal-Mart Stores Inc. cannot proceed as a class action, reversing a decision by the 9th U.S. Circuit Court of Appeals in San Francisco. The lawsuit could have involved up to 1.6 million women, with Wal-Mart facing potentially billions of dollars in damages. The decision is a victory for many employers snared in the net of class action litigation by employees who are attempting to support their cases by flimsy evidence.

The Court unanimously ruled that the purported class of employees could not prove a “common question of law or fact.” The Court pointed out that “the crux of a Title VII inquiry is the reason for a particular employment decision, and respondents wish to sue for millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.” The Court found the necessary “glue” to be completely absent from Plaintiffs’ case.

In making this finding the Court looked at the fact that Wal-Mart had a written policy prohibiting discrimination and penalties for those who violated it. The Court felt the Plaintiffs’ evidence from a sociologist, asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias, completely inadequate. The Court’s decision also said that in this type of case there needs to be a common element tying together “literally millions of employment decisions at once.” The majority found the Plaintiffs’ statistical evidence and sociologist’s report amounted to nothing but thin air. Ultimately, commenting on the question of evidence of common elements, the Court found the evidence supporting Plaintiffs’ claims to be “entirely absent here.”

The Court did hold that a corporate policy, such as Wal-Mart’s, of giving local supervisors discretion over employment matters, could support a Title VII disparate-impact claim. However, the justices pointed out that the disparate-impact claim would be challenging a single employment decision by a single supervisor, and did not mean that “every employee in a company with that policy has a common claim.” The Court felt that “in a company of Wal-Mart’s size and geographical scope, it is unlikely that all managers would exercise their discretion in a common way without some common direction.”

This decision brings some much needed relief to employers faced with the ever growing trend of class-action discrimination lawsuits. In addition, the Court’s decision will potentially have a larger impact on Wage & Hour Class Actions, where the Justices have provided employers with a strong decision outlining the evidentiary burden employees have in certifying a matter as a class action.

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 If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact any members of the the  Labor and Employment Group. For additional articles on employment law issues, please visit Weintraub’s law blog at www.thelelawblog.com.

Disagreeing with the California Labor Commission, a California Court of Appeal upheld the trial court’s decision that explicit mutual wage agreements which include straight time and overtime components are enforceable under California law. The Court affirmed that Labor Code section 515(d) does not outlaw explicit mutual wage agreements of this kind. In Arechiga v. Dolores Press, Inc., a janitor sued his former employer for overtime wages. The trial court dismissed the claim, finding that an explicit mutual wage agreement existed between the employee and the employer under which the employee’s fixed salary of $880 lawfully compensated him for both his regular and overtime work based on a regular hourly wage of $11.14 and an overtime wage of $16.71. Following his termination, Arechiga claimed that Labor Code section 515 governed his employment agreement. Citing subdivision (d) of the statute, Arechiga asserted that the Court must find that his salary of $880 compensated him only for 40 regular hours per week thus making his regular rate of pay $22 per hour and his overtime rate $33 per hour. He then argued that his employer owed him overtime at $33 per hour for his regularly scheduled 26 hours of overtime worked each week. Arechiga pointed to the express language of section 515(d) to support his argument. Subdivision (d) states: “For the purpose of computing the overtime rate of compensation required to be paid to the non-exempt full-time salaried employee, the employee’s regular hourly rate shall be 1/40th of the employee’s weekly salary.”

In reaching its decision, the Court of Appeal rejected earlier case law and Labor Commissioner guidance which disallowed such explicit mutual wage agreements. The Court explicitly rejected reliance on the Labor Commissioner’s Enforcement Policies and Interpretations Manual of the Division of Labor Standards Enforcement because that enforcement manual was not properly adopted and thus is nonbinding on California Courts. It is also found that section 515(d)’s language did not preclude such agreements.

Caution: The Arechiga case also lays out specific elements that such an express mutual wage agreement must contain in order to make them enforceable.

Take Away: This is an important decision for California employers. It establishes Court of Appeal precedent that the Labor Commissioner’s longstanding interpretation of 5.15(d) and its repudiation of such express mutual wage agreement are no longer controlling. However, to ensure an agreement is enforceable, employers should work with their employment counsel before entering into one with their employees.

Taking the next step to implement the federal Americans with Disabilities Amendments Act of 2008 (“ADAAA”), the U.S. Equal Employment Opportunity Commission (“EEOC”) published its long-awaited final regulations on March 24, 2011. However, it is widely believed that the ADAAA and the recently published regulations will not greatly impact employers in California who are already covered by the state’s Fair Employment and Housing Act.

The ADAAA overturned a number of decisions from the United States Supreme Court that had interpreted the definition of “disability” rather narrowly. By expanding that definition, the ADAAA has made it less difficult for employees to qualify for disability protection under federal law. The EEOC’s expressed aim in publishing these regulations is to make it easier to determine who qualifies for such protection under the new law.

For example, the ADAAA and the related regulations have relaxed certain provisions so that an employee is not required to prove that a given condition “significantly” or “severely” restricts his or her ability to perform a major life activity. Meanwhile, comparably low thresholds have existed under California law for a number of years. Still, employers in the Golden State are well advised to take heed of these developments – particularly those with multi-state operations and those who are more prone to be sued under federal law for various reasons.

A copy of the EEOC’s new regulations may be accessed at this link. The EEOC also posted a “Questions and Answers” document (at this link) and a “Fact Sheet” (at this link) to help employers understand the impact of the ADAAA and the related regulations. Attorneys at Weintraub Genshlea Chediak have reviewed these regulations and related materials carefully. They are prepared to provide guidance to employers who wish to give greater consideration to these developments.