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The plaintiffs sought to certify the class of current and former employees under Rule 23(b)(2) of the Federal Rules of Civil Procedure, which prescribes the rules for class actions seeking injunctive relief rather than money damages.  But, the Supreme Court, in an opinion delivered by Justice Antonin Scalia, held that the certification of the plaintiff class was inconsistent with both Rules 23(a) and 23(b)(2).

Under Rule 23(a)(2), the plaintiffs needed to show that there were “questions of law or fact common to” all of the plaintiff class members.  According to the Court, commonality requires the plaintiffs to demonstrate that the class members have suffered the same injury, which does not mean merely that they have all suffered a violation of the same provision of law.  Rather, “[t]heir claims must depend upon a common contention -- for example, the assertion of discriminatory bias on the part of the same supervisor.”  Slip op. at 9.   

The common contention, moreover, must be “affirmatively demonstrate[d]” because “Rule 23 does not set forth a mere pleading standard.”  Id. at 10.  One way to demonstrate a common contention is by presenting “significant proof that an employer operated under a general policy of discrimination … if the discrimination manifested itself in hiring and promotion practices in the same general fashion, such as through entirely subjective decisionmaking processes.”  Id. at 12-13 (citations and quotations omitted).  However, the Court found that “significant proof” is “entirely absent here.”  Id. at 13.  Although the Court recognized that Wal-Mart had a common “policy” of allowing discretion by local supervisors over employment matters, which can be the basis of Title VII liability under a disparate-impact theory, the mere existence of the policy does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common.  Rather, the Court found that “[t]o the contrary, left to their own devices most managers in any corporation -- and surely most managers in a corporation [like Wal-Mart] that forbids sex discrimination -- would select sex-neutral, performance-based criteria for hiring and promotion that produced no actionable disparity at all.”  Id. at 15. 

The Court, in a 5-4 decision, thus concluded that, because the plaintiffs failed to identify a common mode of exercising discretion that pervades the entire company, they failed to establish the existence of a common question, and reversed the class certification order.  Justice Ginsburg, joined by Justices Breyer, Sotomayor, and Kagan, dissented from the Rule 23(a) ruling, arguing that the majority blended Rule 23(a)(2)’s commonality requirement with Rule 23(b)(3)’s inquiry into whether common questions “predominate” over individual ones.  Justice Ginsburg added that “[t]he evidence reviewed by the District Court adequately demonstrated that resolving [plaintiffs’ claims of gender discrimination] would necessitate examination of particular policies and practices alleged to affect, adversely and globally, women employed at Wal-Mart’s stores.  Rule 23(a)(2), setting a necessary but not sufficient criterion for class-action certification, demands nothing further.”  Dissenting op. at 8.

The Court also held that the plaintiffs’ claims for backpay were improperly certified under Rule 23(b)(2) because the monetary relief sought was not incidental to injunctive or declaratory relief.  Under Rule 23(b)(2), a class may be certified when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.”  Rather than involving monetary damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief, the Court found that this case would require additional hearings to resolve the disparate merits and scope of each individual’s relief; and that contrary to the Ninth Circuit’s view, Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay.  “[A] class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”  Id. at 27.  The Court thus concluded, in a 9-0 decision, that, “at a minimum, claims for individualized relief (like the backpay at issue here) do not satisfy the Rule.”  Id. at 20.

The case began when AT&T customers Vincent and Liza Concepcion purchased wireless phone service, which advertised the provision of free phones. The Concepcions were not charged for the phones, but they were charged approximately $30 in sales tax. In March 2006, the Concepcions filed a complaint against AT&T in the United States District Court for the Southern District of California. The complaint was later consolidated with a putative class action alleging that AT&T had engaged in false advertising and fraud by charging sales tax for the “free” phones.

The Concepcions’ contract with AT&T contained a standard arbitration provision, which required the Conceptions to pursue their claims against AT&T through arbitration in an individual capacity rather than through a lawsuit as a member of a putative class.  Accordingly, AT&T moved for arbitration in accordance with the contract, but the district court denied AT&T’s motion, relying on Discover Bank v. Superior Court, 36 Cal. 4th 148 (2005), a California Supreme Court decision that held class action waivers in certain consumer contracts were unenforceable as a matter of public policy. This California law was overturned by the Concepcion  ruling.

Writing for the Court, Justice Antonin Scalia said that permitting states to nullify arbitration agreements based on policy judgments frustrates the purpose of the FAA, which was enacted in 1925 “in response to widespread judicial hostility to arbitration agreements.” According to the Court, the FAA was designed to promote arbitration, under the belief that affording parties discretion to design their own arbitration processes − including limiting the availability of class arbitration − advances efficiency and streamlines the resolution of disputes.

While AT&T v. Concepcion was decided in the context of a consumer contract and not an employment agreement, employers should be aware that the ramifications of this case could extend to the employment sphere. Employers should examine their arbitration agreements to ensure that a class action waiver is included, as these types of provisions are more likely to be enforced in light of the Court’s decision.

While the holding of the case is unambiguous, the Court left unanswered a number of important related questions, including whether an employer can insulate an adverse employment decision from prior discriminatory animus and whether any affirmative defense exists to the cat’s paw theory. The facts of the case, however, may provide a useful lesson to employers seeking to avoid being scratched by the cat’s paw.

Staub was employed by Proctor Hospital as a angiography technician. He also was a member of the U.S. Army Reserve, which required him to attend one weekend drill per month and to train full-time for a two to three week period each year. Staub’s first and second line supervisors were found at trial to be hostile to his military obligations. Collectively, they scheduled Staub for additional shifts without notice so that he could “pay back” his department for “everyone else having to bend over backwards” to cover his service; told a co-worker that he was a “strain” on the department and asked her to help “get rid of him;” made disparaging comments about his service; and issued him a biased “corrective action” and then recommended that he be terminated for violating the corrective action. 

The vice president of human resources, who ultimately terminated Staub’s employment, relied in part on the accusation from Staub’s supervisor that he had violated the corrective action in reaching her decision. She also reviewed the remainder of Staub’s file, which revealed complaints about his performance from other supervisors and co-workers. Staub challenged his discharge under the company’s internal grievance procedure and accused his supervisors of anti-military bias and of fabricating the claims underlying his corrective action. Critically, the vice president of human resources did not follow up on Staub’s claims of bias against his supervisors, and adhered to her earlier decision.

There was no evidence that the human resources executive harbored any anti-military bias towards Staub. However, her failure to follow up on Staub’s claim that his supervisors were discriminating against him was enough to create liability under the cat’s paw theory. Simply, she failed to take any action to sever the causal link between the discriminatory acts of the non-decision makers -- the biased corrective action and tainted recommendation that Staub be terminated -- and the company’s ultimate decision to terminate. Under a cat’s paw theory of liability, that inaction proved fatal to Proctor’s defense. 

Staub serves as a stark reminder to employers that employee allegations of illegal bias in their treatment by managers and supervisors should be independently investigated, regardless when and at what point in the discipline process the allegations are raised. Certainly, a senior human resources employee generally should be able to rely on the judgment and recommendation of lower level managers when considering whether to take disciplinary action against an employee. That said, an employer acts at its own peril by doing so in the face of claims of bias against the supervisor who is recommending the disciplinary action. By independently investigating Staub’s claim of anti-military bias, Proctor’s vice president of human resources might have verified the accuracy of his claims and rescinded the discipline, or determined that Staub’s termination was independently justified by the portion of his disciplinary file that was not tainted by the biased corrective action. Either way, she would have created a record that was much better suited to withstanding a cat’s paw discrimination challenge. 

In 2008, Tratree was discharged because, he was told, his position monitoring oil flow on a section of a  pipeline was being eliminated, as his employer planned to decommission the section of pipeline on which Tratree worked.  The company ultimately did not decommission the section and replaced Tratree with a younger, white employee.  Tratree filed suit.

At a jury trial, a Texas district court excluded evidence that the decision maker who decided to “eliminate” Tratree’s position had a pattern of discriminating against African-American employees (e.g., every employee but one terminated by the decision maker was African-American, the decision maker never hired an African-American, and the decision maker allowed a culture of discrimination against African-Americans to persist).  The district court also excluded internal company  documents that, according to Tratree, showed its plan to target retirement-eligible workers for discharge.  After the jury rendered a verdict in the company’s  favor, the Fifth Circuit affirmed the district court’s evidentiary exclusions.

The Court last visited the “me too” evidence question in 2008 in Sprint / United Management Co. v.  Mendelsohn, 128 S.Ct. 1140 (2008).  In Mendlesohn, the “me too” evidence at issue was testimony by non-parties alleging discrimination at the hands of persons who did not play a role in the adverse employment action alleged by the plaintiff.  The Court held that it was for the trial court to decide whether to admit “me too” evidence, subject to abuse-of-discretion review.  Id. at 1145-1146.  The Court also said that the type of “me too” evidence at issue was neither per se admissible nor per se inadmissible, id. at 1143, and must be viewed in the context of the facts, id. at 1147. 

In asking the Court to hear his appeal, Tratree argues that his case is distinguishable from Mendlesohn because his “me too” evidence pertains to the practices of the decision maker at issue.  Tratree further argues that, since Mendlesohn, “lower courts remain confused about the standards for admission of ‘me too’ evidence.”

Should the Court accept Tratree’s case, it likely will clarify the standards of admissibility regarding “me too” evidence.  If the Court rules in favor of Tratree, employers may face tougher battles defending individual discrimination claims in some courts.  Such a ruling would certainly result in more “me too” evidence being used and admitted in certain cases. 

Read the Fifth Circuit Court of Appeals opinion from which Tratree appeals here.

In response, lawmakers introduced legislation in the House and Senate, including H.R. 3721 and S. 1756, which would effectively overturn Gross.  Legislators note that Gross imposes a higher burden for age discrimination plaintiffs than plaintiffs suing under Title VII or the Americans with Disabilities Act.  If passed, POWADA would standardize the burdens of production and proof in all employment discrimination cases.  Under POWADA, an age discrimination plaintiff -- like a Title VII plaintiff -- could prevail by proving either that an impermissible factor motivated the adverse action or practice complained of, even if other factors also motivated the action or practice; or by proving the action or practice would not have occurred in the absence of an impermissible factor.

Congressman Jerrold Nadler (D-NY), who chaired the hearings on H.R. 3721 in June, stated that Gross “creates substantially different standards across and between federal civil rights laws, thus undermining their predictability, scope, and effectiveness.”  According to Congressman Nadler, “H.R. 3721 seeks to restore the pre-Gross standard for proving age discrimination and the longstanding presumption that Title VII’s framework and precedent applies to other federal discrimination and retaliation laws.  We should act promptly to correct the Gross decision before more damage is done.” 

Congressman George Miller (D-CA), the Chairman of the Committee on Education and Labor who sponsored H.R. 3721, likewise notes that POWADA will “make the standard for proving age discrimination the same as those alleging race, national origin or religious discrimination,” and that Congress intends to “overturn the Supreme Court’s decision [in Gross] and ensure that workers with a legitimate claim will have their day in court.”  Congressman Miller introduced POWADA on October 6, 2009.  When contacted, representatives for Congressman Miller would not predict when a committee report may be issued on H.R. 3721, or when the bill might reach the House floor for a vote.  Bills start in House committees and enter Senate committees only after being passed by the House and received by the Senate.  Many bills are never referred to a committee at all, and most bills never receive committee consideration or are reported out.  POWADA remains in the first step of the legislative process, but it appears to have wide support and has been referred to numerous committees, including the House Subcommittee on Education and Labor and the House Judiciary Committee on the Constitution, Civil Rights, and Civil Liberties.

The Supreme Court’s Decision in Gross
In Gross, the Supreme Court ruled that plaintiffs must prove that their age was the “but for” cause of the adverse employment action to establish an age discrimination claim under the ADEA.  By doing so, the Court eliminated the use of the mixed motive theory to prove discrimination in ADEA actions.  As a result, plaintiffs cannot satisfy their burdens of proof by merely showing that age was a motivating factor in the adverse employment action.  Critics of Gross believe that the decision makes it nearly impossible for plaintiffs to win age discrimination claims unless they have the equivalent of a smoking gun. 

Responding to Gross
Currently H.R. 3721 has 32 co-sponsors and S. 1756 has 23 co-sponsors.  The bills are identical and their proponents hope that they will return age discrimination law to pre-Gross standards.  Specifically, the legislation establishes that the standard of proof for claims under the ADEA is “no different” from the mixed motive theory used in Title VII claims.  Additionally, the legislation states that the burden-shifting framework of McDonnell Douglas v. Green, 411 U.S. 792 (1973) applies to ADEA claims. 

Not Just Age Discrimination
Although the title of the legislation refers to age do not be fooled - the Protecting Older Workers Against Discrimination Act involves much more than the protected class of age.  In fact, the Act explicitly states that “the standard for proving unlawful disparate treatment under the [ADEA] and other anti-discrimination and anti-retaliation laws is no different than the standard for making such proof under [T]itle VII.”  With this language, the Act sweeps all other claims of discrimination or retaliation into its scope and as a result it has the potential to significantly impact numerous federal discrimination and retaliation laws.  Based on this, it seems apparent that the Act does more than just return age discrimination claims to the pre-Gross standard of proof. 

Clarification or Confusion?
The Act was created to clarify the standard of proof in age ADEA claims and to correct the perceived “misconceptions” relied on by the Supreme Court in Gross.  Yet, if this legislation is passed in its current form, it is likely that instead of simply bringing clarity to age discrimination claims, it will instead muddy the water in all other discrimination and retaliation claims.  The Act’s reference to “other anti-discrimination and anti-retaliation law” is not only broad but also ambiguous.  It will be necessary to turn to the courts for guidance on this ambiguity.  The Act will need to be further explained and this will likely be done through litigation where plaintiffs will rely on the Act’s broad scope to test the water with their various discrimination and retaliation claims.  Because the reach of this Act is beyond just age discrimination, it is important to track its progress and be alert to its potential affect on all “other anti-discrimination and anti-retaliation laws.”

The EEOC took this action in light of two relatively recent decisions by the U.S. Supreme Court relating to claims of disparate impact under the ADEA.  In Smith v. City of Jackson, 544 U.S. 228 (2005), the Court confirmed that an employer can defend against such a claim by showing that the challenged decision was based on a reasonable factor other than age (“RFOA”).  In Meacham v. Knolls Atomic Power Laboratory, 128 S.Ct. 2395 (2008), the Court held that the burden falls on the defendant to prove the affirmative defense of an RFOA.  Neither case specifically stated what factors are “reasonable.” 

The proposed rule explains that a reasonable factor is one that is objectively reasonable when viewed from the position of a reasonable employer under like circumstances.  It is one that would be used in a like manner by a prudent employer mindful of its responsibilities under the ADEA.  The proposed rule lists six considerations as potentially relevant to the reasonableness determination:

• whether the employment practice and the manner of its implementation are common business practices;
• the extent to which the factor is related to the employer’s stated business goal;
• the extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately;
• the extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;
• the severity of the harm to individuals within the protected group, in terms of both the degree of injury and the number of persons adversely affected, and the extent to which the employer took preventative or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and
• whether other options were available and the reasons the employer selected the option it did.

Not all criteria must point to reasonableness to establish the RFOA defense; the rule states that the list is illustrative, not exhaustive.  The rule also provides guidance regarding whether the factors considered by the employer were age-related.  The considerations for this inquiry include:

• whether supervisors are given unchecked discretion to subjectively evaluate employees;
• the extent to which supervisors were to evaluate employees based on factors known to be subject to age-based stereotypes; and
• the extent of training received by supervisors in applying evaluative factors and avoiding discrimination.

Assuming that the proposed rule will become final (after the public comment period expires), these considerations can serve as a filter for decision making.  Employers and their counsel who apply these considerations on the front end likely will find that risk is reduced, more sound decisions are reached, and challenges are more likely to be resolved in their favor.

“Texting”--the preferred communication medium among younger employees--differs from other forms of communication in ways making it easier to cross the line into inappropriate content.  Texts are brief, spontaneous, and informal -- even more so than e-mail.  A text can contain only a limited number of characters, so it is customary to abbreviate (“LOL”; “TLK2UL8R”) and to omit even the minimal greetings and pleasantries usually contained in email messages.  With it’s rapid back-and-forth, texting feels more like a telephone conversation than written correspondence.  But unlike a telephone call, a written record of text communications remains and can serve as powerful evidence in sexual harassment lawsuits -- generating the buzzword “textual harassment.” 

 Use of text messages as evidence in discrimination claims is on the rise.  According to a recent article in the National Law Journal:

Perhaps the biggest culprits...are male bosses who are sending scandalous text messages to female employees, asking them out on dates or promising promotions in exchange for sexual favors. These texts are explosive evidence in lawsuits, and pretty tough to dispute.
--“Textual Harassment” on the Rise, The National Law Journal, July 20, 2009

Inappropriate text messages were key evidence in several recent, high profile employment cases, including a claim by four waitresses against a manager at a Famous Dave’s restaurant in West Virginia.  In support of their claim, the waitresses produced text messages from the supervisor requesting sexual favors.  Text messages appear similarly pivotal in a pending Connecticut harassment case against World Wrestling Entertainment, Inc.  The plaintiff-employee in that case claims that a high-level manager made sexual advances to her in late-night text messages.  

Given this exposure, employers’ anti-harassment policies should treat text messages sent on devices owned and provided by the employer as business records that should be monitored for inappropriate content and managed accordingly.  But the sheer volume of text messages can make monitoring impractical.  In a one-month period (January 2009), for example, AT&T processed 31.1 billion text messages.  (Statement of Wayne Watts, Senior Executive Vice President & General Counsel, AT&T, Inc., Before Subcommittee on Antitrust, Competition Policy & Consumer Rights, Hearing on Cell Phone Text Messaging Rate Increases and the State of Competition in the Wireless Market, June 16, 2009).  Monitoring such a vast number of exchanges could prove impossible even for the most diligent employer.  And if the Ninth Circuit’s opinion in Quon is affirmed, such monitoring may violate the privacy rights of public employees--imposing on employers (at least those in the public sector) the conflicting duties of electronic monitoring to deter harassment without infringing employees’ expectation of privacy in text messages.

Mohawk stemmed from a lawsuit filed by Norman Carpenter, who alleged that Mohawk unlawfully terminated him after he complained to the company’s human resources department that the company was employing undocumented workers.  When Mr. Carpenter submitted his complaint, Mohawk was defending a class-action racketeering lawsuit, which alleged that the company had conspired to drive down the wages of its legal employees by knowingly hiring undocumented workers.  When the company received Mr. Carpenter’s complaint, it directed him to meet with its outside counsel in the racketeering action.  According to Mr. Carpenter, during this meeting, outside counsel pressured him to recant his statements.  When he refused to do so, the company terminated him. 

The class-action plaintiffs sought an evidentiary hearing in their case to explore Mr. Carpenter’s allegations.  Mohawk responded to this motion, in relevant part, by asserting that Mr. Carpenter had been interviewed by outside counsel, and his allegations were not substantiated.  Mr. Carpenter filed a motion in his own case seeking to compel Mohawk to produce information concerning his meeting with outside counsel and the decision to terminate his employment.  Mohawk contended that the information Mr. Carpenter sought was protected from disclosure by the attorney-client privilege.  The district court agreed but concluded that Mohawk had waived the privilege through its representations in the class-action lawsuit.  The court stayed its ruling, however, pending an appeal by Mohawk. 

Mohawk filed a notice of appeal and a petition for a writ of mandamus in the Eleventh Circuit.  The Eleventh Circuit dismissed Mohawk’s appeal for lack of jurisdiction concluding that since the district court’s order could be addressed adequately on appeal from a final judgment, it was not an immediately appealable collateral order.  The court also denied Mohawk’s mandamus petition finding “‘no clear usurpation of power or abuse of discretion’” by the district court. 

The Supreme Court affirmed.  Noting that “the decisive consideration is whether delaying review until the entry of final judgment ‘would imperil a substantial public interest’ or ‘some particular value of a high order . . . ,’” the Court concluded that while immediate appeal of disclosure orders implicating the attorney-client privilege posed little risk of harm to litigants,  the “likely institutional costs” and potential burden such appeals could place on appellate courts.

Other considerations also guided the Court’s decision.  First, the Court noted that  appellate courts can vacate judgments and remand cases for new trial that exclude the privileged information and its fruit.  Second, because counsel and client “must account for the possibility that they will later be required by law to disclose their communications for a variety of reasons . . . ,” there was little risk that requiring litigants to wait until a final judgment issued in a case would “chill” frank discussions between counsel and clients.  Third, litigants “confronted with a particularly injurious or novel privilege ruling” have a variety of options available.  They can ask the district court to certify and the appellate court to accept an interlocutory appeal; follow Mohawk’s unsuccessful route and petition the courts of appeal for a writ of mandamus; ignore the disclosure order, risk sanctions and obtain post-judgment review of the sanction order; and ignore the disclosure order and risk a contempt order, which can be appealed directly.  Fourth, the Court noted that its holding was supported by recent legislation “designating rulemaking, ‘not expansion by court decision,’ as the preferred means for determining whether and when prejudgment orders should be immediately appealable.”  The Court reasoned that because the rule making process draws on the “collective experience of the bench and bar,” expansion of the avenues of appeal for disclosure rulings involving the attorney-client privilege must be undertaken through this process.

Since January 1, 2008, the Board has operated with three vacancies, leaving only two members to make decisions regarding labor-management disputes in the workplace.  In the past 16 months, Chairman Wilma Liebman and Member Peter Schaumber have issued more than 400 decisions—all of which could be invalidated based on the Supreme Court’s ruling.  Dozens of these decisions were appealed to federal courts of appeal on the two-member question, and the appellate decisions have been mixed.  The U.S. Courts of Appeal for the First, Second, and Seventh Circuits have upheld the decisions as valid, while the D.C. Circuit took the opposite position. 

Resolution of the issue turns on interpretation of the National Labor Relations Act’s quorum provision, 29 U.S.C. § 153(b).  In arguing for rejection of the Board’s ruling, New Process Steel relies on the Act’s statement that “three members of the Board shall, at all times, constitute a quorum of the Board.”  The Board’s contrary position is based on statutory language that indicates that two members may constitute a quorum when an appropriate designation has been made.

Until the issue is resolved by the Supreme Court, the precedential value of the two-member decisions will remain uncertain.