Employee class actions have increased the heat on national employers across all industries; just ask Novartis, Wal*Mart, Starbucks and Outback Steakhouse.?? Employee class actions can be expensive to defend against and harder to settle than single plaintiff litigation.?? In fact, the class action plaintiffs??? bar generally operates on a ???the bigger they are, the harder they fall??? model.?? For them, a class of sixty employees is just another case on the docket, but a class of sixty thousand can be national news, increasing public pressure on the employer to settle.
Case in point: a recent federal appeals court decision allowed a massive class action lawsuit to go forward against Wal*Mart, the nation???s largest private employer.?? On April 26, 2010, an eleven-judge panel of the Ninth Circuit ruled 6-5 that a class action alleging less favorable treatment of female employees filed on behalf of all women who worked at Wart*Mart from 1998 and the present could go forward.?? In 2001, at the time of filing, the named class was estimated to contain 1.5 million members.?? Wal*Mart unsuccessfully argued that such a lawsuit was inherently unmanageable, and is now considering an appeal to the Supreme Court.?? This is not an insolated incident for Wal-Mart, which in December 2008 alone settled 63 class actions for a total of $640 million.
Wal*Mart, of course, is not alone.?? A federal jury in Manhattan ruled on May 19, 2010 that Novartis Pharmaceuticals Corporation engaged in a pattern of discrimination against women from 2002 through 2007 and must pay $250 million in punitive damages.?? The jury found that Novartis discriminated against thousands of female sales representatives concerning pay, promotion, and pregnancy.?? The jury also awarded $3.3 million in compensatory damages to twelve women who testified in the class action suit.?? The compensatory award allows 5,588 other women to apply for compensatory damages, which will be determined on an individual basis.?? ??Obviously, the total payout could increase exponentially with the inclusion of the additional claims of the other class members.
Other recent cases point in a similar direction.?? In Chau v. Starbucks Corp., filed in California state court in 2004, the plaintiff class alleged that Starbucks violated California???s Labor Code by pooling tips left in tip jars and sharing those not just with baristas (part-time hourly employees), but also with shift supervisors (also part-time hourly employees), who spend 90 percent of their time performing barista tasks.?? The Plaintiffs alleged that this violated California Labor Code Cal. Labor Code ?? 351, which states that ???[n]o employer or agent shall collect, take, or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron.???
The California superior court certified the class of current and former baristas, and after a bench trial, the trail judge found the tip pooling violated ?? 351 because the shift supervisors were ???agents??? of the employer.?? The class was awarded $86 million in damages.?? Recently, the California Court of Appeals overturned the multimillion dollar verdict, holding that under Starbucks??? team service concept, tips were left for the entire team of employees, including shift supervisors whom to customers were visually indistinguishable from baristas.?? Despite the ultimate victory in California, the original verdict led to copycat class-actions in Massachusetts and New York.?? Outcomes there may differ as the wage laws in the various states differ, but the threat of class action remains constant.
In EEOC v. Outback Steakhouse, filed in Colorado federal court in 2006, the Equal Employment Opportunity Commission acting on behalf of all female employees at company-owned restaurants, alleged that Outback denied women equal opportunities for advancement.?? Specifically, the EEOC alleged that Outback engaged in ???gender discrimination on a systemic scale??? by maintaining a glass ceiling that kept women from promotion to higher-level profit-sharing positions.
From the outset, this was a difficult case to defend for Outback, as a joint venture partner had stated that female employees had ???let him down??? and ???lost focus??? when they had children, and that he wanted ???the cute girls??? work in the front as servers.?? In December 2009, the court accepted a $19 million settlement between the parties, which also included a host of other requirements, such as hiring a ???Vice President of People??? (query exactly what that position entails).
No one ???cure-all??? exists for your business to avoid an employee class action suit.?? But creating a culture of best practices can help minimize risk: (1) develop written employment policies with your attorney and communicate them; (2) follow up with training like you mean it rather than holding mere ???one off??? trainings with little impact on employees, (3) develop a culture of respect and team work with a diversity action program that integrates a strategy through hiring, mentoring, promoting and monitoring, (4) make your cultural values specific and reviewable on a performance level with your managers and staff, (5) ensure your human resources department works closely with operations to develop, promote and enforce your culture and values, including legal compliance, (5) make the process of reporting of complaints clear and easy, and investigations of those complaints quick, thorough and confidential.?? While size matters for the plaintiff lawyers, culture can combat the risk of class actions and in the end give your company an edge in the market for talented workers.
Chris Vrountas, Chair of the Employment Counseling and Litigation Practice Group, contributed this posting.
