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Delegating Wage-Setting Discretion to Branches Won’t Justify a Class-Action Lawsuit

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in Best-Practices Leadership,Discrimination and Harassment,Human Resources,Leaders & Managers

Recently, clever lawyers toyed with a new tactic, hoping to turn individual discrimination cases into nationwide class-action monsters. 

They’d find a single unhappy employee and sue on behalf of all similarly situated employees in a company’s subsidiaries. They’d search for a “smoking gun” (some companywide policy that might mean women, for example, earned less than comparable men) and then ask for class-action status.

If the lawyers didn’t find such a policy, they’d claim it meant that subsidiaries had unfettered discretion to make discriminatory decisions.

Now, fortunately, a recent court decision has put an end to the tactic in New Jersey.

Recent case: Four ex-employees sued Johnson & Johnson, claiming race discrimination over the company’s excessively subjective compensation and promotion practices. The employees’ lawyers asked to represent all 8,600 black and Hispanic employees at its 35 subsidiaries who might have earned less than comparable white employees.

The court wouldn’t allow the class action because the lawyers couldn’t show any common employment practice that could explain the disparities. That was true even though a statistical analysis showed differences in compensation across the 35 subsidiaries. But the court said a headquarters policy giving each subsidiary power to set compensation policies wasn’t enough. (Gutierrez, et al., v. Johnson & Johnson, No. 01-5302, DC NJ, 2006)  

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