Oh, The Irony! Tenth Circuit Upholds Denial Of Class Certification In Nationwide Title VII Gender Discrimination Because Employer Failed To Follow Official Company Performance Management Process

By Gerald L. Maatman, Jr. and Laura J. Maechtlen

On January 15, 2012, the U.S. Court of Appeals for the Tenth Circuit upheld a district court order denying class certification in a nationwide Title VII gender discrimination action in Tabor, et al. v. Hilti, Inc., 703 F.3d 1206 (10th Cir., 2013). While the decision is favorable for employers, it demonstrates the realities of a common workplace problem: varied and irregular application of a company-wide policy, and inadequate record-keeping in compliance with the same.

Despite such a problem, the employer in this case was lucky. The varied application of the policy meant that plaintiffs could not meet the elements of Rule 23 to support class certification. As such, the Tenth Circuit’s ruling is one of the leading workplace class action decisions so far this year.

Relevant Facts And Procedural Background

Plaintiffs worked as Inside Sales Representatives at Hilti, a tool manufacturer. Id. at 1211. Inside sales employees at Hilti are often promoted to Account Manager, where they are responsible for outside sales or field sales, including site visits to customers within an assigned territory. Id. at 1212.

Hilti established a performance management and reporting process called “Global Develop and Coach Process” (“GDCP”), which included multiple components that tracked aspects of an employee’s readiness to promote. Id. The GDCP process included a priority rating (“P” rating) that indicated management’s subjective assessment of an employee’s promotion-readiness based on certain competencies. Id. A “P1” rating indicated the employee was ready for promotion, while a “P5” indicated the employee was ineligible for promotion. Id. A second component was a mobility rating (“M” rating), which indicated the employee’s willingness to relocate. Id. Another component was the employee’s own career goals. Id.

Although Hilti considered GDCP the “official” method for identifying employees who would be promoted internally, Hilti did not maintain careful records. Id. Hilti’s applicant flow log data showed that Hilti’s 282 individuals were promoted between 2005 and 2008, but fewer than 24% had been assigned a P rating at the time of promotion; fewer than 37% of promoted employees were assigned “M” ratings; fewer than 8% of individuals who were promoted to outside sales positions had actually identified outside sales as a future career goal; and more than 64% of employees were missing both “P” rating and “M” rating at the time of promotion. Id. Moreover, Hilti managers did not always follow the GDCP ratings in making promotion decisions. Id. Of the promoted employees who had been assigned a “P” rating at the time of promotion, only 28% had a “P1” rating, and 33 promoted employees were assigned a “P” rating of “P5” at the time of promotion (indicating they were ineligible for promotion). Id.

Plaintiffs each filed individual claims for gender discrimination under Title VII, retaliation and disparate impact, and moved to certify a class comprised of “all women employed by Hilti in the United States denied promotion to Account Manager.” Id. at 1215. Plaintiffs alleged that male Inside Sales Representatives were promoted through “tap on the shoulder” promotions, without posting positions and/or allowing women to apply, and that ineligible male candidates were allowed — or even invited — to apply for Account Manager positions, while female employees were told they could not apply until they earned a “P1” rating. Id.

The district court granted summary judgment for Hilti on plaintiffs’ individual claims, and refused to certify the class, finding that plaintiffs failed to meet the numerosity requirement under Rule 23(a)(1), or any condition of Rule 23(b).

The Tenth Circuit’s Opinion

On appeal, the Tenth Circuit affirmed the district court’s grant of summary judgment on certain individual claims of plaintiffs, while it reversed with respect to others. Notably, however, it affirmed the district court’s refusal to certify the class on the ground that plaintiffs failed to show questions of law or fact common to the class under Rule 23(a)(2).

Relying on Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and despite the “official” GDCP process, the Tenth Circuit determined that plaintiffs challenged a “highly discretionary policy” for granting promotions, and failed to demonstrate a “common mode of exercising discretion that pervaded the entire company.” Id. at 1228 (citing Wal-Mart, 131 S.Ct. at 2254-55). It found that Hilti failed to maintain a GDCP system in any uniform manner, and — despite the fact that plaintiff’s statistical evidence demonstrated (at least facially) that the haphazard policy caused an overall disparate impact on women — they failed to show that discriminatory promotion choices were common across the class. Id.

The Tenth Circuit also found that plaintiffs could not meet Rule 23(b)(3), the only sub-section of Rule 23(b) raised in the appeal. Rule 23(b)(3) requires questions of law or fact common to class members predominate over any questions affecting only individual members. The Tenth Circuit agreed with the district court in finding that “defendants allege that both named plaintiffs were denied promotion for specific, objective and individualized reasons,” and that “Hilti’s promotion decisions involve ‘highly individualized’ facts and defenses that cannot be effectively resolved in a class suit.” Id. at 1229-1230.

Implications For Employers

In relying on the commonality rationale set forth in Wal-Mart v. Dukes to demonstrate how the varied and irregular application of a national policy implemented by an employer raises “highly individualized” facts, the Tenth Circuit highlights a key defense for employers facing class certification motions. Although implementation of a company policy can be strong evidence of a “common” practice to support class certification in many cases, strong evidence that the a common policy was implemented on an individualized basis, differently among managers, or in a varied way, could defeat a motion class certification.