Sex Discrimination Class Actions and Merit-Based Compensation: Is Your System at Risk?

Over the past few years, the plaintiffs’ bar has developed a potentially powerful theory of sex discrimination which has particular significance for merit-based compensation systems. In numerous class actions predicated on this theory, employers across diverse industries -- retail, financial services, higher education -- have paid significant sums for apparent gender disparities in pay and promotions within their ranks. For example, Merrill Lynch recently settled a sex discrimination class action for an amount reportedly in excess of $100 million.¹ In 1997, Home Depot paid out $87.5 million,² and in 2002, American Express Financial Advisers, Inc., agreed to pay $31 million³ Morgan Stanley⁴ and Wal-Mart⁵ are presently fending off similar claims. The Wal-Mart suit, if certified, will constitute the largest sex discrimination class action in history, with hundreds of millions of dollars at stake.