December 10, 2018

Federal Judge Sides with KPMG in Gender Discrimination Lawsuit

KPMG scored a huge victory in court on Nov. 30, as a New York federal court judge declined to certify a long-running class-action lawsuit by thousands of current and former female KPMG tax and advisory professionals who accused the firm of gender, pay, and promotion discrimination dating back to 2008.

While the ruling bars the women from proceeding with the lawsuit as a group, it doesn’t prevent them from pursuing claims against KPMG individually.

The female KPMG workers filed a motion on Nov. 27 that asked a Manhattan federal court to certify their class and collective action under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act.

But in her Nov. 30 ruling, U.S. District Judge Lorna Schofield cited several factors from the landmark 2011 U.S. Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes in her reasoning to deny the female plaintiffs’ class certification.

Betty Dukes, a greeter with the big-box retailer, led a class-action lawsuit on behalf of as many as 1.5 million female workers accusing Walmart of systemic gender discrimination against women. They alleged that the discretion exercised by their local Walmart supervisors over pay and promotion matters violated Title VII by discriminating against women.

But the Supreme Court dismissed the lawsuit on the grounds that the plaintiffs “did not suffer from a common policy of discrimination.” In the majority opinion, written by Justice Antonin Scalia, the court ruled that because the plaintiffs provided “no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question” necessary for a class-action suit.

The Dukes decision was rendered by the Supreme Court less than three weeks after Donna Kassman, a former KPMG senior manager, filed a $350 million lawsuit against the firm alleging “relentless gender discrimination and harassment.” Several other women eventually joined Kassman’s class-action lawsuit as named plaintiffs.

The plaintiffs had sought to certify a proposed class of more than 10,000 current and former female associates, senior associates, managers, senior managers/directors, and managing directors within KPMG’s tax and advisory functions dating back to Oct. 30, 2009, who claimed that the firm’s pay and promotion practices violated the disparate impact provision of Title VII.

The lawsuit also sought to certify a class of the same group of employees employed by KPMG in the state of New York dating back to June 2, 2008, who claimed that the firm’s pay and promotion practices also violated New York law.

The plaintiffs alleged that, although women are hired as associates at nearly the same rate as men, females represent only about one-fourth of the managing directors and less than one-fifth of the partners at KPMG.

They also claimed that women’s total compensation is 2.7% less than men’s in KPMG’s tax practice on average and 2.8% less in the firm’s advisory practice. The plaintiffs contend that KPMG knew as far back as 2009 that compensation disparities exist for women and the firm has done nothing to address it.

But Schofield said Dukes “makes it extremely difficult for a gender discrimination suit to proceed as a class action when the discriminatory treatment was the product of local supervisors exercising their discretion in awarding pay and promotions,” not KPMG operating under a general policy of discrimination.

She stated that most of the conduct challenged in Dukes “provided a roadmap to avoid class certification” of a nationwide class alleging gender discrimination. And, not surprisingly, during the years since Dukes, “KPMG has utilized a decentralized system for determining pay and promotion reminiscent of that used by Walmart in Dukes.”

Although individual decisions are made by managers at the local level, KPMG’s overall system is not the product of accident or happenstance. It is under the direction of a National Director of Compensation Strategies, who — with a staff of approximately 12 people – is responsible for designing and implementing the firm’s employee compensation program and managing the firm’s performance recognition programs. The result, according to Plaintiffs, is a pay disparity between women and men of approximately 2.8%. Although any statistically significant pay disparity on account of gender would be improper, for context, the national disparity in pay between women and men is 18%. …

KPMG counters Plaintiffs’ analysis and asserts that Plaintiffs have provided “no statistical evidence of anything more than sporadic and isolated within-job sex disparities in pay.”

Schofield said, regardless of who is correct, under Dukes, the proposed class cannot be certified.

Plaintiffs’ argument, at its core, still boils down to “managers, who were left without meaningful guidance … , fell back on their own stereotyped views of women in making pay and promotion decisions.” … Nevertheless, this argument “leaves [p]laintiffs right back where they started: challenging [defendant’s] practice of delegating discretion to local managers, which the Supreme Court specifically held was not a specific employment practice supplying a common question sufficient to certify a class.” As Plaintiffs provide insufficient evidence of “some glue” holding together the reasons for the countless individual employment decisions they challenge, the motion for class certification is denied.

Equal Pay Act claim

The judge also denied final certification of the Equal Pay Act collective. In October 2014, 9,000 women—both past and present Klynveldians—were sent a court-ordered notice that welcomed them to join the collective action challenging pay discrimination at KPMG. Of those 9,000, more than 1,100 responded to the notice, allowing them to join the Equal Pay Act collective as “opt-ins.”

But Schofield said “the sheer size and breadth of the proposed collective” suggests that its members didn’t work in a single “establishment” and aren’t “similarly situated.”

[A]lthough KPMG set generally applicable guidelines, individual pay and promotion decisions were left to the discretion of local practice area leaders. These decentralized discretionary determinations were reviewed by firm leadership on an aggregate basis against budget. Pay and promotion decisions were not sufficiently “centralized” to amount to “unusual circumstances” warranting a finding that the many offices and practice areas represented in the 1,100-member Proposed Collective qualify as a single “establishment” under the EPA. …

[B]ecause employees sharing a single job title at KPMG are not “similarly situated” to one another, if the Proposed Collective were certified, it would be necessary to: (1) match the Opt-ins with 1,100 unique proposed male comparators; (2) adjudicate approximately 1,100 “equal work” questions and only then (3) turn to any individualized defenses KPMG might raise with respect to specific Opt-Ins (e.g., poor performance reviews). Such an undertaking is impractical if not impossible. … For this reason, the motion for final certification of a collective is denied, and the collective that was preliminarily certified is decertified.

KPMG spokesperson Manuel Goncalves told Going Concern the firm is pleased with the federal court’s decision.

“KPMG is committed to the advancement of women throughout the organization, and as a result is recognized as a leader for its strong commitment to supporting women in the workplace,” he said. “Diversity and inclusion have long been priorities for the firm, and as such are woven into our culture and everything we do.”

Kate Mueting, partner and co-chair of the Title VII practice in Sanford Heisler Sharp’s Washington, DC, office and lead attorney for KPMG’s female plaintiffs, told Going Concern, “We still currently represent 1,100-plus opt-ins who are in active litigation, and we are considering our options for moving forward.”

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