Litigating the glass ceiling

Class actions alleging gender discrimination are ubiquitous in the US. Helen Donovan and Kirsty Faichen look at whether Australia is set to go down the same path

Litigating the glass ceiling
Class actions alleging gender discrimination are ubiquitous in the US. Helen Donovan and Kirsty Faichen look at whether Australia is set to go down the same path

One of a director’s key responsibilities is to assess whether there are appropriate policies and procedures in place to enable effective oversight and management of risks, including (but not limited to) the identification of principal risks, and effective management of those risks. This article considers a compliance and brand risk that may not be at the forefront of every director’s mind. The risk of being subject to a class action involving current or former employees alleging gender discrimination is not far-fetched or fanciful, particularly given how popular that type of litigation is in the US. Boards should include this risk when assessing employee-related risks, and they should develop and implement strategies to manage any identified risks associated with gender discrimination within their organisations.

In the US, the home of the class action law suit, class actions alleging gender discrimination are ubiquitous. It’s even a topic of popular culture. Recently, Hilary Swank revealed that she was offered 5% of what a male counterpart was offered for a role in a film. She had won two Oscars, “… but the male hadn’t had any kind of critical success … and he got offered $10m, and I got offered $500,000”. In an acceptance speech at the Oscars in 2015, Patricia Arquette referred to the need to close the wage gap. “It’s time to have wage equality once and for all, and equal rights for women in the United States of America,” she said.

Gender discrimination overseas
It’s not hard to find examples in the US of employees litigating the glass ceiling. In August 2016, Kerrie Campbell, an equity partner at the law firm Chadbourne and Parke LLP, commenced a $100m class action against the firm on behalf of current and former female partners alleging discrimination in relation to pay and decision-making power.

Earlier this year, Novartis agreed to pay $8.2m to settle a proposed class action lawsuit by more than a dozen female employees alleging gender discrimination in relation to pay and promotional opportunities. In the last two years, Goldman Sachs, Daiichi Sankyo and Sterling Jewellers (among others) have all faced class actions involving  gender discrimination in relation to pay and promotional opportunities (among other things). Perhaps the most wellpublicised class action in recent times involved the claim by Ms Dukes against Wal-Mart Stores alleging gender discrimination in relation to pay and promotion. This matter went all the way to the US Supreme Court, which found in 2011 that the 1.5 million employees in the class action did not have enough in common to proceed as a class action.

Closer to home
In Australia, closing the gender pay gap and improving diversity in the workplace is gaining greater attention and becoming more of a business issue. This is driven by shifting social expectations and an increase in legislative reporting requirements and focus on diversity at the board level.

Private sector organisations with more than 100 employees are required under the Workplace Gender Equality Act 2012 (Cth) to report to the Workplace Gender Equality Agency against a set of indicators, including equal remuneration between women and men. At the board level, the ASX Corporate Governance Council Principles and Recommendations on Diversity report suggests that boards of listed entities set measurable objectives for achieving gender diversity. The Australian Institute of Company Directors’ diversity campaign, the 30% Club, aims to achieve 30% women on S&P/ASX 200 boards by 2018. This campaign recognises that diversity at the board (and senior management) level is not just a social imperative – research indicates that having both genders in the boardroom enhances decision-making and can boost organisational performance.

We are yet to witnesses large-scale class actions in Australia alleging gender discrimination. Despite this, Australia is regarded as an attractive jurisdiction for class actions and there is an increasing presence of litigation funders here. The largest litigation funder in Australia, IMF Bentham Limited, has a presence in five Australian cities.

Recent research by Professor Vince Morabito (Monash University) indicates that class actions involving workers have declined somewhat in the past decade or so. This may be due to unions using other mechanisms to resolve disputes and workers relying on the Fair Work Ombudsman to recover entitlements. However, we do know that
since class actions became permissible in the Federal Court of Australia in 1992, class actions by aggrieved workers have made up a good proportion (13.7%) of all class actions pursued in that jurisdiction.

Future directions
There may be signs on the horizon that class actions involving workers could become more common. Recently, a group of former workers filed a class action in the Federal Court against Appco, one of Australia’s largest charities, alleging sham contracting and underpayment of wages. It is estimated that up to 8,000 former workers could join the class action. And Unions NSW has recently foreshadowed a possible class action against job-posting websites such as Airtasker for not paying minimum award (see its report, Innovation or Exploitation: Busting the Airtasker Myth).

Perhaps, though, we won’t see quite the same volume of litigation as in the US. Arguably, the rules of litigation in Australia do a better job of fending off spurious claims (despite the relative simplicity of commencing such actions). Courts in Australia require that the losing party pay costs, unlike in the US. Also, lawyers are not allowed to charge contingency fees calculated by reference to award or settlement value (although litigation funders may take a percentage of the amount paid to the members of the class, and ‘no win no fee’ is allowed in most Australian states).

Litigation funders are always looking for new claims to invest in, and awards in discrimination claims are on the rise in Australia. In 2014, the Full Court of the Federal Court made an award for $100,000 in damages in a sexual harassment claim. In 2015, the Victorian Civil and Administrative Tribunal made an award for $180,000 in general damages, plus $20,000 in punitive damages, also in a sexual harassment claim. If the trend towards greater damages in discrimination claims continues, litigation funders may become more interested in litigating Australia’s glass ceiling.

Boards would be well advised to include in their risk assessments the possibility of a class action involving current or former employees and ensure strategies are in place to ensure gender equality in the workplace.

Kirsty Faichen is a partner and Helen Donovan is a senior associate in the employment practice at law firm Herbert Smith Freehills.


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