Why Walmart's Sex Discrimination Case Matters to Small Business

As a posse of blue-suited lawyers harangues the nation's top judges today, at issue is whether the sex discrimination lawsuit a group of women filed against Walmart is a legitimate class action. It won't change anything else about the decades-old prohibition against sex-based workplace bias. But it will likely encourage some employees to seek redress for their grievances. And that's something you probably should think about.

By "you" I mean most -- but not all -- employers in America. That's because the smallest firms are exempt from laws meant to protect employees against sex discrimination. Title VII of the 1964 Civil Rights Act, which is what the Walmart case is filed under, doesn't cover any firm with 15 or fewer employees. Why? "Part of it was the notion that mom-and-pop operations shouldn't have to hire people they didn't want to hire, essentially," says Dianna Johnston, a senior attorney advisor at the Equal Employment Opportunity Commission. "I think it was as simple as that. They didn't want the government intruding on those people." Legislators at the time also likely considered compliance too burdensome for small employers. Whatever the reason, the exemption survived and is echoed in more recent legislation, such as the Family Medical Leave Act, which also exempts companies with fewer than 15 employers.

That leaves a lot of employees uncovered by Title VII. In fact, nearly one in five U.S. workers labors at a company with fewer than 20 workers, according to the Census Bureau (which unhelpfully skips in its tabulations from 10 to 20 employees.)

But that doesn't mean small businesses owners are completely off the hook either. Employees at these companies may be covered in other ways. State laws, for example, empower Fair Employment Practices Agencies that operate like the federal EEOC. In California, state anti-discrimination laws apply to all businesses regardless of size in the nation's most populous state. But the second-most populous state, Texas, retains the 15-employee limit. To find out the law in your state, check the compliance tools at HR.BLR.com.

Dollar damages in the Walmart case, assuming it's certified as a class-action lawsuit, could reach billions. Although a small business won't get hit with a tab like that, any discrimination case can be costly, as The Debunker reported recently. Rather than wonder and worry, why not minimize your risk of getting clobbered by a discrimination lawsuit to begin with? Here's how:

First, adopt a zero-tolerance policy. Spell it out in writing in the employee handbook, including disciplinary procedures and penalties, and train managers to understand and follow it.

Second, investigate all claims thoroughly. That means the human resources department or person -- not the supervisor -- should do the investigating, and employees who violate policy should be disciplined.

If you take these steps, your company could still be accused of sex discrimination. But the risk will be lower and, if the worst happens, these actions will demonstrate to the courts and regulators that you are trying to follow the law.

Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications long enough to lay somewhat legitimate claim to being The Article Authority. Follow him on Twitter @bizmyths.

Image courtesy of Flickr user foxandfeathers, CC2.0