The International Journal of Organizational Analysis

ORGANIZATIONAL JUSTICE THEORIES AND LANDMARK CASES

Marjorie Chan
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International Journal of Organizational Analysis, Vol. 8 Iss 1 pp. 68 - 88
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 The International Journal of Organizational Analysis
2000, Vol., 8, No. 1, pp. 68-88

ORGANIZATIONAL JUSTICE THEORIES

AND LANDMARK CASES

Marjorie Chan
California State University, Stanislaus
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The paper examines various organizational justice theories and three

landmark cases which illustrate that with enabling legislation, the vio-
lations of organizational justice (distributive, procedural, and interac-
tional justice) give rise to lawsuits on the part of the unfairly treated
employees. These lawsuits, if successful, bring about various remedies.
Violations of each justice component have unfavorable consequences.
As Fo]lger and Cropanzano's (1998) fairness theory integrates prior or-
ganizational justice theories and various justice concepts such as dis-
tributive, procedural, and interactional justice, each case's justice vio-
lations are assessed in accordance with fairness theory. Each successful
case results in a landmark monetary settlement and court-mandated
remedial initiatives.
We hold these truths to be self-evident, that all men are created equal,
that they are endowed by their Creator with certain unalienable Rights, that
among these are Life, Liberty, and the pursuit of Happiness. That to secure
these rights, Governments are instituted among Men, deriving their just
powers from the consent of the governed. That whenever any Form of
Government becomes destructive of these ends, it is the Right of the People
to alter or to abolish it, and to institute new Government, laying its foundation
on such principles and organizing its powers in such form, as to them shall
seem most likely to effect their Safety and Happiness. (Jefferson, 1776)
The American people, tracing their heritage back to the Declaration of Inde-
pendence, believe that there are unalienable rights that everyone has. They view
justice as an entitlement. The American people's conception of justice extends into
every aspect of life, including one's membership in an organization. The societal
expectation for organizational justice has manifested itself in the passage of various
workers' rights laws on both the federal and state levels. Typical examples include
the Social Security Act of 1935, the Equal Pay Act of 1963, Title VII of the Civil

Note: I wish to thank Kenneth D. Mackenzie for his invaluable comments and suggestions.
 M. CHAN 69

Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the
Occupational Safety and Health Act (OSHA) of 1970, the Employee Retirement
Income Security Act (ERISA) of 1974, the Pregnancy Discrimination Act of 1978,
the Americans with Disabilities Act of 1990, the Civil Rights Act of 1991, and the
Family and Medical Leave Act of 1993 (Jones, George, & Hill, 1998; Lewin,
Mitchell, & Sherer, 1992). However, as much as these laws try to ensure that all
employees are treated fairly, lawsuits on the part of some employees indicate that
not all employees believe they have been treated with fairness.
The topic of workplace fairness has been dubbed "organizational justice"
(Greenberg, 1990b). This paper examines various organizational justice theories
and three landmark cases that illustrate that with enabling legislation, justice viola-
tions in the workplace give rise to employees' lawsuits, which, if successful, bring
about remedies (see Figure 1). For example, the Civil Rights Act of 1991 has con-
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tributed to an increase in the number of discrimination lawsuits against the

employers. It provides up to $300,000 for each individual in compensatory and
punitive damages in addition to back-pay awards that were available under Title
VII of the Civil Rights Act of 1964. Over the period 1992 to 1994, Oakland's law
firm, Saperstein, Goldstein, Demchak, and Bailer, which represented employees in
various class-action employment-discrimination lawsuits, collected more than $600
million in damages and litigation fees from corporate defendants. The Saperstein
law firm incites other attorneys and unfairly treated protected group members to
engage in collective action. This contributes to a resurgence in class-action
employment-discrimination lawsuits; for by means of the expanded remedies for
discrimination under the Civil Rights Act of 1991, the success of these lawsuits
results in great financial payoffs for both the plaintiffs and their attorneys. Pressure
resulting from these lawsuits leads to positive changes for protected groups such as
females and minorities in employment-related matters ('The Swat Team," 1995).

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 70 ORGANIZATIONAL JUSTICE

From group deprivation research results Martin (1993) indicated the impor-
tance of including disadvantaged group members' perspectives in theory and
research. Because the class-action employment-discrimination lawsuit has become
protected groups' powerful weapon of retaliation against violations of workplace
justice, the three landmark cases of this paper focus on this type of lawsuit. As
fairness theory integrates prior organizational justice theories and various justice
concepts such as distributive, procedural, and interactional justice (see Table 1),
each case's justice violations were assessed in accordance with fairness theory. The
remedies of these three successful class-action employment-discrimination lawsuits
in terms of a large landmark monetary settlement and court-mandated initiatives to
ensure justice were also examined.
An outline of the paper is presented as follows. Organizational justice
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consists of distributive, procedural, and interactional components, which first were

discussed together with the organizational justice theories. Three class-action
discrimination lawsuits were described, and each was discussed in accordance with
fairness theory. The paper ends with a brief discussion of future research
directions.

Organizational Justice Theories

The justice concept was first developed in philosophy and then introduced
into the social psychological literature. Cohen and Greenberg (1982) discussed
various philosophers' works on the justice concept. They mentioned Aristotle's
"proportionate equality," a justice principle that has been widely accepted. At the
heart of this principle is "merit," but not all individuals define merit in the same
terms. In Hobbes' Leviathan, first published in 1651 (as cited in Cohen & Green-
berg, 1982), the English philosopher conceptualized justice to be dependent on the
contractual terms drawn up by individuals. In J. S. Mill's Utilitarianism, Liberty,
and Responsive Government (as cited in Cohen & Greenberg, 1982), the philoso-
pher, with a utilitarian approach, conceived justice "as equal treatment accorded
each individual as a matter of right" (p. 8). As there are many principles of justice,
Mill advocated that the utilitarian standard, "the greatest good for the greatest
number," should provide a basis for decision (as cited in Cohen & Greenberg,
1982, p. 8).
Rawls's A Theory of Justice, published in 1971, and Nozick's Anarchy, State,
and Utopia, published in 1974 (as cited in Cohen & Greenberg, 1982), spark the
current philosophical debate on justice. Rawls developed nonhistorical principles
to evaluate distributive justice. Rawls's construction involves the selection of jus-
tice principles by individuals who meet in an '"original position'" and the applica-
tion of these principles to the basic structure of society (p. 6). These justice princi-
ples become the subject matter of the original agreement, and future conformity to
these principles is required even though individuals do not know what their places
would be in society. Under the specified conditions of the agreement, Rawls con-
sidered that individuals would select two justice principles: "Equal liberty and jus-
tifiable inequalities most beneficial to the least advantaged" (Cohen & Greenberg,
1982, p. 8). Nozick considered that historical principles of justice are superior to

The International Journal of Organizational Analysis, Vol. 8, No. 1, 2000

 The International Journal of Organizational Analysis, Vol. 8, No. 1, 2000

Table 1
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Fairness Theory with Its Component Justice Concepts and Theories

Distributive Procedural Interactional Relational Outcome (Distributive Integrative

Justice Justice Justice Approaches to Justice) X Process of Various
Justice (Procedural & Justice
Interactional Justice) Concepts &
Theories

Equity Theory Process control Explanations (Bies & Group-Value Referent Cognitions Fairness
(Adams, 1965; (Thibaut & Walker, Shapiro, 1988; Model (Lind & Theory (Folger, 1987, Theory

M.CHAN
Walster, Berscheid, 1975) or voice Shapiro, 1991; Shapiro Tyler, 1988) 1993) (Folger &
& Walster, 1973; (Folger, 1977) Buttner, & Barry, 1994) Cropanzano,
Walster, Walster, & 1998)
Berscheid, 1978)
Relative Deprivation Six justice rules Interpersonal sensitivity Relational Model
Theory (Crosby, 1984; (Levcnthal, 1980) (Greenberg, 1993) of Authority
Martin, 1981) in Groups (Tyler
& Lind, 1992)

Note: Based on the information from Folger and Cropanzano (1998)

71 71
 72 ORGANIZATIONAL JUSTICE

nonhistorical principles of justice, for the former take into consideration past perti-
nent circumstances, and they evaluate distributive justice according to the proce-
dures used. Nozick argued against the use of nonhistorical principles of distributive
justice, for they take away individuals' freedom to enter associations on their own
terms. Using historical principles, Nozick, therefore, developed his entitlement
theory of justice. Nozick indicated that a distribution is just, and individuals are
entitled to their holdings if the distribution is brought about by the principles of
justice in acquisition and transfer, and by the principle of rectification of injustice
if the two principles of justice are violated.

Distributive Justice
Folger and Cropanzano (1998) defined distributive justice as the "perceived
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fairness of the outcomes or allocations that an individual receives" (p. xxi). The
authors showed that injustice can bring about negative consequences such as
reduced job performance (Greenberg, 1988; Pfeffer & Langton, 1993), less coop-
eration with coworkers (Pfeffer & Langton, 1993), reduced quality of work (Cow-
herd & Levine, 1992), stress (Zohar, 1995), and theft (Greenberg, 1990a).
Greenberg (1987) discussed both the reactive and proactive content theories
of distributive justice. Reactive content theories focus on how individuals respond
to unfair treatment in terms of outcome distributions, and proactive content theo-
ries focus on how individuals bring about equitable distributions of outcome.
Reactive Content Theories. Greenberg (1987) classified social exchange
theory (Blau, 1964; Homans, 1961), equity theory (Adams, 1965; Walster, Ber-
scheid, & Walster, 1973; Walster, Walster, & Berscheid, 1978), and relative depri-
vation theory (Crosby, 1984; Martin, 1981) to be reactive content theories. Martin
(1993) pointed out that equity and relative deprivation theories have important
similarities. Both theories involve individuals' comparison of their contributions
and outcomes with those of others to determine distributive justice. Individuals
experience feelings of deprivation when the social comparison indicates inequity in
the allocation of rewards. Runciman's study (1966) made the distinctions between
individual egoistic deprivation based on interpersonal comparisons, and group-
based fraternal deprivation based on intergroup comparisons. Judgments used by
equity theory are similar to individual egoistic deprivation. With group deprivation,
one feels that the social group to which one belongs is deprived because of
common group attributes such as age, gender, and race. Group deprivation focuses
on the "enduring inequalities" between groups such as males and females, blacks
and whites, and labor and management.
Martin (1993) pointed out that the results from group deprivation research
indicate that under some conditions, some disadvantaged group members, espe-
cially those whose ideology did not justify their low-status position, would com-
pare themselves with members of a higher-status group and find intergroup ine-
quality to be "expected, dissatisfying, and unjust" (p. 316). The "discontent and
alienation" felt by the disadvantaged group members could "erupt into violent
protests or other collective actions challenging the legitimacy of an entire system
of reward distribution" (pp. 316-317). Martin, therefore, demonstrated from group

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 M. CHAN 73

deprivation research results the importance of including disadvantaged group

members' perspectives in theory and research.
Proactive Content Theories. Greenberg (1987) discussed two proactive
content theories: Leventhal's (1976, 1980) justice judgment model and Lerner's
(1977; Lerner & Whitehead, 1980) justice motive theory. Both theories predict
how people make decisions with respect to reward allocations in different situa-
tions.
Leventhal (1976) discussed three major justice rules that determine outcome
justice: the contributions rule, the needs rule, and the equality rule. Leventhal
pointed out that allocative decisions based on the contributions rule are for the pur-
pose of achieving productivity and a high level of performance. The author indi-
cated that the equality rule is used when the allocator's goal is to preserve social
harmony, and the needs rule is used when the objective is to foster personal wel-
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fare. Lerner (1982) developed four principles for making allocations: (1)
competition—allocations based on performance outcome, (2) parity—allocations
based on equality, (3) equity—allocations based on proportional contributions, and
(4) Marxian justice—allocations based on needs regardless of contributions.

Procedural Justice
Folger and Cropanzano (1998) defined procedural justice as the "fairness
issues concerning the methods, mechanisms, and processes used to determine
outcomes" (p. 26). Procedural justice research has been proliferating ever since the
first major researchers, Folger and Greenberg (1985), applied procedural justice to
work settings (Folger & Cropanzano, 1998). Evidence shows that unjust decision-
making processes are associated with various negative consequences such as lower
performance, higher turnover intentions, greater theft, and less organizational
commitment and citizenship behaviors (Cropanzano & Greenberg, 1997; Folger &
Cropanzano, 1998).
Greenberg (1987) discussed the reactive and proactive process theories of
procedural justice. Reactive process theories differ from proactive process theories
in that the former focus on dispute-resolution procedures, and the latter focus on
allocation procedures. The author also pointed out that process theories differ from
content theories of organizational justice in that the former focus on the fairness of
decision processes, and the latter focus on the fairness of decisions resulting from
the decision-making processes. Also, the process theories emerge from the legal
tradition.
Reactive Process Theories. According to Greenberg (1987), Thibaut and
Walker's (1975) theory of procedural justice is a prime example of reactive process
theory, for it assesses people's reactions to dispute-resolution procedures. Thibaut
and Walker's theory involves two types of decision input: process control and
decision control. Process control refers to individuals' ability to control the nature
of evidence presented on their behalf in the process stage of the dispute-resolution
process. Decision control refers to individuals' ability to have a say in the determi-
nation of an outcome during the decision stage of the dispute-resolution process.
Process control is referred to as "voice" (Folger, 1977; Folger & Cropanzano,
1998), and decision control is referred to as "choice" (Folger & Cropanzano,

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 74 ORGANIZATIONAL JUSTICE

1998). Tyler, Boeckmann, Smith, and Huo (1997) indicated that Thibaut and
Walker's theory of procedural justice had been applied to both legal and nonlegal
settings such as the managerial, organizational, educational, and political contexts.
Tyler et. al (1997) cited numerous studies that supported Thibaut and Walker's
finding that "procedures with greater process control are judged to be fairer" (p.
88). Folger and Cropanzano (1998) also raised the importance of "voice" in
procedural justice research.
Proactive Process Theories. According to Greenberg (1987), Leventhal,
Karuza, and Fry's (1980) allocation preference theory, an outgrowth of Leventhal's
(1976, 1980) justice judgment model, is a prime example of a proactive process
theory, for it has been applied almost strictly to procedural rather than distributive
decisions. The allocation preference theory declares that allocation procedures that
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lead to the attainment of the allocator's goals, including justice, will be favored.
Leventhal, Karuza, and Fry (1980) identified seven components of allocative
procedures that might lead to justice attainment: (1) the selection of decision-
making agents, (2) the establishment of ground rules for evaluating prospective
reward recipients, (3) the collection of information about prospective reward
recipients, (4) the definition of the structure of the decision process, (5) the
establishment of safeguards to monitor the behavior of both the allocators and the
prospective recipients of rewards and resources, (6) the establishment of appeals
procedures that enable dissatisfied individuals to seek redress, and (7) the
establishment of mechanisms for changing the allocative procedures that may be
unfair.
Leventhal (1980) also developed six justice rules to evaluate the fairness of
his seven components of allocative procedures. A fair procedure should be (1) con-
sistent, (2) unbiased, (3) accurate, (4) correctable in case of a mistake, (5) repre-
sentative of the interests of all concerned parties, and (6) in accordance with per-
sonal standards of ethics and morality. Folger and Cropanzano (1998) indicated
that research affirms the importance of Leventhal's (1980) six attributes of fair
procedures, which have been applied to different practical situations.
Interactional Justice
Bies and Moag (1986) stated that interactional justice denotes individuals'
concerns about "the quality of the interpersonal treatment they receive during the
enactment of organizational procedures" (p. 44). Folger and Cropanzano (1998)
indicated that interactional justice was first introduced as an independent justice
variable (Bies, 1987; Bies & Moag, 1986), and it is currently considered to be a
procedural justice component (Cropanzano & Greenberg, 1997; Greenberg, 1990b)
with questions raised by some researchers (Greenberg, 1993). Folger and Cropan-
zano (1998) considered a decision-making process to consist of both the formal
structural component represented by Leventhal's six justice rules, and the informal
interactions between the decision-makers and the recipients that represent interac-
tional justice.
Folger and Cropanzano (1998) pointed out that regardless of how interac-
tional justice is viewed, either as an independent construct or as part of procedural
justice, interactional justice consists of two components: interpersonal sensitivity

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 M. CHAN 75

and explanations or social accounts. Interpersonal sensitivity refers to fair treat-

ment with respect and politeness. Explanations provide a rationale for unfavorable
outcomes to the recipients. Studies cited by Folger and Cropanzano (1998) showed
that conflict, low performance, and poor attitudes tend to characterize insensitively
treated individuals. Folger and Cropanzano also pointed out that research (Bies &
Shapiro, 1988; Shapiro, 1991; Shapiro, Buttner, & Barry, 1994) demonstrated that
an unfavorable outcome is better received by the receivers when a rationale is pro-
vided.
Self-interest Model, Group-Value Model and
the Relational Model of Authority in Groups
The self-interest and the group-value models of procedural justice were
developed by Lind and Tyler (1988). In 1992, these authors produced a revised
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version of the group-value model and labeled it a relational model of authority in

groups (Tyler & Lind, 1992).
Lind and Tyler (1988) indicated that the self-interest model or "instrumental
perspective" suggests that people seek decision control because they are concerned
with maximizing their own outcomes. However, when individuals have to cooper-
ate with others in groups to achieve outcomes, the informed self-interest model
comes into play, and the focus shifts from decision control to process control. Pro-
cedures are used as instruments to attain fair or favorable outcomes. The model is
incomplete, for evidence indicates that process control or voice enhances proce-
dural justice independent of outcomes. The noninstrumental value-expressive
effects of process control are not explained by the informed self-interest model.
A group-value model, drawn from the group identification models (Brewer &
Kramer, 1986) was developed by Lind and Tyler (1988) to explain the value-
expressive effects of process control. Lind and Tyler (1988) emphasized that group
identity and group procedures are two elements that govern the functioning of
groups. People consider procedures that allow voice to be fair, for they can partici-
pate in group process as valuable group members. Even if "voice" does not pro-
duce a favorable outcome, it enhances perceived procedural justice because its
value-expressive function confirms the values of group participation and group
membership status. Because the group-value model is independent of outcomes, it
fails to explain the decrease in evaluations of procedures following negative out-
comes.
Tyler and Lind (1992) developed a relational model of authority in groups, a
revised version of the group-value model. The authors discussed three relational
concerns with the authority that affect procedural justice judgments: trust, neutral-
ity, and standing. The authority's trustworthiness can be measured by the ratings of
his/her fairness and ethicality. If the authority behaved fairly, and he/she consid-
ered the needs and views of the individual, then the authority could be trusted.
Trust involves beliefs about the authority's intentions. The authority's neutrality
can be judged in terms of the person's unbiased decision making with the use of
facts. Standing refers to status recognition that is indicated to people by an author-
ity who treats them with dignity, politeness, and respect for their rights. Through
the procedures that the authority uses, individuals can judge whether they will be

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 76 ORGANIZATIONAL JUSTICE

treated fairly with the authority's relational concerns of trust, neutrality, and
standing.
Referent Cognitions Theory
Folger (1987) developed the Referent Cognitions Theory (RCT), and Folger
published a revised version in 1993. In 1998, Folger and Cropanzano developed
the Fairness Theory, which incorporates the RCT, equity theory, interactional and
relational approaches to justice. Greenberg (1987) indicated that Folger's RCT
expands the reactive content perspective of both the relative deprivation and equity
theories to a process perspective.
Folger (1993) indicated that the original RCT represents a two-factor model
with outcome-related and process-related factors. The latter include the conduct of
the exchange agent (outcome allocator) and the procedures used in the outcome
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allocation process. The key element of the original RCT is counterfactual thinking,
thoughts about imagined alternatives to actual outcomes and instrumentalities or
procedures. Folger (1987), in his discussion of the original RCT, affirmed that in
order to arrive at the standards for evaluating the actual outcome and the actual
means used to attain the actual outcome, referent cognitions—or the mental simu-
lations of imagined alternative outcomes (referent outcomes) and means (referent
instrumentalities)—are involved.
Folger (1987) showed that the means are considered to be causally instru-
mental to producing the ends. With referent instrumentalities morally superior
(inferior) to the actual instrumentalities, justification is low (high) for actual out-
comes. Justification refers to the rationale, reasons or excuses for using certain
procedures for doing things. Folger (1993) demonstrated that counterfactual
thinking can be blocked with convincing excuses or justifications from the agent
whose persuasive arguments indicate that he or she could not have acted differ-
ently. Excuses can be claims of "mitigating circumstances" which lessen one's
responsibility for an event. Justifications are "appeals regarding what should be
done" (p. 165). Folger (1987) pointed out that when the rationale underlying the
actual procedures is less (more) acceptable than the rationale underlying the refer-
ent procedures, there is low (high) justification for the actual instrumentalities.
High justification for actual instrumentalities together with a high referent outcome
will produce dissatisfaction. Low justification for the actual instrumentalities when
combined with a high referent outcome will produce resentment.
Folger (1993) emphasized that the RCT laboratory studies published as of
1989 supported the causal counterfactual focus of the original version of RCT. The
author described various experiments that indicate that appropriate procedures and
explanations in terms of excuses and justifications can mitigate the resentment of
an individual who suffers from outcome loss toward the outcome allocator. The
laboratory studies also indicate that with an awareness of a referent outcome, an
experimenter's unfair procedures and inadequate explanations together with a poor
outcome would lead to counterfactual thinking. People would imagine that if the
experimenter had behaved in an appropriate way (referent instrumentality), then a
better outcome (referent outcome) would have been attained. The original RCT
emphasizes causal responsibility, and it lacks generalizability.

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 M. CHAN 77

In sum, Folger (1987) affirmed that RCT assumes that one's maximal
resentment over one's treatment results from an awareness of more favorable refer-
ent outcomes, low justification for actual instrumentalities, and the low probability
for desirable future outcomes.
Folger's (1993) review of the data from various field studies indicates that
causal counterfactuals may not be interpretable from some of the field data. There-
fore, the author incorporated into a revised version of RCT a general basis for out-
come prediction in addition to the causal counterfactual element that serves as the
central focus of the original RCT. Folger and Cropanzano (1998) stated that the
1993 revised version of RCT "stemmed in part from developments related to inter-
actional justice, particularly those pertaining to interpersonal sensitivity shown
after a decision" (p. 61).
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Folger and Cropanzano (1998) showed that the decision-making process con-
sists of the elements of both procedural and interactional justice. The procedural
justice structural elements of "voice" and "choice" occur during the decision-
making process. Process control or "voice" can be used to influence the decision
maker prior to the time when a decision is made. Decision control or "choice," if
allowed, can be exercised at the time when a decision needs to be made. Commu-
nicated explanations together with interpersonal treatment represent interactional
justice. Explanation events in terms of justifications and excuses occur after the
decisions have been made. Interactional justice also involves interpersonal treat-
ment with ethicality and moral conduct indicated after the decisions have been
made. Therefore, elements of interactional justice occur at a different point in time
than the elements of procedural justice.
Folger and Cropanzano (1998) pointed out that Greenberg (1993) used the
term "interpersonal sensitivity" to represent fair treatment of others with morally
acceptable conduct. Folger and Cropanzano (1998) demonstrated that "Tyler
(1988; Barrett-Howard & Tyler 1986) was one of the first to recognize the impor-
tance of ethicality and its implications for fair treatment as interpersonal sensitiv-
ity" (p. 48). Ethicality was operationalized as politeness and respect for rights by
Tyler in his 1988 survey, and that good intentions for others' well-being are central
to moral conduct. Folger and Cropanzano (1998, p. 48) also cited Bies (1986), who
identified "honesty, courtesy, timely feedback, and respect for rights" as elements
of interpersonal sensitivity or moral conduct.
Folger (1993) indicated that the revised version of RCT represents an attempt
"toward a dual obligations model" in the following:
The revision of RCT identifies things being exchanged as the first (outcome-
related) factor of a two-factor model. The second (process-related) factor—
the agent's role—requires greater attention in an expanded approach that
focuses on the obligations of that role. I contend that in the context of
employment, the agent's moral obligations toward the employee entail more
than fair treatment with respect to the wages and benefits given in exchange
for labor, and more than fair treatment with respect to the implementation of
policies and procedures that determine those levels of compensation. In addi-
tion, a moral obligation exists to treat the employee with sufficient dignity as

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 78 ORGANIZATIONAL JUSTICE

a person; doing so entails numerous aspects of conduct beyond those regard-

ing compensation as ends or decision-making procedures as means to those
ends. Rather, all aspects of the agent's conduct, whether or not they have a
direct bearing on employee compensation or the means for determining com-
pensation, can carry implicit messages about whether the agent views the
employee as someone worthy of that minimal level of respect to which all
humans should be entitled. (pp. 174-175)

Based on both laboratory studies and field data, Folger (1993) indicated that
the resentment of an agent is the result of the interaction between an unfair
outcome and an unfair process. An unfair process refers to unfair procedures or
inappropriate agent conduct.
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Fairness Theory
Folger and Cropanzano (1998) developed a general theory of fairness that
integrates equity theory, relative deprivation theory, Leventhal's (1980) six justice
rules, referent cognitions theory (RCT), interactional justice, and the relational
approaches to justice (see Table 1). The authors showed that an integrative theme
across various justice models revolves around the direction of responses to the
party held accountable for the justice violations.
Fairness theory's moral accountability involves discretionary conduct, prin-
ciples about the constrained discretionary conduct, and affected parties' states of
well-being. All these aspects of moral accountability are influenced by counter-
factual thinking. With the Could (feasibility) counterfactual, a contrast is made
between what the person's discretionary conduct was in terms of a choice among
feasible options, and what the person could have done. With the Should (morality)
counterfactual, the person's discretionary conduct is evaluated in terms of moral
tenets, and a contrast is made between what should have been done and what actu-
ally was carried out. With the Would counterfactual, an affected party's actual state
of well-being is contrasted with how the affected party would feel had an event
other than the one affiliated with the other party's discretionary conduct occurred
(Folger & Cropanzano, 1998).
Folger and Cropanzano (1998) affirmed that the Could and Should factors
determine the feasibility and morality aspects of accountability respectively, and
the Would factor serves a separate function of determining the magnitude of an
event's negative impact. Folger and Cropanzano (1998) indicated that to connect a
person to an event, feasibility dwells on "what the person did or did not do and on
what the person could or could not have done" (p. 189). A person cannot be held
morally accountable for unfair actions taken without examining whether the person
has other feasible options and personal control over them. Feasibility connects a
person with an event based on the person's own actions with intent and the per-
son's role with assigned responsibility and authority (e.g., management is respon-
sible for employees' illegal conduct). However, the authors pointed out that feasi-
bility is prerequisite, but not sufficient to hold someone morally accountable.
Moral tenets applicable to the event and the potentially accountable individuals to
the event due to their role are also necessary for holding someone accountable.
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 M. CHAN 79

Therefore, contrasts are made with the Should (morality) counterfactual between
actions that were carried out and those that should have been carried out.
In their discussion of the Would concept, Folger and Cropanzano (1998)
pointed out the deficiencies of RCT when compared with fairness theory, one of
which is RCT's narrow emphasis on referent outcomes, which are sometimes
implied to be the determinants of the experienced negative impact of an event.
With fairness theory, an event's experienced negative impact is influenced by not
only distributive justice (outcome factor), but also procedural and interactional
justice (process factors). Another weakness of the RCT approach is that it implies
that the Would concept is linked to the Should concept. In other words, the think-
ing about what would have occurred is connected to the thinking about what should
have been done. Fairness theory considers that each of the aspects of Would and
Should can occur separately with the Could aspect. The theory contends that there
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are contextual factors other than the Should aspect that promulgate different feasi-
ble options. Counterfactual alternatives can be generated automatically with fair-
ness theory, whereas they are generated by a conscious mental process of simula-
tion with RCT.
Folger and Cropanzano (1998) criticized that equity theory failed to "ade-
quately specify the determinants of responses to unfair deprivation" (p. 190). This
led to "ambiguities in the theory's explanation for why people sometimes try to
resolve an inequity by decreased outcomes as opposed to increased inputs" (p.
190). Equity theory was modified by the early versions of RCT, which used the
attribution of blame as a determinant of the mode of resolution. If the negative con-
sequences experienced from an inequity were due to one's own mistakes, then
cognitive distortion would be the response. However, if someone else were to be
blamed for an inequity experienced by an individual, then retributive actions would
be directed to the other person. Fairness theory examines various factors that
decide who should be accountable for an inequity, and in such a sense, it includes
equity theory and early versions of RCT.
Fairness theory incorporates also the components of interactional justice
(Bies, 1986, 1987) and the relational approaches to justice. Folger and Cropanzano
(1998) used "relational" as a "summary term" for Lind and Tyler's (1988) group-
value model and Tyler and Lind's (1992) relational model of authority in Groups
(p. 186). Tyler and Lind (1992) discussed three relational concerns with the
authority that affect procedural justice judgments: neutrality, trust, and standing.
People validate their own self-identity as members of a valued group when the
authority treats them with impartiality (neutrality) and trustworthiness (trust), and
when it recognizes their status (standing) in the group. The authors recognized that
trust involves beliefs about the authority's intentions. However, Folger and Cro-
panzano (1998) considered intentions to be central to all three relational compo-
nents of trust, neutrality, and standing. When a leader intentionally fails to exhibit
these relational components, an individual's self-esteem is threatened. The authors
also pointed out that intention is related to perceived feasibility.
While the components of equity and the early versions of RCT revolve
around unfair deprivation, the components of interactional justice and the relational
approaches to justice revolve around unfairness due to insulting conduct. Folger

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 80 ORGANIZATIONAL JUSTICE

and Cropanzano (1998) averred that both interactional justice and the relational
approaches to justice involve Tyler and Lind's (1992) "dignity concerns," which
represent "concerns about face saving or threat to face and social status, such as
when people feel demeaned by rude or insulting conduct" (p. 191). Tyler and Lind
(1992) indicated that when an individual encounters an authority who violates the
three relational components of trust, standing, and neutrality, the former will feel
marginalized by the latter's demeaning conduct. Folger and Cropanzano (1998)
showed that although insulting conduct is dissimilar to unfair deprivation, the same
elements of fairness theory, the Could, Should, and Would counterfactuals, are
used in the determination of whether someone is held accountable for the event and
the negative impact of the event.
Folger and Cropanzano (1998) pointed out that the relational approaches to
justice (Lind & Tyler, 1988; Tyler & Lind, 1992) operate from a "group-based,
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hierarchical context" (p. 78). Fairness theory emphasizes a person's membership in

the larger moral community with more universally accepted moral principles.
Fairness theory, independent of a group context, can be used to explain global
phenomena such as the global moral outrage over the ethnic cleansing in Kosovo.
As demonstrated by Folger and Cropanzano (1998), the results of Skarlicki
and Folger's (1997) study were in support of fairness theory. The study indicated
that retaliation was strongest when there was a three-way interaction among dis-
tributive, procedural, and interactional justice, and all three components of justice
were low. Variations in distributive justice alone would not affect retaliation; how-
ever, they would affect retaliation when both procedural and interactional justice
were low. Also, retaliation increased in intensity as distributive injustice grew, and
both procedural and interactional justice were low. Characteristic of RCT, Skar-
licki and Folger (1997) found two significant two-way interactions in the study.
With low interactional justice, a significant two-way interaction was found
between low distributive and low procedural justice. With low procedural justice, a
significant two-way interaction was found between low distributive and low inter-
actional justice. Retaliation was associated with each significant two-way interac-
tion.

Landmark Cases
The process model depicted in Figure 1 indicates that with enabling legisla-
tion, justice violations in the workplace give rise to employees' lawsuits, which, if
successful, bring about remedies. The class-action employment-discrimination
lawsuits against Texaco, State Farm, and Lucky Stores were chosen to illustrate the
process model, for they all resulted in large landmark monetary settlements and
court-mandated initiatives to ensure workplace justice. These landmark cases with
historical significance show the importance of taking a proactive stance to ensure
organizational justice.
Texaco's Class-Action Racial-Discrimination Lawsuit
In 1994, a class-action racial-discrimination lawsuit was filed against Texaco
by six black employees on behalf of around 1,400 black professionals and middle

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 M.CHAN 81

managers employed by the company ("Judge Oks Texaco's," 1997). The lawsuit
claimed that Texaco systematically denied promotions to minority employees
because of their race and fostered a racially hostile environment (Bryant, 1997).
This indicates that the minority employees were not treated with distributive,
procedural, and interactional justice. Texaco management violated the relational
components of justice (Tyler & Lind, 1992): trust, standing, and neutrality. Blacks
suffered from group-based fraternal deprivation as described by Runciman (1966).
The collective action of Texaco's plaintiffs supported the results of group
deprivation research as discussed by Martin (1993).
In November of 1996, a disgruntled former Texaco executive released a tape
recording of a 1994 meeting in which senior Texaco executives made disparaging
comments about black employees (violation of interactional justice) and plotted to
conceal or destroy evidence demanded in the discrimination lawsuit (violation of
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procedural and interactional justice). The tape generated such negative publicity
that Texaco was forced to settle the discrimination lawsuit on November 15, 1996,
for $176 million and to promote minorities within the company (Mulligan, 1996).
This amount constituted the largest settlement in a racial discrimination lawsuit
(Bond, 1997).
The 1996 settlement of the class-action discrimination lawsuit brought about
both voluntary and court-mandated remedial initiatives on the part of Texaco.
These initiatives include the hiring and promotion of more minorities and women;
the awarding of more contracts to minority- and female-owned firms; diversity
training for employees; and the linkage of managerial compensation to the
achievement of diversity goals involving the hiring and promotion of minorities
and to the executives' scores on the company's "respect for the individual" in
company surveys (Bryant, 1997, p. 1). The Equality and Fairness Task Force, with
seven outside members, was formed to oversee Texaco's compliance with the
terms of the 1996 settlement (Kerber, 1998). The task force must file Texaco's
implementation reports with the U.S. District Court in White Plains, New York.
Counterfactual thinking is used in fairness theory. With the Should counter-
factual, Texaco should have prevented the lawsuit by proactively undertaking the
aforementioned initiatives instead of having the court to mandate that they be
undertaken as part of the settlement for the lawsuit. With the Could counterfactual,
Texaco's management could and should have developed objective criteria and fair
procedures for making fair promotion decisions. Instead, they engaged in discrimi-
natory conduct in making those decisions. To ensure the fairness of procedures,
Leventhal's (1980) six justice rules can be used: consistency, bias suppression,
accuracy, correctability, representativeness, and ethicality. Texaco could also have
provided a work environment devoid of racial hostility. With the Would counter-
factual, Texaco's plaintiffs would have received fair treatment in terms of promo-
tional decisions (distributive justice), fair procedures for promotions (procedural
justice), and respect (interactional justice) if only management had not engaged in
discriminatory conduct.
Texaco's executives did not act in a morally responsible way, for they did not
intend to treat black employees with distributive, procedural, and interactional jus-
tice. The analysis indicates that Texaco's executives were morally accountable for

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 82 ORGANIZATIONAL JUSTICE

their conduct, which brought about the class-action race-discrimination lawsuit.

The remedies of the successful lawsuit included a landmark monetary settlement as
well as Texaco's court-mandated and voluntary initiatives to ensure distributive,
procedural, and interactional justice.
State Farm's Class-Action Sex-Discrimination Lawsuit
After 13 years of litigation, State Farm agreed on April 28, 1992, to pay $157
million to 814 California women who claimed that the company did not offer the
sales agent positions to them because of their sex (violation of distributive justice).
The settlement, which resulted from a class action suit filed in 1979, represents the
most expensive sex-discrimination suit in U.S. history. In 1988, U.S. District Judge
Thelton E. Henderson approved a consent decree under which a minimum of 50%
of the new sales agents hired by State Farm over a 10-year period in California
were to be women.
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The State Farm case started in 1974 when Muriel Kraszewski filed with the
U.S. Equal Employment Opportunity Commission a complaint charging the com-
pany with sex discrimination for denying her a sales agent position. Less than Wo
of the sales agents hired by State Farm were females at the time. This indicates that
females were intentionally excluded from the positions as sales agents, and a fair
procedure for filling these positions was not in place. Kraszewski was an assistant
to the sales agents at State Farm with an annual income in the amount of $8,000.
When she sought a sales agent position with the company, the managers first told
her that it was necessary for her to have a college degree, and then they told her
that State Farm would not hire female agents. The fact was that many sales agents
who were males did not have a college degree.
In 1979, Kraszewski, an agent for Farmers Insurance, joined other females in
a class-action suit against State Farm. In 1985, U.S. District Judge Henderson
found State Farm had '"lied to, and/or given false and misleading information'" to
female seekers of positions as sales agents (Hager, 1992, p. A18). Consequently,
State Farm was ruled by Judge Henderson to be liable for sex discrimination. The
1988 consent decree finally led to the April 28, 1992 settlement, which offered the
highest individual awards in a sex-discrimination case, an average amount of
$193,000 to each of the 814 females (Hager, 1992).
Management's dishonesty indicates that the female job seekers were not
treated with interactional justice. State Farm managers violated the relational com-
ponents of justice (Tyler & Lind, 1992): trust, standing, and neutrality. They were
not trustworthy, for they lied to the female job seekers. They did not recognize that
the females had the same rights as males to apply for the positions as sales agents.
State Farm managers were not neutral toward the female job applicants, for they
engaged in biased decision making with respect to hiring.
State Farm managers (agents) had a moral obligation to treat all position
seekers (exchange partners) with distributive, procedural, and interactional justice.
However, State Farm managers violated all justice concerns with respect to the
female seekers of positions as sales agents. The latter suffered from group-based
fraternal deprivation, and they engaged in a class-action lawsuit in protest against
discrimination.

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 M. CHAN 83

With the Could counterfactual, State Farm management could and should
have developed objective criteria and fair procedures for making fair hiring deci-
sions. Instead, they engaged in discriminatory conduct in making the hiring deci-
sions. To ensure the fairness of procedures, Leventhal's (1980) six justice rules can
be used: consistency, bias suppression, accuracy, correctability, representativeness,
and ethicality. The lawsuit resulted in a $157 million settlement, which also
required that a minimum of 50% of the new sales agents hired by State Farm over a
10-year period in California were to be women.
With the Should counterfactual, State Farm to begin with should have proac-
tively and voluntarily sought out females who were qualified for the positions as
sales agents instead of waiting for the court to mandate as part of the lawsuit set-
tlement the expansion of the number of female sales agents hired by State Farm.
State Farm should also have been honest with the female job seekers with respect
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to the qualifications required for the positions as sales agents. With the Would
counterfactual, the female job seekers for the positions as sales agents would have
received fair treatment relative to hiring decisions (distributive justice), fair hiring
procedures (procedural justice), and honest information from management per-
taining to the requirements for the positions as sales agents (interactional justice) if
only management had not engaged in discriminatory conduct. State Farm managers
were morally accountable for their conduct, which brought about the class-action
sex-discrimination lawsuit.

Lucky Stores Inc.'s Class-Action Sex-Discrimination Lawsuit

In December of 1993, Lucky Stores agreed to pay almost $108 million to set-
tle a class-action sexual discrimination lawsuit filed in 1984 by 20,000 female
employees from the chain's 188 Northern California stores. About 14,000 females
employed at Lucky's Northern California Stores from 1983 to 1992 were covered
by the settlement. The $108 million settlement included $74.25 million damage
payments to the plaintiffs (Tassy, 1993).
In August, 1992, U.S. District Judge Marilyn Hall Patel in her 193-page
ruling stated that '"sex discrimination was a standard operating procedure' at
Lucky" (Tassy, 1993, p. D1). Judge Patel found Lucky guilty of channeling
females to low-paying jobs and denying them promotional opportunities (Tassy,
1993). This indicates a violation of distributive justice for the female employees.
Judge Patel rejected Lucky's defense argument that female employees did not get
promotions into better positions because of their own lack of interest in those
positions. The $108 million settlement also included funding in the amount of $20
million for affirmative action programs for female employees and up to $13
million in damages if Lucky failed to meet specific hiring and promotion targets
specified in a consent decree supervised by Judge Patel (Gross, 1993).
Lucky signed a consent decree under which it would drastically change its
hiring and promotional practices to eliminate race and sex discrimination. Promo-
tional decisions at Lucky used to be made by the untrained store managers without
any objective criteria, and there was not a job posting system so that all employees
would have knowledge of promotional opportunities (violation of procedural jus-
tice). The white male Lucky managers revealed their stereotyped views about

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 84 ORGANIZATIONAL JUSTICE

women's capability or interest in holding managerial positions (violation of inter-

actional justice) in hundreds of statements that were submitted by plaintiffs to the
court. With respect to Lucky's new procedures for hiring and promotion, an entry-
level management training program and a bidding system by eligible employees for
managerial promotions were instituted. Lucky established targets for increasing the
number of females and minorities in managerial positions, and it set procedures for
job assignments, work hours allocation, and promotions of employees to full-time
positions in the grocery and produce departments (Zwiebach, 1992).
Lucky's managers violated the relational components of justice (Tyler &
Lind, 1992): trust, standing, and neutrality. With respect to the violation of trust,
Lucky's managers did not indicate any concern for the developmental needs of the
female employees. With respect to the violation of standing, they did not recognize
the status of the female employees to be the same as that of the male employees,
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for they segregated the female employees in low-paying jobs. Furthermore, with
respect to the violation of neutrality, Lucky's managers had a biased view toward
female employees, who suffered from group-based fraternal deprivation.
Counterfactual thinking is used in fairness theory. With the Could counter-
factual, management could and should have developed objective criteria and fair
procedures for making fair decisions with respect to hiring, promotion, compensa-
tion, job assignments, and so on. To ensure the fairness of procedures, Leventhal's
(1980) six justice rules can be used: consistency, bias suppression, accuracy, cor-
rectability, representativeness, and ethicality. With the Should counterfactual,
Lucky's male managers should not have segregated females into low-paying posi-
tions and denied them promotional opportunities just because they had stereotyped
views about women's capability and interest in holding managerial positions. With
the Would counterfactual, the plaintiffs would have received fair treatment in terms
of management's fair human resource decisions (distributive justice), fair proce-
dures used by management in making human resource decisions (procedural jus-
tice), and management's objectivity in making human resource decisions (interac-
tional justice) if only management had not engaged in discriminatory conduct.
Lucky's managers did not act in a morally responsible way, for they did not
intend to treat female employees with distributive, procedural, and interactional
justice. The analysis shows that Lucky's managers were morally accountable for
their conduct, which brought about the class-action sex-discrimination lawsuit. The
successful lawsuit resulted in the nation's second-largest sex-discrimination
monetary settlement after State Farm. Lucky was also required to abide by a con-
sent decree supervised by Judge Patel to overhaul its hiring and promotional prac-
tices to ensure distributive, procedural, and interactional justice for females and
minorities.

Directions for Future Research

The cases demonstrate that with enabling legislation, justice violations in the
workplace give rise to employees' lawsuits which, if successful, bring about vari-
ous remedies. The justice violations described in this paper occurred in business
firms, one in each of the three industries: oil, insurance, and grocery. Future

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 M. CHAN 85

research should examine the use of litigation with enabling legislation as a retalia-
tory weapon against workplace injustice across different occupational groups,
industries, and organizations such as educational institutions, governmental agen-
cies, and not-for-profit entities. With a comparative analysis, the prevalence of
litigation as a retaliatory measure against workplace injustice can be identified with
respect to the types of occupations, organizations, and industries. Furthermore, the
reasons for the prevalence of employees' lawsuits across different contexts can be
identified as well.
As employment-related lawsuits are on the rise, managers do not seem to
have learned from the past mistakes of other companies which had to pay out mil-
lions in order to settle various lawsuits filed by their employees. What are the
causes of managerial actions that are considered to be unfair by employees? The
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same question was raised by Folger and Cropanzano (1998), who suggested that
situational factors that influence managers to act in an unjust way should be
examined instead of just attributing managers' unjust actions to character deficien-
cies, which may not be correct.

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Biographical Note

Marjorie Chan
School of Business Administration
California State University, Stanislaus
Turlock, CA 95382
Phone/Fax: 209-667-3445/603-807-8191
Email: mchan@toto.csustan.edu
Dr. Chan (Ph.D., UCLA) is Professor of Management at California State University,
Stanislaus. Her publications have appeared in the Journal of Management Case Studies,
IEEE Transactions on Engineering Management, Journal of Small Business & Enlrepre-
neurship. International Journal of Case Studies and Research, Management Research News,
Business Journal, International Journal of Organizational Analysis, and various business
texts.

The International Journal of Organizational Analysis, Vol. 8, No. 1, 2000

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