Why Worry About Employment Litigation Trends? 1.6 Million Reasons

Tuesday, November 1, 2005 - 01:00

Cary Griffith
Thomson West

On June 22, 2004, a federal judge approved class action status for a sex discrimination law suit against a large retail chain. The class action has become the largest private civil rights case in U.S. history, potentially representing as many as 1.6 million current and former female employees. The suit alleges this chain created a system that pays its female workers less than their male counterparts for comparable jobs, and bypasses women for key promotions.

On July 23, 2004 a class action was filed against a large restaurant chain alleging the restaurant chain in the Atlanta region systematically terminates employees over 40. The case was filed under the federal Age Discrimination in Employment Act, which in part states an employer cannot terminate, refuse to promote or treat unequally an employee based on being 40 years of age or older.

If you are corporate counsel, and you feel as though the employment litigation landscape is becoming more rugged, dangerous and problematic, you're not alone.

"There's been a real explosion in class action litigation," explains Michael R. Lindsay, partner with Thelen Reid & Priest LLP, and the author of Thomson West's Defense of Equal Employment Claims, 2d . "Those cases are back, and are often about wage and hour issues, or the failure to promote."

"At the moment the big litigation employment trend is class actions," agrees Barbara Brown, office chair and employment partner with Paul, Hastings, Janofsky & Walker's Washington, DC office, and the author of Thomson West's Legal Guide to Human Resources . Ms. Brown explains that in the 1980s class action suits in the employment law area were plentiful. "Then there was a hiatus," she says, as corporate America responded by fixing many of their employment law practices. But the Civil Rights Act of 1991 passed "with compensatory and punitive damages. It took awhile to take hold, but has now led to a very big up tick in class actions over the last seven years or so."

Like Lindsay, Brown believes most of these new employment law class actions fall into two types: pay equity for women and minorities, and wage and hour cases. With regard to corporate counsel, Ms. Brown believes "race and gender class actions on pay and promotion are the most threatening." Though she is quick to add that the increase in employment litigation is not limited to these legal issues alone.

Employment Litigation Trends: More, More And More

According to Jay E. Grenig, professor of law, Marquette University of Law School, and co-author of Thomson West's Federal Jury Practice and Instructions, cases are being filed under a variety of claims, including the Family and Medical Leave Act, and the Americans with Disabilities Act. Professor Grenig believes we also are seeing "an increased number of retiree benefit cases including health benefits and pensions, and more cases involving misuse of employer computers and e-mail systems."

Stanley L. Goodman, Esq., principal with Grotta Glassman, and the author of Thomson West's New Jersey Employment Law, believes two additional employment law trends corporate counsel should be worried about are "the generic retaliation suits against whistleblowers," particularly related to new Sarbanes Oxley procedures. Mr. Goodman adds that corporate counsel should also pay attention to "suits involving hostile work environments and harassment because of handicap, religion, race, and sex. One person's harassment is another person's uncivil treatment. Because virtually everyone is in a protected class, anyone is in a position to claim harassment. Our courts are being asked to become arbiters of civil conduct."

An example of an unusual type of employment litigation that has grown by as much as 14 percent over the last year is male-on-male sex harassment. For example, on Sept. 27, 2005, the Equal Employment Opportunity Commission (EEOC) announced that a large cinema chain agreed to pay $765,000 to settle a male-on-male sex harassment law suit. In that suit the EEOC alleged that a male supervisor groped young men, made advances and requested sexual favors. The EEOC filed the suit one year ago under Title VII of the Civil Rights Act of 1964. According to Reuben Daniels, Jr., director of the EEOC's Charlotte, N.C. district office, "employers must heighten their awareness of harassment of teenage workers - one of the most vulnerable segments of the labor force - and actively take steps to prevent it. This settlement sends a message to all employers that if you hire teens, you must be especially vigilant to protect them from discrimination on the job."

In addition to the preceding, other large national companies have all been targets of recent employment practice lawsuits. According to a March 7, 2005, Insurance Journal article, cases like the preceding "high-profile lawsuits have made headlines with their multi-million dollar settlements, but they merely highlight a growing trend of employees suing employers."

The general employment litigation trend is that cases are increasing in frequency and severity. In spite of an overall drop in employment law claims from 2003 to 2004 the general trend is up. Perhaps more importantly, according to a 2004 report by Jury Verdict Research, "the median jury compensatory award for employment-practice cases has increased over the last two years, and currently stands at $250,000. É The same award for 2001 was $168,000."

So What's Different?

Some of the contributing factors to increases in employment litigation have already been mentioned. For example, the increased dollar value of settlements and verdicts.

"Virtually every state has an employment law statute that has a parallel with the federal law," explains Steve Nemerson, director of Compliance Services for Ceridian Corporation. "But whereas the federal statutes have limits on punitive damages, the states don't. Punitive damages are much bigger than compensatory damages." Lawyers recognize employment litigation can often yield sizeable awards.

Another reason for recent growth in employment litigation is a growing pool of potential litigants. Stanley Goodman's observation bears repeating: "Because virtually everyone is in a protected class, anyone is in a position to claim harassment." Since the overall population is aging, baby boomers in particular are adding to the ranks of those who can sue over age discrimination issues (anyone 40 years of age or older).

Compounding the previous factors is an increasing employee awareness of individual rights. More employees are beginning to understand there are a variety of behaviors and employer actions that can result in litigation. There also is an increased willingness to sue. For instance, in the past, male-on-male sex harassment suits might have been ignored or handled in a less formal way, simply because the harassed parties were too embarrassed to make their claims public.

Advice From The Experts To Avoid Future Problems

Given the increased employment litigation trends and the increasingly complex work environment, what can corporate counsel do to limit the company's liability? Plenty. Frequently mentioned as an increasing source of litigation are cases arising out of Sarbanes-Oxley litigation, particularly with regard to whistleblowing. Part of the Sarbanes-Oxley Act calls for corporations to set up anonymous reporting procedures and processes that make it easy for employees to report wrongdoing.

Barbara Brown and others interviewed for this article cite several additional steps corporate counsel can take to limit that kind of liability. For example, make sure all company policies are legal and current. Examine company processes and procedures to see if they're being followed and are transparent to employees - particularly those that reduce employee anxiety and dissatisfaction. When necessary, or when it's not currently being done, educate employees with regard to proper legal and ethical behavior. Look at company complaint procedures and make sure they're working. And finally, examine the kinds of complaints that are being received.

How Can Corporate Counsel Stay Tuned?

Perhaps as important as the preceding suggestions is the need to stay informed. In the rapidly changing world of employment litigation, how can corporate counsel keep abreast of the latest trends and cases?

"Three ways," comments Professor Grenig, "read, read and read." The professor's words sound, well, professorial. But his advice is shared by plenty of other employment law professionals. Grenig believes some of the best sources for monitoring employment litigation are newspapers and magazines. He suggests that if corporate counsel wants to keep abreast of the latest large court filings, most of today's business and general news media are excellent sources for becoming aware of and monitoring employment law trends.

"Subscribe to newsletters from two or three quality firms," suggests Stanley Goodman. In today's e-environment, corporate counsel can skim law firm newsletters without having to get out of their chairs. Good firm newsletters will inform corporate counsel about where employment litigation is trending. "And if a major case is decided, every quality employment law firm is going to have a critique of it in their newsletter the next day."

Barbara Brown agrees. "For example, there's a new regulation on the definition of an applicant from the Department of Labor (DOL) due out on Monday, and we're going to have a client alert on it as soon as possible." Corporate counsel who are "technology savvy are getting their information about regulatory and judicial changes almost instantaneously." In addition to law firm communications, commercial research services like Thomson West's Westlaw can assist corporate counsel in staying abreast of the latest trends. For example, Westlaw GC is specifically designed to alert general counsel on recent changes in statutory, regulatory and case law. Similarly, online clipping services like WestClip, and searches of customized databases for legal and business news, can be invaluable corporate counsel resources.

Michael Lindsay advises his corporate clients to "talk to your HR [Human Resources] people and listen to what they're hearing from their employees." Lindsay believes employees will often talk to HR people more candidly than they do corporate counsel. And that frank talk can sometimes be extremely useful when measuring the tenor of employee morale and perspectives. Lindsay also points out that there are "any number of seminars and programs corporate counsel can attend." These continuing legal education classes are excellent resources for broad overviews of employment litigation trends.

In today's litigious work environment, "nothing is a guarantee against litigation," concludes Barbara Brown. "But being more informed and self aware can head it off."

Cary Griffith is an author, consultant and contributor to a variety of publications on issues of legal and information technology. He is writing this article on behalf of Thomson West and can be reached at cary.j.griffith@ceridian.com.