For the coming year, the financial risks of class action litigation are “enormous,” says attorney J. Stephen Poor, and more often than not, class actions adversely affect your market share and impact your reputation in the marketplace as well.
Poor, who is the Managing Partner of law firm Seyfarth Shaw LLP, made his remarks in the firm’s Annual Workplace Class Action Litigation Report. He suggests that the threat of legal exposure should be keeping you up at night.
The report offers eight developments that are particularly significant to HR managers:
1. Big Cases in the News
First, 2010 was the year of big headlines in employment discrimination class actions, the report says. Those headlines involved the biggest employment class action trial verdict ever—the $250 million verdict in Velez, et al. v. Novartis Pharmaceuticals Corp. in May of 2010 — and its subsequent settlement two months later for $175 million.
Such big verdicts not only tend to increase the monetary value of other class action settlements, but also tend to prompt copy-cat litigation filings, the report suggests.
2. One Huge Case at the U.S. Supreme Court
Second, 2010 also spawned landmark decisions relating to the granting of class status (Rule 23 interpretations.). None was bigger than Dukes, et al. v. Wal-Mart Stores, Inc., where the U.S. Supreme Court agreed to hear the case concerningthe certification of the largest employment discrimination class action ever—a pay and promotions class of approximately 1.5 million female workers.
3. More Litigation
Third, the continued economic challenges and low hiring rates during 2010 fueled more class action and collective action litigation, the report says. Most significantly, the plaintiffs’ bar increased the pace of collective action filings under the Fair Labor Standards Act (“FLSA”) seeking recovery for unpaid work time and overtime wages.
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4. Wage and Hour
Fourth, by sheer numbers, wage & hour litigation continued to out-pace all other types of workplace class actions. In turn, this trend also was manifest in more wage & hour class action and collective action decisions by federal and state court judges than any other area of workplace litigation.
5. Ramped Up Enforcement Efforts
Fifth, the mid-term election results in 2010—with Democratic losses and Republican gains in the U.S. Congress—also contributed to heightened workplace litigation exposures for employers. As Democratic legislative initiatives for labor and employment reform stalled, the Obama Administration continued to ramp up its enforcement efforts through the U.S. Equal Employment Opportunity Commission (“EEOC”) and the U.S. Department of Labor (“DOL”).
Those efforts are expected to intensify as the Obama Administration’s policy goals, which may be thwarted in the U.S. Congress, are advanced through agency regulation and government enforcement litigation.
6. Class Action Fairness Act
Sixth, the Class Action Fairness Act of 2005 (“CAFA”) continued to have significant effects on workplace litigation, and most significantly on wage & hour class actions filed in state court. The past twelve months saw evolving case law on jurisdictional issues under the CAFA. As the plaintiffs’ bar continues to devise techniques to adapt to the CAFA, rulings on the scope, meaning, and application of the law are already numerous for a statute of such recent vintage.
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7. New Strategies
Seventh, the class action plaintiffs’ bar has been able to cultivate new strategies in response to fast paced developments in regard to the ability to form a class and who can be a member of the class. This fosters quick evolution in legal theories, which in turn impacts defense litigation strategies.
8. Higher Financial Stakes
Eighth and finally, the financial stakes in workplace class action litigation increased in 2010. Plaintiffs’ lawyers have continued to push the envelope in crafting damages theories to expand the size of classes and the scope of recoveries. These strategies resulted in a series of massive settlements in nationwide class actions particularly in the context of employment discrimination and wage & hour litigation. This trend is unlikely to abate in 2011, the report concludes.
In tomorrow’s Advisor, some class action issues you may not have thought about, plus an introduction to a unique new training system, designed to help you avoid class action suits altogether.