HR Management & Compliance

Class Actions Pose “Enormous” Financial Risks

In 2011, the financial risks of class action litigation are “enormous,” says attorney J. Stephen Poor — and, more often than not, class actions adversely affect both your market share and 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 — 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 copycat 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. None was bigger than Dukes, et al. v. Wal-Mart Stores, Inc., where the U.S. Supreme Court agreed to hear the case concerning the 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 federal Fair Labor Standards Act 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 outpace 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 Equal Employment Opportunity Commission and the Department of Labor.

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 this recent.

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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 affects 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 CED, some class action issues you may not have thought about, plus an introduction to a comprehensive resource designed to help you avoid wage/hour class action suits altogether.

Download your free copy of Paying Overtime: 10 Key Exemption Concepts today!

2 thoughts on “Class Actions Pose “Enormous” Financial Risks”

  1. Yesterday , we looked at 8 trends that make class actions a real danger for every HR department in 2011

  2. Yesterday , we looked at 8 trends that make class actions a real danger for every HR department in 2011

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