Benefits and Compensation

Settlement Amounts in DOL Enforcement Suits Declined Substantially in 2016, Report Says

by Jane Meacham, contributing editor

Federal government enforcement lawsuits brought by the U.S. Department of Labor (DOL)—including those centered on Employee Retirement Income Security Act (ERISA) violations—continued at an aggressive pace in 2016 but were less effective in terms of number of filings and recoveries when compared with previous years, according to annual report on workplace class action litigation.


Law firm Seyfarth Shaw said in its 13th annual, 881-page report on state and federal court rulings released January 11 (order form available here) that workplace class action litigation risks “are at the top of the list of problems that keep business leaders from sleeping at night.” An adverse judgment in a class action has the potential to bankrupt a business or savage its market share.

‘Copy-Cat’ Class Actions

In addition, the firm said, companies that do business in multiple states are also susceptible to “copy-cat” class actions that create a domino effect of litigation that challenges corporate policies and practices in numerous jurisdictions at the same time. This effect was seen in 2015 and 2016 as plaintiff classes sued to seek damages for the adverse effects of employer plan sponsors’ past decisions about costs from retirement plan menus’ share classes and service provider fees in 401(k) plans.

In 2016, governmental enforcement cases pursued by the DOL and the U.S. Equal Employment Commission (EEOC) belied an aggressive agenda for both the agencies, as regulatory oversight of workplace issues remained a high priority in the last year of the Obama administration. However, the DOL’s litigation docket decreased in the latest year.

“This trend is critical to employers, as both agencies have [had] a focus on ‘big-impact’ lawsuits against companies and ‘lead by example’ in areas that the private plaintiffs’ bar aims to pursue.”

Looking ahead, Seyfarth said in the report on 2016 class actions that changes to government priorities in the Trump administration “may well be stark reversals in policy that are sure to have a cascading impact on private class action litigation.”

The law firm report said “most believe there will be wholesale changes, which may well prompt the private plaintiffs’ class action bar to ‘fill the void’ and expand the volume of litigation pursued against employers over the coming year.”

Key Trends in 2016

Among several key trends noted in 2016, the report said class action dynamics increasingly were shaped and influenced by recent rulings of the U.S. Supreme Court, including in the retirement plan arena. The High Court over the past several years has accepted more cases for review and issued more rulings that have shaped class actions and government enforcement litigation, often in plaintiffs’ favor.

But despite that increase in Supreme Court rulings on class actions, the monetary value of the top employment-related class action settlements declined significantly in 2016. This was in part a slowdown from record high judgments in 2014 and 2015, the report said.

The top 10 settlements in a variety of employment-related categories totaled $1.75 billion in 2016, down sharply from $2.48 billion in 2015 and somewhat lower than $1.87 billion in the year before that.

The report said the novel challenges of rising class action litigation “demand a shift in the way companies formulate their strategies.” It said identifying, addressing, and resolving class action vulnerabilities deserves a place at the top of corporate counsel’s priorities for 2017.

Jane Meacham is the editor of BLR’s retirement plan compliance publications. She has nearly 30 years’ experience as a writer/editor of financial services news.