Regulatory Risk

Employment Law Outlook for 2016

Litigation against employers continues to rise, often with significant financial consequences.
By: | January 25, 2016

U.S. employers faced a record number of class-action lawsuits in 2015, with more than 1,300 rulings across the nation.

The financial risks of such cases are enormous, with the monetary value of employment-related class-action settlements reaching an all-time high in 2015. The top 10 settlements alone totaled nearly $2.5 billion, according to the “12th Annual 2015 Workplace Class-action Litigation Report” by Chicago-based law firm Seyfarth Shaw.

The last several years have been transformative in class-action and collective-action litigation involving workplace issues, said Gerald Maatman, Jr., partner and co-chair of the Complex Discrimination Litigation Practice Group at Seyfarth Shaw.

A number of clear employment litigation themes have emerged that may help executives direct their efforts in order to mitigate their organization’s risk.

There’s been virtually a complete turnaround from the collective “sigh of relief” that resulted from the landmark 2011 Dukes v. Walmart, in which 1.5 million women sued the retail giant for back pay.

The Supreme Court ruled in favor of Walmart, changing the standards by which lawyers could certify class-action lawsuits and giving employers cause to celebrate, that is until the last couple of years.

“For the first couple of years, as Dukes began to take hold and impact selection of case theories, types of cases, and litigation filings, a lot of people thought class-action law had become pro-defense and anti-plaintiff,” said Maatman.

“It came home to roost in 2015 that is no longer true and the manner in which cases are brought has changed such that the plaintiff’s bar is now enjoying success in bringing, prosecuting and settling cases.”

The Supreme Court, according to the Seyfarth Shaw report, “has created a complex tapestry of both pro-worker and pro-business rulings through which employers must carefully thread the needle.”

At the same time, Maatman said, there has emerged a “push-the-envelope agenda” by the Equal Employment Opportunity Commission, Department of Labor and National Labor Relations Board, emboldened by the Obama administration.

In 2015, the EEOC was involved in three Supreme Court cases that brought significant implications for employers — EEOC v. Mach Mining (gender discrimination); EEOC v. Abercrombie & Fitch Stores (religious discrimination); and Young v. UPS (pregnancy discrimination) — according to Barry A. Hartstein, co-chair, EEO and diversity practice group at Littler Mendelson in Chicago.

Under both the Equal Pay Act and the Age Discrimination Act, the EEOC has authority to direct an investigation even when a charge has not been filed by an employee. All these factors have combined to create a “perfect storm when it comes to wage-and-hour litigation,” according to Maatman.

All indications point to this year resulting in an even greater number of employment-related lawsuits. Fortunately, a number of clear themes have emerged that may help executives direct their efforts in order to mitigate their organization’s risk:

Continued Scrutiny of Hiring Policies and Practices: Recent litigation has focused on criminal history, but the EEOC has been closely scrutinizing other pre-employment hiring practices, such as testing and assessments.

Expansion of Pregnancy Discrimination Claims: EEOC guidance issued in the aftermath of the Young v. UPS ruling makes it clear that failing to accommodate pregnant employees may expose employers to ADA claims, based on temporary disability caused by pregnancy.

Evolution of Religious Discrimination Claims: The scope of reasonable accommodation for religious practices has the potential to impact grooming and appearance policies, as well as requested time-off policies.

Broad Interpretation of LGBT Rights in the Workplace: The EEOC has announced its intentions to protect workers from discrimination on the basis of sexual orientation and/or gender identity by defining such discrimination as an allegation of sex discrimination under Title VII.

“The EEOC is actively looking for cases to push their arguments about the scope of Title VII,” said J. Randall Coffey, a partner in the Kansas City office of Fisher & Phillips LLP.  “They will be trying to find cases they can use as a vehicle to convince courts to adopt their view.”

Increased Scrutiny of Independent Contractor Classification: Pointing to the 2015 Alexander v. FedEx Ground Package System independent contractor misclassification case that resulted in a $228 million settlement, Maatman predicts a significant increase in “copycat cases” in 2016.

“If you are labeling people as independent contractors and not paying them benefits or overtime, but otherwise treating them as employees, you may owe them back pay or benefits,” he said.

The average cost of defending an organization against an employee lawsuit tops $150,000, said Maatman.

A class-action lawsuit results in an even greater expenditure. And if the court rules in favor of the employees — or the employer decides to settle — it can be a “bet-the-company” scenario with the potential to bankrupt the business, he said.

Therefore, it’s incumbent upon companies to take any steps necessary to resolve an employee’s issue internally, before he or she hires an attorney or turns to a government agency.

Employers can avoid becoming the target of a class-action lawsuit or EEOC investigation by keeping tabs on what kinds of claims are being levied, said Coffey. Focusing on the “hot spots” to stay ahead of the curve, reducing the risk of costly litigation.

“The smartest thing an … executive can do is take a look at the EEOC’s strategic enforcement plan because it’s a roadmap to which specific areas the agency is going to focus its enforcement activities on,” said Coffey.

“If you have concerns about whether you are in compliance with the law, you can scrutinize the list to make sure your policies and practices are up to snuff.”

Julie Cook Ramirez is a long-time journalist. She can be reached at [email protected].

More from Risk & Insurance

More from Risk & Insurance