If it looks like the firm has made mistakes that cannot be fixed short of litigation, then a quick settlement might not be a bad idea. Oberman says that, in addition to incurring legal exposure and expenses, protracted litigation of cases with weak defenses undermines workplace morale and productivity. When a company has ignored a problem, failed to properly document, or treated an employee in a patently unfair manner, that is not the strongest position in which to enter a courtroom. Settlements don't just involve cash, though. Be aware that plaintiffs may seek substantive changes to company policies, procedures, and maybe operations, and that courts have been very aggressive about upholding all the terms of out-of-court settlements, which themselves are legally binding.
Some companies, even if they know a case is weak, will use the legal system and their resources to stall the process as long as possible in the hopes of outspending or waiting out the plaintiffs until they abandon the case. This strategy may occasionally work for smaller individual cases, but it can also backfire, especially when established, well-funded plaintiff's attorneys are involved, as is the case with the Wal-Mart class-action suit. In such cases, there's little chance the plaintiffs will abandon their case unless a large settlement offer is made before going to court.
Arbitration agreements have had a mixed history as a litigation-avoidance tool. State law varies widely on the conditions under which they are binding and whether an employee may concurrently file a lawsuit while arbitration proceeds. Some courts have thrown out arbitration agreements signed by employees if they are found to be unfair, imposed a financial burden for arbitration on the employee, limited the number of awards, or were signed under duress. It was for this last reason that, in 2003, the 9th U.S. Circuit Court of Appeals in San Francisco invalidated an arbitration agreement used by Circuit City.
Whatever route a firm takes, experts say the best way to protect yourself is to document, document, document. At NRG, for example, CFO Roger Blomquist notes that careful documentation couldn't help the company avoid a lawsuit but did help it win. "We felt that we had all the necessary documents signed by both the company and the employee" in the matter, he says.
That's why it is vital to have processes in place to handle employee complaints, discipline, and termination. And documentation should cover actions taken after a problem arises, too. If a case does make it to trial, the first thing a jury will look at is what the company did when it found out about the problem. Often the answer spells the difference between winning and losing — or, in the case of a loss, the difference between paying back wages and reinstatement or paying compensatory or punitive awards. "The court wants to know what the company's procedures were, and did the company follow them once the problem was made known," says Fulbright & Jaworski's Dawson.
Above all, act with fairness. "In the final analysis, the main reason people decide to sue is because they don't think they were treated fairly," says Gilmore. "If you treat an employee unfairly, and that employee is a member of a protected group, you run the risk of being sued for discrimination."
Kris Frieswick is a freelance writer based in Boston.
Retaliation: Lawsuit du Jour
The fastest-growing area of employment litigation is retaliation. In 2004, Equal Employment Opportunity Commission settlements alone totaled $90 million. And that's not likely to abate anytime soon, considering the U.S. Supreme Court's broadening of the definition of retaliation last summer.
That case involved a female employee of Burlington Northern Santa Fe Railway Co. who claimed the company retaliated against her after she filed a harassment claim against her manager. After the complaint, she was reassigned from her forklift-operator job to one involving more hard physical labor. The company denied the charge. It hadn't fired her or cut her pay, argued company attorneys, so its actions could not be deemed retaliatory.
The Supreme Court, however, sided with the worker. And its June 2006 ruling created a precedent that dramatically broadened the concept of retaliation to include management's alteration of an employee's status in ways other than outright termination or pay reduction. Now retaliation can include a transfer or a change in working hours, for example.
The EEOC is also broadening its definition of retaliation, says Constance M. McGrane, a litigation attorney with Conn Kavanaugh Rosenthal Peisch & Ford in Boston. Typically, as part of any employee-lawsuit settlement, a clause is added stipulating that the employee will not reapply for a job at the company. These so-called don't-darken-my-door clauses, however, may be "viewed by the EEOC in and of themselves as retaliation," says McGrane. — K.F.
So Many Ways to Sue
Determining the scope of employee lawsuits is problematic. For starters, there are no aggregate numbers for how many such suits are filed annually. After all, they can be filed in either federal or state court and can allege violations of a multitude of federal or state employment statutes.
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