Risk Management

Workplace Class Actions: The Threat Keeps Growing

Class action litigation mania didn't abate last year. Here are five of the hottest trends heading into 2020.
David McCannJanuary 15, 2020

The prosecution of workplace class action litigation by the plaintiffs’ bar continues to escalate, as it has for more than a decade. Importantly, class actions increasingly pose unique “bet-the-company” risks for employers.

As has become readily apparent in the #MeToo era, an adverse judgment in a class action has the potential to bankrupt a business. Further, adverse publicity can eviscerate a company’s market share. Likewise, the ongoing defense of a class action can drain corporate resources long before the case reaches a decision point.

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Companies that do business in multiple states are also susceptible to “copy-cat” class actions, whereby plaintiffs’ lawyers create a domino effect of litigation filings that challenge corporate policies and practices in numerous jurisdictions at the same time. This risk is particularly acute in wage-and-hour cases.

Skilled plaintiffs’ class action lawyers and governmental enforcement litigators are not making this challenge any easier for companies. They are continuing to develop new theories and approaches to the successful prosecution of complex employment litigation and government-backed lawsuits. New rulings by federal and state courts have added to this patchwork quilt of compliance problems and litigation management issues.

In turn, events of the past year in the workplace class action world demonstrate that the array of litigation issues facing businesses is continuing to accelerate while also undergoing significant change.

Notwithstanding the business-friendly policies of the Trump Administration, governmental enforcement litigation pursued by the U.S. Equal Employment Commission (EEOC) and other federal agencies continues to manifest an aggressive agenda. Conversely, litigation issues stemming from the U.S. Department of Labor (DOL) reflected a slight pull-back from previous efforts to push a pronounced pro-worker/anti-business agenda.

The combination of these factors is challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures. The challenges are especially acute for businesses in the context of complex workplace litigation.

Adding to this mosaic of challenges in 2020 is the continuing evolution in federal policies emanating from the Trump White House, the recent appointments of new Supreme Court justices and lower federal court judges, and the uncertainty over impeachment inquiries and the upcoming presidential election.

Furthermore, while changes to government priorities started on the previous Inauguration Day and are ongoing, others are being carried out by new leadership at the agency level who were appointed over the past year. As expected, many changes represent stark reversals in policy that are sure to have a cascading impact on private class action litigation.

While predictions about the future of workplace class action litigation may cover a wide array of potential outcomes, one sure bet is that the plaintiffs’ class action bar will continue to evolve and adapt to changes in case law precedents. As a result, class action litigation will remain fluid and dynamic, and corporate America will continue to face new litigation challenges.

An overview of workplace class action litigation in 2019 reveals five key trends.

Certification Success

The plaintiffs’ bar was successful in prosecuting class certification motions at the highest rates ever in the areas of ERISA and wage-and-hour litigation, as well as employment discrimination class actions.

Plaintiffs’ lawyers continued to craft refined class certification theories to counter the more stringent certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).

Of the 271 wage-and-hour certification decisions in federal courts in 2019, plaintiffs won 199 of 245 conditional certification rulings (81%) and lost 15 of 26 decertification rulings (58%).

By comparison, there were 273 wage-and-hour certification decisions in 2018, with plaintiffs winning 196 of 248 conditional certification rulings (79%) and losing 13 of 25 decertification rulings (52%).

Supreme Influence

Class-action litigation has been shaped and influenced to a large degree by recent rulings of the U.S. Supreme Court.

Over the past several years, the high court has accepted more cases for review than in previous years — and, as a result, has issued more rulings — that have impacted the prosecution and defense of class actions and government enforcement litigation.

The past year continued that trend, with several key decisions on complex employment litigation and class action issues that were arguably more pro-business than decisions in past terms.

Among those rulings, Lamps Plus v. Varela and Nutraceutical Corp. v. Lambert reflected a conservative, strict constructionist reading of statutes and class action procedures.

Furthermore, a case decided last year — Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018), which upheld the legality of class action waivers in mandatory arbitration agreements — proved to be a transformative decision that is one of the most important workplace class action rulings in the last two decades.

Coupled with the possibility of more appointments to the Supreme Court by the Republican-controlled White House, litigation may well be reshaped by Supreme Court decisional law in ways that change the playbook for prosecuting and defending class actions.

Pro-Business Trend

Filings and settlements of government enforcement litigation in 2019 did not reflect a head-snapping pivot from the ideological pro-worker outlook of the Obama Administration to a pro-business, less-regulation/litigation viewpoint of the Trump Administration.

However, the numbers began to trend downward in terms of a diminishment in the aggressive agenda of prior government enforcement litigation. As an example, the EEOC brought 144 lawsuits in 2019, as compared to 199 in 2018 and 184 in 2017 (although the 2019 total still outpaced 2016, the last year of the Obama Administration, when the EEOC filed 86 lawsuits).

Furthermore, the value of the top 10 settlements in government enforcement cases decreased dramatically to $57.52 million, from $126.7 million in 2018 and from $485.25 million in 2017.

Explanations for this phenomenon are varied. They include:

  • The time-lag between Obama-appointed enforcement personnel vacating their offices and Trump-appointed personnel taking charge of agency decision-making power
  • The number of lawsuits “in the pipeline” that were filed during the Obama Administration that came to conclusion in the past two years
  • A “hold-over” effect whereby Obama-appointed policy-makers remained in their positions long enough to continue their enforcement efforts before being replaced in the last half of 2018 or in 2019. This was especially true at the EEOC, where the Trump nominations for the commission’s chair, two commissioners, and general counsel did not reach the Senate floor until the second half of 2019.

These factors are critical to employers, as both the DOL and the EEOC have had a focus on “big impact” lawsuits against companies and “lead by example” in areas that the private plaintiffs’ bar aims to pursue.

As 2020 opens, it appears that the content and scope of enforcement litigation undertaken by the DOL and the EEOC in the Trump Administration will continue to tilt away from the pro-employee/anti-big business mindset of the previous Administration.

Trump appointees at the EEOC and the DOL are slowly but surely “peeling back” on aggressive litigation enforcement tactics that were watchwords under the Obama Administration. As a result, it appears inevitable that the volume of government enforcement litigation and the value of settlement numbers from those cases will decrease even further in 2020.

Low-Value Workplace Settlements

The aggregate monetary value of workplace class action settlements increased slightly in 2019. But compared against the last several years, it was among the lowest marks for settlements, after those values plummeted to their lowest level ever in 2018.

For most of the past decade, these settlement numbers had been increasing on an annual basis, reaching all-time highs in 2017. The 2019 numbers showed increases in settlement values for ERISA and wage-and-hour class action settlements, while there were large drop-offs in the values of settlements for employment discrimination and other workplace statutory class actions.

The plaintiffs’ employment class action bar and governmental enforcement litigators were exceedingly successful in monetizing their case filings into large class-wide settlements this past year, but they did so at decidedly lower values than in previous years.

The top 10 settlements in various employment-related class action categories totaled $1.34 billion in 2019, virtually unchanged from $1.32 billion in 2018 — although that was a stark decrease from the 2017 total of $2.72 billion. Whether this is the beginning of a long-range trend or a short-term aberration remains to be seen.

Spotlight Stays on #MeToo

As it continues to gain momentum on a worldwide basis, the #MeToo movement is fueling employment litigation issues in general and workplace class action litigation in particular.

On account of news reports and social media, it has raised the level of awareness of workplace rights and emboldened many to utilize the judicial system to vindicate those rights.

Several large sex harassment class-based settlements were effectuated in 2019 that stemmed at least in part from #MeToo initiatives. Likewise, the EEOC’s enforcement litigation activity in 2019 focused in large part on the filing of #MeToo lawsuits while riding the wave of social media attention to such workplace issues.

Of the EEOC’s 2019 sex discrimination lawsuit filings, 28 cases included claims of sexual harassment, and 57 of the 84 Title VII lawsuits were based on gender discrimination allegations. The total number of sexual harassment filings decreased slightly in 2019 as compared to 2018 and 2017, when sexual harassment claims accounted for 41 and 33 filings, respectively.

Employers can expect that #MeToo issues will remain in the limelight in 2020, and litigation over these issues is not apt to slow down in the coming year.

Gerald Maatman is a partner at law firm Seyfarth Shaw LLP.