What Companies Are Getting Sued Over!

by Michael Haberman on October 23, 2009 · 0 comments


Thanks to Jon Hyman over at the Ohio Employer’s Law Blog who wrote the other day on Do you know? Employment Litigation Expected to increase in 2010. It was an eye opener. I clicked through from his blog to the Fulbright & Jaworski Fifth Annual Litigation Trends Survey and Highlights and read through the employment law section. Here is some of the information I gleaned from that report, but I would recommend you look at Hyman’s analysis and also the actual report itself.

The report deals with multi-plantiff cases (aka class-action suits?) and here are some of the results (Note: I am only report results from the U.S., but there are results from the U.K. as well):

  • In the U.S. largest increase in multi-plantiff cases where in FLSA wage & hour (19%), discrimination (14%), and Americans With Disabilities Act (10%).
  • Increases in FLSA wage & hour cases were highest in California, the South and the Midwest.
  • Education and retail had the highest increase in wage & hour cases.
  • Discrimination increases where highest in education, financial services and retail.
  • ERISA cases were highest in the Midwest and retail and engineering/construction sectors.
  • Age discrimination cases rose the highest in education, financial services, retail, and technology/communication.
  • Privacy cases were most common in California, but were generally a smaller percent of the overall cases.
  • For small companies discrimination was the biggest issue followed by wage & hour. For big companies the reverse was true.

The costs associated with dealing with these cases, excluding settlements often exceed $50,000 per case and almost a quarter of the time exceed $100,000. For a small company that can be devestating. The areas that cost the most to deal with are race, sex and wage & hour cases.

What are we to conclude from these facts and figures? Well the overall conclusion of the report is that companies are going to be spending more on litigation in 2010. Other conclusions that I reached are:

  • Education is having some difficulty. That arena made it on just about every list. Anyone have a reason for this? Suggest some.
  • Small businesses probably need to do alot more training and education to both supervisors and employees, with race and sex discrimination still being the big expensive issues.
  • There is still alot of misunderstanding of the Fair Labor Standards Act, which has only been around since 1938. My experience has been that many companies unknowingly and knowingly violated the FLSA.
  • The recession is probably driving alot of this litigation. As people are let go and then have difficulty finding work they start grasping at straws to provide income. One way to do that is to sue your former employer. All the TV ad lawyers will tell you that.

How can you avoid some of this litigation increase? Three things pop to my mind.

  1. Understand the laws, train supervisors on the laws, train HR on the laws and abide by the laws. (I can hear all the bitching and moaning about compliance now.)
  2. Document that training, document your decisions, especially your compensation decisions (Ledbetter requires it) and document your actions with employees.
  3. Treat people with respect and dignity, even when you are firing them for gross misconduct. People are more likely to sue you when they feel like they have been mistreated.

So there you go. As Jon concluded in his blog post about this topic “What does all this data mean for your business? Your legal budgets will likely increase next year. The question you need to answer is whether you want those funds to pay to defend lawsuits, or to proactively audit your internal personnel and employment practices to limit your litigation costs?” I vote that you be proactive! And of course I know a good consultant that would be more than happy to help you. LOL. 

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