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What is your class action risk? How can you reduce it?

Updated: May 17


 


Every employer rues the day when they become the defendant in an employment lawsuit. Any time an employee becomes disgruntled or leaves under less-than-ideal circumstances there’s a risk that they will seek out an attorney to air their grievances. Now, more than ever, employees are seeking legal remedies, and some plaintiff attorneys are seeking out unhappy employees. With claims on the rise, have you thought about your risk of a class action lawsuit?


Class action lawsuits for employment claims have risen steadily year-over-year since 2020, according to the 2023 Carlton Fields Class Action Survey (www.jdsupra.com/legalnews/companies-see-big-rise-in-labor-5574900/).

Coins

In 2020 labor and employment claims comprised 22.5% of all class actions among survey respondents, but that number rose to 33.6% in 2022. In addition, 75% of respondents stated they had been party to at least one class action suit within the past five years. Let’s translate that into dollars:


In 2022 the top 10 settlements in wage an hour class actions totaled $574.55M, the top 10 settlements in discrimination class actions totaled $597M, and the top 10 settlements in Employee Retirement Income Security Act class actions totaled $399.6M, according to a report from Duane Morris (www.duanemorrisclassactionreview.com).


Co-workers discussing

Although it’s unlikely that a smaller organization will experience class action settlements in the millions, as a percentage of gross revenues it can still be a devastating blow to company finances.


So, what is class action, and how can you protect your organization? In simple terms, when an employee sues the employer, they can seek class certification with the argument that other similarly situated employees were also affected.


Plaintiff counsel will seek to include as many employees as possible, past and

present, in the class certification. That’s why these settlements can become very expensive very quickly. The best protection for employers against class action lawsuits is proactive risk mitigation.

Consultants interactions with customer

This starts with having an up-to-date understanding of state and federal laws and regulations. It’s best practice to have an employment attorney that you can consult on high-risk issues, and a good HR Consultant can help identify what those issues may be. You can also use the following measures to reduce your risk:


  • Purchase employment practice liability insurance to protect you financially from employment claims and litigation. Most policies don’t cover wage and hour violations, but they can protect you from discrimination, harassment, bullying, and retaliation claims.

  • Review your HR policies with an expert to make sure they are up to date with the most recent changes in legislation or case law.

  • Have a consultant who can conduct periodic audits of your timekeeping and pay practices to ensure compliance with your policies and procedures.

  • Make sure your employees are educated around wage and hour laws, i.e., meal and rest period requirements, and that they are following company policies.

  • Make sure policies are being enforced objectively and consistently across the organization.

  • Document generously! Your best protection from false accusations is to objectively and timely document interactions with employees.

3 men talking

It’s nearly impossible to avoid employment litigation entirely, but by implementing proactive strategies an organization can reduce the risk of being sued or at least decrease the settlement potential. In a state where it is easy to be found at fault, without any true intention of wrongdoing, make sure your company has someone who can help protect you from avoidable consequences.

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