As higher standards for certifying class action lawsuits make it harder for workers, plaintiffs’ lawyers turn to wage and hour suits with lower hurdles, says report
Two Supreme Court rulings of recent years have made it easier for companies to defend themselves against certain kinds of lawsuits. But given how many other kinds remain difficult for employers, their first priority should be how they pay employees. That’s a critical takeaway from Seyfarth Shaw’s eleventh annual analysis of workplace class action cases, profiling rulings from around the country, which was released recently.
The results of the analysis expose why employers focus ‘fundamental risk management on how they pay,’ says Gerald L Maatman Jr, partner in Seyfarth’s Chicago office who wrote the report. The Court’s decisions in Wal-Mart v. Dukes (2011) and Comcast v. Behrend (2013) rendered class action status in discrimination and similarly individual cases much harder for plaintiffs to win. Other areas, which either can meet the standards imposed by those cases or which are ‘collective actions’ instead of  ‘class actions’, remain relatively plaintiff-friendly.
Regarding discrimination cases, ‘Wal-Mart and Comcast are like a one two punch,’ says Maatman, requiring plaintiffs to prove a similarity of liability (Wal-Mart) and similarity of damages (Comcast) that dramatically ramped up the standards plaintiffs must meet. In effect, courts now want  ‘one member of the class to be able to get on the stand and tell a story that applies to everybody’ in the class on both issues. Those new standards are hard to meet in employment discrimination cases, as employees factual situations differ significantly. Maatman notes that pay and promotion depend on the employee’s job performance and on a manager’s discretion, neither of which is the kind of topic that can be universally addressed by a single class member. As the report documents, the two Supreme Court decisions have substantially reduced both the number and value of discrimination settlements.
Nonetheless, plaintiffs’ lawyers in one key employment class action area are not inhibited by the new decisions: ERISA. The report finds ERISA settlements have jumped tenfold, to over $1 bn. Maatman explains the stunning increase as resulting from a combination of three factors:  an artificially low baseline because ‘there hadn’t been any blockbuster settlements in many years,’ the huge dollar value of pension plan litigation given the massive size of plans and retiree classes, and employers' decisions to settle pending cases in the wake of recent decisions making clear that the tougher Wal-Mart standard didn't affect ERISA cases. As a result, the huge numbers in this report should be something of a blip, though ERISA litigation risk has not been mitigated by Wal-Mart or Comcast.
Unlike discrimination and ERISA cases, which are federal class action suits, wage and hour litigation happens both on the federal and state level under laws that make it easier for plaintiffs to get their group certified. That’s driven ‘what I call a migration of talent,' with high quality plaintiffs’ lawyers filing wage and hour cases instead of discrimination and other federal class actions, says Maatman. He suggests thinking of the lawyers as ‘investing in the stock market.' Buying into a discrimination case or an ERISA case requires a substantial investment because expensive expert testimony is needed. By contrast, he says, wage and hour cases can be supported with worker affidavits.
The applicable federal law is the Fair Labor Standards Act, and it has its own ‘collective action’ standard of being ‘similarly situated, which is a lower standard than class actions,’ says Maatman. Besides wage and hour issues, another big litigation area targets a company’s decision to use independent contractors instead of employees. A lot of companies use contractors now to reduce costs and avoid benefits, but they can work alongside employees in ways that make them appear to be just like employees, triggering the lawsuits.
Making the situation much worse for employers, he says, is the fact that they can be federally compliant and still vulnerable to suit under a patchwork of state laws. For example, employers may be sued for  ‘reimbursing expenses incorrectly in California; paying meal breaks incorrectly in Pennsylvania, and incorrectly paying waiting time in New York.’ California, Florida, Massachusetts, Pennsylvania, New Jersey, New York, and Washington are particularly plaintiff-friendly, offering more generous damages, longer statutes of limitations, lower bars to class certification, and generally pro-worker judiciaries, he adds.
Reflecting the complexity of the issues, Maatman notes that many employers have ‘designated an in-house counsel as in charge of employment law.’
Maatman cites the Equal Employment Opportunity Commission and Department of Labor as another area of risk; both have been so aggressive in pushing the envelope that the government has been losing a lot of cases. But even when the employer wins, the litigation is still costly. Still, the ramifications of Wal-Mart and Comcast were not the only bright spots for employers in the report. Decisions interpreting the Class Action Fairness Act have made it much easier for employers to remove cases to federal court, he says. Federal courts are often perceived as more favorable for employers. For example, the business-friendly American Tort Reform Foundation's annual ‘judicial hellhole list’ highlights state and local jurisdictions, not federal ones.
