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Thinking about settling a lawsuit? Do it early

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in Discrimination and Harassment,Human Resources

When it comes to employment-law cases, if you think your organization will settle the case (rather than go to trial), do it as early in the discussions as possible; it could end up saving you big bucks.

That advice is especially true if your organization realizes that it will probably be held liable. Don't wait to settle until the employee and her attorney have sued you and involved the court in the settlement process. Here's why:

Under many federal anti-discrimination laws, the loser has to pay the winner's attorneys' fees. That's true even if the case was settled before it went to trial and even if the employee lost most of her claims, but prevailed on just one issue. So, an ex-employee who charges your organization with age, race, sex and disability discrimination has to prevail only on one charge to force you to pay her attorney.

If the court is actively involved in the settlement and signs off on the deal—or if the settlement includes some future employer action, such as training, that the court will oversee—the former employee can demand attorneys' fees. But a straightforward settlement with a one-time payment to the employee that doesn't involve court action can save you those fees.

Recent case: After Terry Bell was fired from his government job, he filed suit, claiming the agency violated his free speech and due process rights. He requested $1.4 million, but a jury dismissed most of his claims and gave him only $90,000.

He appealed, and the government agency agreed to settle the case without court involvement. It paid Bell, but Bell's attorneys sued for their fees. The 10th Circuit turned down that request, concluding that the settlement was a private matter it wasn't involved in and, therefore, it couldn't order attorneys' fees. (Bell v. Board of County Commissioners of Jefferson County, No. 04- 3224, 10th Cir., 2006)  

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