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Class action settlements fell sharply in 2013

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in Centerpiece,Employment Law,Human Resources

justice scales and legal booksAlthough potentially ruinous wage-and-hour class-action lawsuits increased “significantly” in 2013, employers dug in their heels and wound up paying less than they have in years, according to a new report by the Seyfarth Shaw law firm.

Reason: A new legal landscape works against employee class-action suits, following key U.S. Supreme Court decisions. Result: 2013 class-action settlements were lower than they have been since 2006.

Last year, employees filed 12,311 discrimination class actions, almost 2,000 fewer than in 2012. Employee Retirement Income Security Act (ERISA) class actions—many accusing employers of mismanaging retirement funds—totaled 7,279. That’s 629 less than in 2012.

But wage-and-hour class actions grew from 7,672 in 2012 to 7,882 in 2013. Although small in number, it was a significant increase according to attorney Gerald Maatman, lead author of Seyfarth Shaw’s 2014 “Annual Workplace Class Action Litigation Report.”

That’s because wage-and-hour class actions can be financially crippling. One back overtime lawsuit might cost an employer a few thousand dollars; multiply that by many thousands of employees in a class action, and it could cost tens of millions.

But in 2013, employers fought back, insisting on trials instead of agreeing to write huge settlement checks. Employees’ lawyers often take class-action cases with an eye toward scoring quick and lucrative settlements.

In fact, class-action settlements were down across the board. The 10 largest 2013 wage-and-hour settlements totaled $248.5 million, $43.5 million less than in 2012. The top 10 ERISA settlements fell $81.4 million, to $155.6 million.

If not for a whopping $160 million payout by Merrill Lynch in a race-bias class action, the 10 largest discrimination settlements would have cost just $74.1 million, a sum not seen since 2006.

Employers were emboldened by business-friendly decisions in two landmark Supreme Court cases: 2011’s Wal-Mart v. Dukes and 2013’s Comcast Corp. v. Behrend.

The report said, “Wal-Mart was the ‘800 pound gorilla’ in courtrooms in 2013 as litigants argued and judges analyzed class certification issues.” The two-year-old case continued to reverberate in 2013 because it made it harder for workers to bring class actions, setting a high bar for employees trying to prove that everyone who wants to join in a lawsuit has enough in common to form a genuine class.

The Comcast case also reinforced the importance of “commonality” among potential class members.

That’s the battlefield on which employers often won the class-action war last year—by challenging the legitimacy of a class.

Advice: With the economy still sluggish, expect more wage-and-hour class-action suits. If you do get sued, work with your attorney to weigh the merits of fighting instead of settling. Aggressive defense may be the best strategy.

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