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Employers Blame Economy for Workers' Lawsuits

Despite an improving economy, more companies in a recent survey say economic conditions are pushing unhappy workers to file more lawsuits against their employers.

Tuesday, July 22, 2014
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The economy appears to be moving in the right direction. Unemployment has dropped from 9.6 percent in June 2009 to 6.1 percent last month. During the same time frame, the number of (nonfarm) jobs climbed from nearly 131 million to almost 139 million. Even the number of discrimination lawsuits filed by the Equal Employment Opportunity Commission has been cut in half, from 314 to 148.

So why do more employers feel that economic conditions are leading disenchanted employees to bring more lawsuits?

More than 500 HR professionals, C-suite executives and in-house counsel responded to the 2014 Executive Employer Survey, which was conducted by Littler, a global employment and labor law practice. According to survey results, 48 percent believe the economy is the main driver behind employee lawsuits, a 25 percent increase over 2013. More than 40 percent state that their organization has seen employee lawsuits or class actions last year involving discrimination and harassment the most, while 36 percent pointed to wrongful-termination claims or wage and hour lawsuits. the economy is a contributing factor, not everyone is convinced it's the main culprit. There are other influences to consider, experts say, such as changing state or federal employment laws and increased enforcement of those laws by the Equal Employment Opportunity Commission and Department of Labor. During a weak or strong economy, HR can help minimize claims by following national employment trends and changes in employment laws and passing that knowledge along to supervisors and managers.

Dennis P. Duffy is not surprised by the survey's results. As a Houston-based partner and employment attorney at > BakerHostetler, he says the real question is whether employer sentiments actually reflect claims data.

"The survey states a truism that is very hard to determine whether or not it's born out of data, but it does drive the way employers feel, so we have to take note of it," he says. "We don't have micro economic data that would be able to tell us whether their assumptions are right."

On the surface, there's less belt tightening and fewer things that would negatively impact employees as the economy improves, he says. Generally, people are happier, more likely to find good paying jobs and less likely to sue their employer.

Anytime there is a change in business operations or job responsibilities, involuntary terminations can occur. Take mergers and acquisitions, for example, which tend to produce layoffs. He says employers will usually experience an increase in claims even though such common business practices are independent of the economy's status.

Geography also plays a role. Unlike Texas, which is lean in terms of regulations, New York and California both support complex employment laws. "They are traps for the (uninformed) and potential gold mines for enterprising plaintiff lawyers," Duffy says. "Anytime you increase your data points, it's that much more your rank and file has to be on top of."

Meanwhile, he says, retaliation claims have been growing over the last several years. There's also been a recent uptick in claims involving employee noncompetes and wage and hour, which is cyclical.

"I do agree that the incidences of claims relating to discharges or terminations increases with the deterioration of the economy," says Duffy. "But claims have been rising -- depending upon the area -- for some time, independently of the economy."

Regardless of economic conditions, HR routinely needs to re-evaluate its company's policies and procedures, says Barry Hartstein, attorney and co-chair of Littler's EEO and diversity practice group in Chicago.

"It's more than just monitoring," he says. "What worked yesterday may not be the most effective way to minimize risks today, let alone tomorrow."

For example, he says, the EEOC just issued new guidance to deal with pregnancy discrimination that reinterprets laws that have been on the books for a long time. Even conducting a criminal history can land HR in trouble, he says, explaining that the EEOC may feel that background checks have a disparate impact among minorities. Then there are situations beyond an employer's control like job candidates who file claims because they believe an employer is observing discriminatory hiring practices since they weren't hired for a job they were clearly qualified for, he says.

"Seasoned HR professionals have to stay on top of their game and make certain they get the right expertise, whether internally or externally, to ensure they're staying ahead of the curve," Hartstein says.

Also keep in mind that plaintiff lawyers are constantly on the lookout for the next cause of action to file, adds Ellen E. McLaughlin, partner and employment attorney < at Seyfarth Shaw in Chicago.

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So look for the hot spots, she says. What are the EEOC and DOL focusing on? If HR knows what they are, it can change or adjust its current policies or procedures reflecting those areas to decrease the risk of claims.

"Hiring practices are a big issue with the EEOC right now," she says, emphasizing the constant need for training supervisors and managers on employment regulations. "There has also been an uptick in discrimination claims, wage and hour claims and whistleblower claims."

Although she believes the majority of claims lack merit, that still doesn't stop disgruntled employees in any economy from crossing their fingers and hoping for some kind of settlement.

Many wage and hour claims are successful, she says, because employers unknowingly violate new and highly technical state statutes involving meal or rest periods. Other times, HR can prevent claims. Terminated employees are sometimes asked to sign a release in exchange for a severance package. She says it's often the amount of severance that determines whether employees sign or sue.

"I don't think it's just the economic conditions that are spurring an increase in litigation," says McLaughlin. "I would point more toward the increased enforcement by the EEOC and DOL, which ultimately drives some private litigation."

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