Survey: Cost of Lawsuits on the Rise

Gavel and Papers

Every year, the law firm of Fulbright & Jaworski LLP commissions a Litigation Trends Survey of corporate counsel concerning their experiences and issues with litigation. They recently released the 9th annual Survey, which reflects information collected from 392 in-house attorneys in the USA and the UK. Here are a few findings you may find interesting:

  • When asked to name types of claims to which their companies are vulnerable:
    • 40% answered “wage and hour”.
    • 28% said “age discrimination”.
    • 22% cited “retaliation”.
    • 21% named “racial discrimination”.
  • When asked about the types of claims filed under the Fair Labor Standards Act (FLSA):
    • 64% cited overtime issues.
    • 45% mentioned misclassification.
    • 31% named meal and rest breaks.
  • 60% of the responding companies had retained outside counsel to assist in a regulatory investigation during the 12 months leading up to the survey.
  • Respondents indicated the vast majority of wage and hour disputes filed against them are filed in state court.
  • The cost of labor litigation has been rising. The average cost to litigate a single-plaintiff employment action was $100,000 or more, as reported by 67% of the U.S. based respondents. In fact, I recall reading about a recent case in Washington state, in which the company PPG Industries spent over $700,000 defending and appealing in an employee’s lawsuit claiming $12,000 in unpaid overtime. (The company ultimately lost the case, by the way, and ended up having to pay the employee $24,000 for willfully violating overtime law, plus all his attorney fees, in addition to their own legal costs.)
  • About one quarter of all respondents (including 40% of larger companies — i.e. those with revenues of $1 billion or more) had faced one or more class-action cases in the 12 months leading up to the survey.

To be sure, there were a few bright spots:

  • The percentage of companies facing class-action cases has remained essentially flat for the past five years.
  • As the U.S. economy picks up and the unemployment rate eases, the rate of increase in wage and hour cases seems to be slowing.

Still, there remain a fair number of things to be concerned about. In particular, companies should be careful when calculating overtime, be especially cautious about automatic meal or break deductions, and train supervisors and managers to avoid discrimination or retaliation charges. And if you do face a lawsuit, it’s important to evaluate how much it will cost — in money, time and headaches — to mount a vigorous defense versus pursue a settlement agreement.

Has your company faced a lawsuit (or more than one) in the past year? How did it work out for you?

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