Are Employment Class Actions Dead
After Walmart & AT&T?
& Other Tales from World of
Employment Exposure
RIMS Annual Conference
April 15-16, 2012
Today’s Discussion Leaders
• Nicole Franzese/Best Buy
• Laura Maechtlen/Seyfarth Shaw LLP
• Tom Hams/Aon
RIMS - The Brave New World Of
Employment Class Actions
- View From The Defense
RIMS Annual Conference
April 15-16, 2012
Some Key Terms For Today’s Discussion
•
Rule 23(a) Requirements
– Numerosity – The individuals who would comprise the class must be so
numerous that joinder of them all to the lawsuit would be impracticable.
– Commonality – There must be questions of law and fact common to the
proposed class.
– Typicality – The claims or defenses of the representative parties must be
typical of the claims and defenses of putative class members.
– Adequacy Of Representation – The representative plaintiffs and their counsel
must be capable of fairly and adequately protecting the interests of the class.
Some Key Terms For Today’s Discussion
(Cont’d)
• Rule 23(b) Requirements
– (b)(1) – Decision as to one class member’s claim
dispositive of all others
– (b)(2) – Injunctive/equitable relief
– (b)(3) – Money damages
Some Key Terms For Today’s Discussion
(Cont’d)
•
Rule 23(b)(3) Requirements
– A class may be certified under Rule 23(b)(3) if the court finds that
questions of law or fact common to the members of the class
predominate over any questions affecting only individual members, and
that a class action is superior to other available methods for the fair and
efficient adjudication of the controversy.
– To qualify for certification under Rule 23(b)(3), a class must meet two
additional requirements: [1] common questions must predominate over
any questions affecting only individual members; and [2] class resolution
must be superior to other available methods for the fair and efficient
adjudication of the controversy.
– Rule 23(b)(3) applies to cases where the primary relief sought is money
damages. Each class member is entitled as a matter of due process to
personal notice and an opportunity to opt-out of the class action.
Introduction
• Overview Of 2011/2012 Developments –
A Transformative Year!
• Our Topics Today Relative To Employment
Discrimination, Wage & Hour, And
Government Enforcement Class Actions
Key Trends In 2011/2012
• An increase in wage & hour class actions, especially those
brought under the FLSA. In 2012, will the wave crest?
• ERISA class actions took center stage in 2011; and 2012 is
expected to be another key year on the ERISA front.
• Developments in Rule 23 and § 216(b) case law is causing an
evolution of new case theories, defense litigation strategies,
and class certification approaches.
• Change and flux are the new watch words in the class action
world
Headlines Of 2011 Relevant To
Employers
• Wal-Mart Stores, Inc. v. Dukes – in a 5-4 opinion, the
Supreme Court held that Plaintiffs failed to satisfy the Rule
23(a) commonality requirement.
• AT&T Mobility LLC v. Concepcion, et al. – subordinated state
law to the Federal Arbitration Act (FAA) and allows the
broad use of arbitration and class action waiver clauses in
consumer and employment contracts.
• End-Of-Year Statistics
– (i) Employment discrimination filings increased from 14,559 lawsuits in
2010 to 14,771 lawsuits in 2011
– (ii) More EEOC charges were filed in 2011 than ever before (99,947
charges)
Wal-Mart Stores v. Dukes
• Impact of SCOTUS ruling on “class certification
architecture”
• Impact of SCOTUS ruling on damages recovery
• Unanswered questions/issues inherent in the
SCOTUS ruling
• Anticipated “second generation issues” from
Dukes
AT&T Mobility v. Concepcion
• How SCOTUS ruling impacts class action
waivers in the context of workplace arbitration
agreements
• Plaintiffs’ strategies to “work around”
Concepcion – initial 2011 case law, and
predictions for 2012
Pre-emptive Defense Strategies
• The “second bite at the apple” defense tactic
based on Dukes
• A shining example - Pilgrim v. Universal Health
Care, 660 F.3d 943 (6th Cir. 2011)
• How defense strategies are transforming and
the early “returns” from federal courthouses
Toolkit Issues
• Are workplace arbitration agreements worth it?
• Pros of Arbitration
– Following the AT&T Mobility decision, it is clear (at least for now) that
arbitration agreements can include a class and collective action waiver
that effectively prevents the filing of such actions either in court or in
arbitration.
– With regard to routine litigation matters, arbitration provisions
generally result in reduced litigation costs.
– Typically, arbitration results in faster resolution than traditional court
litigation.
– Arbitration usually includes limitations on discovery and reduces
discovery and related litigation burdens on the company.
Toolkit Issues
• Pros of Arbitration
– Arbitration reduces the likelihood of a “runaway” verdict,
and offers less risk of staggering damage awards of the
type that might be awarded by a jury.
– Arbitration is more confidential, and proceedings are
typically private or at least not as likely to attract publicity.
– Arbitration offers greater finality, given the lack of appeal
rights.
Toolkit Issues
• Cons of Arbitration
– While the possibility of an effective waiver of class or collective actions is
compelling, the AT&T Mobility decision is brand-new, and it remains to be
seen whether and how Congress may respond.
– Employees or consumers may file a lawsuit anyway, and enforcing an
arbitration agreement in court and compelling a dispute to arbitration can add
to overall litigation costs.
– An arbitration policy generally will be ineffective and unenforceable with
regard to the filing of administrative charges, and cannot prevent the
Department of Labor, the Equal Employment Opportunity Commission, or
similar agencies from bringing suit on behalf of employees.
– Arbitrators are paid by the hour or by the day. Arbitration proceedings are far
less likely to be decided by a dispositive motion than are court proceedings.
Toolkit Issues
• Cons of Arbitration
– Administrative and arbitrator fees – which often are paid by the company – are rising
and can be significant for multiple day hearings.
– Plaintiff challenges to the enforceability of an arbitration clause often proceed to the
appellate court level, generating significant legal fees prior to reaching the merits of the
dispute.
– Arbitrators are less likely to accept procedural defenses and more likely to allow hearsay
and irrelevant witnesses.
– Arbitrators typically are more prone to issue poorly reasoned decisions. In addition,
some feel pressure to “even the scorecard” to appear more neutral statistically, or are
inclined to “split the baby” notwithstanding the law.
– Reviewing courts are extremely reluctant to overturn adverse arbitration decisions or
reduce large arbitrator awards under the existing standards of review.
– Consumers or employees may perceive that mandatory arbitration has removed or
infringed upon their rights.
Design Considerations
• Contents of Agreement
• Not “One Size Fits All”
• Choice of FAA or State Arbitration Law
• Grievance Procedure
• Mediation
• Mandatory Carve Outs
• Class Action Waiver
• NLRA Waiver
• Cost of Arbitration, Including Reallocation
• Mutuality
• Inclusion of Related Entities and Persons
Additional Toolkit Issues
• Ensure robust policies to ban discrimination and
encourage internal appeals
• Ensure objective elements in pay-setting and
performance evaluations
• Preemptively, in a privileged way, analyze adverse
impact
• Recruit diverse candidate pools
• Avoid quotas
RIMS – Impact of the Brave New
World from Broker Perspective
RIMS Annual Conference
April 15-16, 2012
EPL Legal Trends Update
• The Government
– EEOC & OFCCP Continue To Be Aggressive
• Reduced backlog of charges by 10% thanks to increased staffing
• Increase monetary recoveries to historic levels
• Charge filings reach historic high
– Long-term Unemployed as Protected Class?
EPL Legal Trends Update
• ADA Claims Continue to Surge
– Disability charges up over 17% in 2010 and up 69% since 2005
– John Hendrickson’s Top 5 Lessons From Recent ADA Class
Litigation:
• An Inflexible Period of Disability Leave, Even if Substantial, is Not
Sufficient to Satisfy an Employer’s Duty of Reasonable
Accommodation
• The Appropriate Lengths of Leave Under the ADA Requires an
Individualized Analysis – Even When the Employer has a Generous
Leave Policy
• Separating Leave Administration – Like the Administration of
Worker’s Compensation Benefits or Disability Benefits – from ADA
Administration is Risky for Employers
[“Lessons” - continued]
EPL Legal Trends Update
[“Lessons” - continued]
• Clear Lines of Communication Regarding Reasonable
Accommodations are Critical Not Only with Employees on Leave
but Also with Their Health Care Providers, Supervisors, and
Managers
• The EEOC Occupies a Unique Role in Litigating These Cases
EPLI Large Loss Trends
1994
2012
0
50
Lockheed M art in
Texaco
FM C
America Gen'l Lif e
The Coca-Cola Co.
10 Year span 2000 to
2010
First Union
Home Depot
Publix
Texas St at e College
Ceridan Corp
Libert y Nat ional
M it subishi
Smit h Barney
Wal-M art
Johnson Cont rols
Johnson & Higgins
Det roit Edison
Ingles M kt s. Inc
Winn-Dixie St ores
Daimler-Chrysler
Amt rak
Ford M ot or Co
The Supper Club
Int erst at e Bakeries
Olst en Healt h Svcs
Norf olk Sout hern
AL Dept of Trans
Waddell & Reed Fin
Fult on Count y GA
American Express
Rent -A-Cent er
Ralphs
Abbot t Labs
L. Liv. Labs
Unit ed Airlines
NYPD
M organ St anley
M cKesson
Boeing
R.R. Donnelley
Abercrombie
Sodexho
UBS
Cal. Dept . Correct ions
Privat eAir
CH Robinson
FedEx
Verizon
Sout hwest Airlines
FedEx
M organ St anley
Progressive
Sprint
Walgreen
Sydley Aust in
M organ St anley
NY Cit y Parks Dept .
Kroger
Smit h Barney
LA Weight Loss
Kodak
Republic Services
Out back St eakhouse
Sanof i-Avent is
Wells Fargo
Aaron Rent s
• Would Novartis Survive
Post Wal-Mart?
Novart is
M ercy General
100
150
In Ms of $
200
250
300
EEOC Charge Patterns
Pay Act
Equal
Disability
EEOC
CHARGE STATISTICS 1992
- 2011
Age
National Origin
Retaliation (All Statutes)
Religion
Pregnancy
Race
Sex
Sexual Harassment
40,000
Total Charges Hit
Historic High: 99,947
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1992
1993
1994
1995
1996
1997
Source: EEOC Charge Data System National Database
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
EEOC Charge Patterns, cont’d.
EEOC MONETARY BENEFITS 1992 - 2011
Age
Race
Disability
Religion
Equal Pay Act
Severity
Trends
Sex
National Origin
Sexual Harassment
Pregnancy
160
Total Recoveries Hit Historic Highs:

$364.7M
140
120
100
80
60
40
20
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
 Total recoveries by the EEOC in 2011 increased massively by $45,300,000! This was over a 14%
increase in recovers from 2010 and yet another record high year of recoveries. Increased staffing
allowed the EEOC to reduce its backlog of cases by over 10% for the first time in history contributing
to the major increase in recoveries.
Workforce Trend Issues
Gender Pay Gap
The new census data has bolstered the risk
faced by large employers relative to this issue.
Combined with the systematic initiative now
being employed by the EEOC, most large
employers very well may see this issue tested
within their organizations. Any unexplained
disparity will almost certainly be pursued with
class action lawsuits with the support of the
EEOC.
Unemployment and Age
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
19
48
19
5
19 0
5
19 2
54
19
5
19 6
5
19 8
60
19
6
19 2
6
19 4
6
19 6
68
19
7
19 0
7
19 2
74
19
7
19 6
7
19 8
80
19
8
19 2
8
19 4
86
19
8
19 8
9
19 0
92
19
9
19 4
9
19 6
9
20 8
00
20
0
20 2
0
20 4
06
20
0
20 8
10
The effects of the recent recession have hit older
workers harder than ever before. As the
unemployment, COBRA and other benefits available
to this unemployed populations has been ending, this
has been accompanied by charges or lawsuits
alleging a disparate impact and may explain in large
part the 60% increase in EEOC charges. With large
employers having such a diverse population,
including older employees, the exposure to this will be
realized by many large employers (and in several
cases, it already has). This is also impacting
employers on claims by applicants that are older.
Average Annual Unemployment Rate for Persons Ages 55 and Over
Source: U.S. Department of Labor, Bureau of Labor Statistics,
Labor Force Statistics from the Current Population Survey.
Market Update – Employment
Practices Liability
Capacity
Coverage
Limits
Retentions
Pricing
• Overall capacity remains adequate for most accounts.
• Coverage remains consistent and broad between most
primary markets
• Aggregation is being monitored by both insurers and
insureds
• Retentions generally stable but may increase in some
pockets
• Rates hardening is spots and remaining aggressive in
others
EPL Market Pricing Index
Year-Over-Year Change
Q1 2002 – Q4 2011 | Base year 2001 = 1.00
1.90
1.70
1.67
1.60
1.50
Index Value
1.50
1.42
1.38
1.30
1.28
1.26
1.17
1.10
1.04
0.98
0.90
0.70
0.50
2002
2003
EPL Pricing Index
Full
– 5.8%
2011
.98
2010
1.04
28
2004
2005
2006
2007
2008
2009
2010
2011
EPL Market Pricing Index
Quarterly Change
Q1 2002 – Q4 2011 | Base year 2001 = 1.00
1.90
1.67
1.70
1.60
1.50
Index Value
1.50
1.30
1.42
1.38
1.28
1.28
1.26
1.17
1.08
1.10
1.01
0.95
0.86
0.90
0.96
0.91
0.89
0.70
0.50
2002
2003
2004
2005
2006
2007
2008
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
EPL Pricing Index
Q4
+11.6%
Q4 2011
0.96
Q4 2010
0.86
First evidence of rising pricing in many years is driven by anomalies and real increases:
• Pricing increases are occurring in the smaller employer segment of the market where the increased frequency of claims has significantly impacted loss ratios
because of very low retentions
•
•
29
Anomalies also exist in these numbers driven by some larger employers reducing their limit as a result of the Walmart decision. These clients often have received
premium decreases on the limits they maintain but the overall rate per million of the program has increased due to lower limits purchased, the Index reflects this as
an increase
Most clients are still experiencing flat pricing or small decreases
Distribution of Class Actions (2011)
W&H Class Actions by Sector
W&H Class Actions by Jurisdiction
W&H Class Actions - Nature of Claim
Questions