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US Supreme Court Hears Class-Action Case: What You Should Know

T he US Supreme Court heard arguments Monday, October 2 regarding whether employers can legally require employees to sign arbitration agreements that wave their rights to filing class-action lawsuits — which some believe to be a violation of the National Labor Relations Act. If the Court finds in favor of the employees, the ruling could substantially increase the accessibility of class-action lawsuits against companies operating in the country.

And with an estimated 25 million workers in the United States having already signed such agreements, in-house counsel should consider making substantive changes to their employment and litigation protocol in preparation for the decision. Below are three strategies for how you can protect yourself and your company.

Avoid

It is generally understood that class-action litigation with regard to wage and overtime can be a time-consuming process. In fact, wage/hour class action lawsuits represent more than 90 percent of all class action disputes in the United States, averaging nearly US$1.9 million per settlement. Complex litigation remains a top area outsourced to law firms, with 97 percent of CLO respondents to the ACC Chief Legal Officers 2017 Survey stating that they delegate litigation to outside counsel — increasing the cost on the company to mitigate risk.

Faced with the potential increase in class-action disputes, in-house counsel should begin by conducting a thorough audit of current practices to determine how to avoid costs without the need for an arbitration agreement.

According to the ACCDocket.com article “Learning to Avoid Costly Wage and Hour Class Action Litigation,” conducting an audit will allow the legal department to better understand the scope of their arbitration agreements (if applicable) and discover inconsistencies. “Senior management has to be well informed to take action, making lasting chance, and ensuring compliance,” the article states.  

In truth, however, the only sure-fire way to avoid class-action litigation is to ensure that company practices abide by the contracts agreed upon with their employees. When disputes do arise, having a thorough understanding of your employment protocol prior to the dispute will be an asset toward a speedy resolution. The article continues:

“By discussing lessons learned from past litigation, in-house counsel can work collaboratively to ensure policies and practices are adapted to help defend against future actions.”

Manage

If companies do see a sharp increase in class-action litigation disputes, litigation management will be crucial. In the ACC Docket October 2016 feature article “Litigation Management: The Critical Steps to Achieve Success and Reduce Costs,” author Brenda M. Cotter outlines important ways to manage litigation costs in a time where the threat of litigation is more pressing than ever before. According to the ACC Chief Legal Officers 2017 Survey, 24 percent of the law department budget is spent on litigation yearly.

“Unfortunately, the nature and importance of in-house litigation management is not well understood,” Cotter states in the article. “In fact, it is one of those jobs that if done well, the effects may go unnoticed … In contrast, failure to properly supervise a litigation matter in-house, whether due to time constraints or to lack of specific litigation expertise, can have serious consequences.

To mitigate risk, Cotter outlines a list of key steps that all in-house counsel should follow in the pursuit of a clean and efficient litigation process:

“Managing litigation requires several critical steps including the following:
      •    Develop and define a “win” at the outset;
      •    Investigate insurance and indemnity status;
      •    Hire the right outside counsel;
      •    Negotiate and closely monitor fee arrangements;
      •    Facilitate internal communication and systematic reporting;
      •    Oversee ongoing strategic decisions;
      •    Ensure that all pleadings and communications are consistent with business and litigation strategy;
      •    Minimize the burden on the business whenever possible;
      •    Continually look for opportunities to resolve mattes favorably;
      •    Provide careful attention to compliance; and,
      •    Look for ways to implement process improvements.”

In the wake of the Supreme Court decision, in-house counsel would be shortsighted to apply “one-size-fit-all” protocol to litigation management. In setting long-term objectives, remember that each dispute — no matter how small — must be given the appropriate attention. Management is not synonymous with cutting corners.

Arbitrate

Litigation is known for its inefficiency, open-ended costs, and misaligned priorities. However, companies are beginning to look at arbitration as a suitable alternative. In preparation for an increase in class-action disputes, in-house counsel operating in the United States should consider implementing such practices to avoid the consequences of the courtroom.

According to the ACC Docket October 2017 feature article entitled “Confessions of a Former Litigator: How to Craft Truly Business-Friendly ADR,” author Rob Christopher underscores that handling limited-stakes disputes in arbitration can have substantial benefits for employers looking for an amicable resolution. For years, Christopher argues that even the smallest piece of litigation has been a Pandora’s box of time, resources, and cost-efficiency for the legal department.

“Our justice system has created a serious and growing ‘no man’s land’ or ‘gap’ of injustice in the resolution of limited-stakes legal disputes. Ours is a system that effectively turns all of those moderate stakes cases into insane poker games.”

Christopher advocates for the rise of neutrally driven alternative dispute resolutions (NDR) in company practices — which empowers a mutually selected independent judge to conduct an investigation into the case and, if necessary, ultimately decide the dispute. The process slashes time-commitment and costs to rational levels by focusing on the investigation instead of prioritizing an advantage. In addition, it makes an unpredictable process predictable by agreeing to fixed or capped fees in advance of the process. NDR, according to Christopher, is a tangible solution to the potential outpouring of litigation cases.

Predicting the future

Although the Supreme Court currently has a 5-4 conservative majority, with many in support of the employer, some justices have expressed their support for the employee’s right to file a class action — making it increasingly difficult for companies to predict the outcome of the case.

“To proceed alone in the arbitral forum will cost much more than any potential recovery for one,” says Supreme Court Justice Ruth Bader Ginsburg. “That’s why this is truly a situation where there is strength in numbers. We have to protect the individual worker from being in a situation where he can’t protect his rights.”

In looking to the future, in-house counsel should see the Supreme Court’s decision for its potential opportunity. Regardless of the outcome, consider using the moment to analyze litigation practices, cut costs, and increase efficiency. You’ll be happy you did.


The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.