Class-Action Lawsuits Against Employers Grow

​New research shows how much class-action lawsuits against employers have increased and the need for employers to take action to prevent legal missteps.

The top 10 settlements in employment discrimination class actions totaled $597 million in 2022. The top 10 settlements in wage and hour class actions totaled $574.55 million, and the top 10 settlements in Employee Retirement Income Security Act class actions totaled $399.6 million, according to a new report from Duane Morris.

In recent years, "jurors are more apt to find for plaintiffs, and when they find for plaintiffs, they are apt to award more money than they used to," said Gerry Maatman Jr., an attorney with Duane Morris in Chicago. It's a "perfect storm of factors that has driven up the cost of settlements."

Courts greenlighted more class-action certifications in Fair Labor Standards Act cases than in any other type of case in 2022.

"Success begets copycats," Maatman said, so employers can expect more of the same trends in case filings and settlements in 2023.

One new area of focus for class actions is workers suing employers for using biometric technology, based on the Illinois Biometric Information Privacy Act. "[T]hose sorts of lawsuits are accelerating at a quicker pace," Maatman said. "2023 is going to be the year where privacy issues are going to confront employers, and those employers that have privacy policies in place will be well-served. The notion of privacy and what privacy means, especially in the workplace, has been transformed, and it's much more important now than in the past."

Civil Rights

In civil rights class actions, many of the top settlements in 2022 were against universities for alleged sexual abuse by employees. For example, the University of Michigan paid $490 million to settle a class-action alleging sexual abuse of thousands of male students by a

doctor employed by the school, and the University of California paid $374.4 million to settle a class-action alleging sexual abuse of more than 300 female patients by a gynecologist at the University of California Los Angeles.

Plaintiffs in two cases before the U.S. Equal Employment Opportunity Commission (EEOC) alleged that the National Aeronautics & Space Agency discriminated against Black and Asian-American employees by using a biased rating system in performance reviews, which led to pay, promotion and performance disparities. The EEOC approved the class certification in September 2022.

About 500 Black fire protection inspectors sued New York City on the basis that predominately white building inspectors received higher pay for performing essentially the same work. A federal court approved their motion to be certified as a class in June 2022.

Limiting Arbitration

One way for employers to stop class actions is to take a case to arbitration instead of trial. However, two U.S. Supreme Court rulings in 2022 made it harder for employers to compel arbitration.

In Southwest Airlines Co. v. Saxon, the court ruled that the airline could not compel arbitration of a baggage-handling supervisor's wage claims because she was considered a transportation worker engaged in foreign or instate commerce and thus exempt from the Federal Arbitration Act.

In Morgan v. Sundance, the court ruled that federal courts cannot adopt special, arbitration-preferring procedural rules. It said the employer, Sundance, could not compel arbitration after waiting for eight months to do so.

Practical Steps for Employers

To avoid class-action lawsuits, employers should be aware of any changes to employment laws, keep accurate staff records and apply policies consistently.

"That's often the best defense," Maatman said. Following protocols and standard operating procedures "often makes a big difference in spelling success or failure in trying to defend these cases."

Training employees on wage and hour laws and making sure nonexempt workers properly record all hours worked can be helpful as well.

Especially for larger companies, an audit of wage and time-keeping practices could flag potential problems before they turn into a class-action lawsuit.

"A well-done audit by someone with expertise, often a sophisticated wage and hour attorney or HR consultant, may serve to significantly reduce an employer's exposure to problems that may arise if challenges later occur," said Robert Boonin, an attorney with Dykema in Ann Arbor, Mich. "Such an audit could establish nonwillfulness and good faith sufficiently to reduce liability from three to two years, and to also reduce the likelihood of liquidated damages in an amount equal to any unpaid overtime finding from being assessed."