How to Respond to Class Actions

​Frequently involving wage and hour issues, class actions against employers can result in lengthy litigation—but early response to them may reduce damages. This article, the first in a two-part series on class actions, examines strategies for responding to such actions, including how to interact with current employees who are seeking information on a lawsuit. The second part explains the differences among class, collective and representative actions.

"Over the past decade, workplace class-action litigation has exploded relative to its prevalence and complexity," said Jennifer Riley, an attorney with Seyfarth in Chicago. The class-action mechanism allows plaintiffs' lawyers to inflate the size and risk of litigation exponentially, she added. "As a result, workplace class actions remain at the top of the list of challenges that business leaders face. Managing and combating workplace class-action threats commands an ever-evolving and strategic approach."

Do's

Riley said the first 90 days of a class action are critically important. She recommended the following steps:

• Develop a plan for document preservation that includes preparation and distribution of a "record hold notice." Records to be preserved should include electronic records.
• Develop a strategy and plan for defense of the plaintiffs' claims.
• Align next steps such as investigation and preparation of responsive pleadings with the company's overall defense strategy.

In addition to consulting with a lawyer, investigate the claim, recommended Mike Kun, an attorney with Epstein Becker Green in Los Angeles.

"The most common situation I see is the former employee who believes that he or she was aggrieved in some way and is looking for recourse against his or her former employer," said Mark Wallin, an attorney with Barnes & Thornburg in Chicago. "Anytime a class or collective action is filed, it is well worth the time to review underlying policies and practices, not only to understand the allegations and how to defend against them, but also to ensure compliance going forward."

Nonetheless, it's not as unusual as it used to be for current employees to file class actions, Kun said.

Don'ts

"Local managers sometimes interact with plaintiffs in a manner that puts the corporate defendant at legal risk," Riley said. "We call it the inadvertent retaliation problem." One way to limit this risk is to send a memorandum to managers to whom plaintiffs report with instructions on how to deal with situations involving plaintiffs and a frequently asked questions guide about the lawsuit, she noted.

In responding to class actions, Kun said employers shouldn't panic. "Panic leads to bad decisions." Class actions are common and don't necessarily mean a business will have to pay millions or has done anything wrong, he noted.

Kun also advised the following:

• Don't call the plaintiffs' attorney right away to talk about the case. "Nothing good will come of that," he said, "and whatever you say not only will educate that lawyer, but they may try to use it against you later."
• Don't rush to talk with your employees or the media.
• Don't try to talk with plaintiffs themselves about the case.
• Don't send e-mails or memoranda to others about the case. Such e-mails or memoranda "often will not be privileged, meaning that you will produce them to the plaintiffs in the lawsuit."

At the beginning of the employment relationship, "employers should also consider arbitration agreements with class and collective waivers," Wallin said. "These agreements are not a cure-all, but they can be useful when dealing with workplace class and collective actions."

Current Employees Who Are Seeking Information on Lawsuit

Despite the risk of retaliation, employers that are being sued by current employees should be aware that those workers may be trying to gather information for use in their lawsuit and may have been instructed to do so by their attorneys, Kun said.

"Except in unique circumstances, it is wise to educate managers not to talk about the lawsuit or the issues in it with those employees, even when those employees initiate the conversation," according to Kun. "Even if managers are careful about what they say, their statements could be misconstrued or, worse, twisted."

Nonetheless, Keith Kopplin, an attorney with Ogletree Deakins in Milwaukee, said, "It is generally permissible for employers to deny liability, to say that they take the claims seriously and to explain that the court has not taken a position on the merits of the claims."

If employees involved in litigation want documentation for use in their lawsuit, their attorneys must request it as part of the litigation, Kun said. "The employees are not entitled to help themselves to the employer's documents. This is particularly true of confidential information."

If an employer discovers that an employee is taking documentation for use in the litigation, it should contact its attorneys to promptly address it, he added. "Such conduct not only could be grounds for termination of the employee, but for sanctions or disqualification of the employee's attorney," he said. "Generally speaking, attorneys are not permitted to accept stolen property, much less use it to their advantage in litigation."

Employers should be particularly sensitive to employees who have access to confidential information and documents through the employer's computer system, Kun emphasized, noting that employees are generally "not entitled to search through an employer's computer system to look for information for their litigation."

Employees also are not entitled to give their lawyers their ID and password information so that their attorneys can go searching through the employer's computer system themselves to look for documents for their case, Kun added, saying he caught this in a class action several years ago.

"If you learn that has occurred, you should contact your attorneys promptly," he recommended.