Why workplace lawsuit settlements totaled billions of dollars last year -- and 2022 could be even worse
The top 10 settlements in workplace class action litigation report hit a record $3.62 billion in 2021. Here's what employers might see in 2022.
The conventional wisdom in the early days of the pandemic was that a cash-strapped economy would combine with a dearth of trials to decrease pressure on defendants and deflate settlement offers. The lawyers at labor and employment defense firm Seyfarth Shaw found in their annual survey of workplace class action settlements last year that the conventional wisdom didn’t quite hold up. The top 10 settlements in that world totaled $1.58 billion in 2020, compared to $1.34 billion in 2019, and $1.32 billion in 2018.
So what happened in 2021?
According to the latest crunch of the numbers by the firm, the top 10 workplace class action settlements ballooned to a record $3.62 billion last year. You can request a full copy of their 844-page report here, or check out the executive summary and first two chapters here.
Gerald Maatman Jr., the co-chair of the firm’s class action litigation practice group at the firm and the general editor of the report, offered his take on what’s behind the uptick in settlement dollars and why it matters, in a discussion with BenefitsPRO’s sister publication, Law.com. The following has been edited for length and clarity.
The aggregate amount of the top 10 settlements from the various employment class action categories you track went up to a record $3.62 billion in 2021. What was driving that?
Gerald Maatman Jr.: I think there was a combination of factors. One would be that skilled plaintiffs attorneys figured out how to craft cases that would maximize their recovery. A subcategory of that is both ERISA and wage and hour settlements more than doubled in 2021. Claims for violation of employment-related laws and claims made against employers for sexual abuse and things like that – that particular area, increased tenfold.
You’re seeing lawyers who used to do securities fraud class actions, or only wage and hour class actions beginning to branch out and bring other sorts of claims that are still related to workplace issues. But they now have a broader kind of inventory and array of cases that they’re litigating.
To me what was counterintuitive is that in the beginning of 2021 and the beginning of COVID there was this notion that cash is king, and companies didn’t know what the future would bring during the calendar year. Employees were being furloughed, laid off, or companies were taking other cost-saving measures. Courthouses were being shut down and things were reverting to Zoom. So many people thought “there aren’t going to be very many settlements this year” or “companies or insurance companies will hold on to money because there’s no pressure with looming trial dates to settle.”
My personal take is that employers and corporate America adjusted very well to the new normal in terms of doing business. The economy was strong and they did pretty darn well this year. And so instead of pulling back, there was more settlement activity than normal and at higher settlement levels. All those things kind of coalesced and a good percentage of those blockbuster settlements took place in the fourth quarter of 2021. And so I think you saw a change or a shift in the mentality of businesses from the first quarter to the fourth quarter in terms of “now let’s try to close out these cases, settle them and resolve them, so we have a flying head start into 2022” which hopefully, knock on wood, would be a different year where people can return to the old normal and go back to the office. And then, of course, Omicron hit.
What Seyfarth tracks is tied to the top 10 settlements. Why do you think that’s an effective way to gauge the market?
One reason is that lawyers for the plaintiffs follow that sort of thing and track it and use successful settlements and successful theories in crafting their cases. Again, success begets copycats.
The other area is social media – what Joe Q. Public follows on the internet or on his or her phone, in terms of reading about legal issues. They might not understand a court ruling, but they understand a headline that announces a big settlement. Typically those big settlements prompt additional lawsuits or cause people to think about their own problems.
The challenges to the federal vaccine or test mandate come up in the report. With the federal mandate now pending at the Supreme Court, can you tell me how employers who’ve been implementing their own rules on this front have fared in challenges brought by workers?
I would divide those legal challenges issues into two boxes: What happens when a private employer is challenged or sued for what it’s done in terms of instituting a policy in a workplace? And then there’s another legal box which is government-imposed regulations being challenged. In that box, people challenging regulations are kind of doing well in terms of first-generation challenges. But lately, most state and local regulators’ regulations are being upheld. But now at the federal level, it’s a roll of the dice in terms of what’s going to occur with what was argued this past week, and when that decision will come down.
These cases tend to be class actions, but they have to separate sensitivity or flashpoints. Judges are giving a wide berth to private employers, by and large, With government defendants, judges are saying the government regulator, the legislator, or the executive official has to follow the rules or has to follow the Constitution as they craft a rule. That makes sense. I would expect the language the U.S. Supreme Court uses and its upcoming opinion will be a marker that will have a big impact on legal challenges going forward in 2022.
What are you expecting out of 2022?
Well, I think a lot depends on people working more in a physical office location than in a remote location. Typically when there is a return to work, there is a reshuffling of the deck so to speak or a refashioning of operations. So I think you’re gonna see dislocations in the economy over the year as companies try to become even more efficient and determine who they need to conduct their operations and who they don’t. I think you’re going to see a lot of firing and layoff litigation. I think there’s going to be a lot of wage and hour litigation because more than half the states have raised their minimum wage and so the damages in wage and hour cases are only going up. And I think that the way in which employers pay people and comply with federal state and local wage and hour laws and regulations continues to be the sweet spot.