SETTLE OR FIGHT AN EMPLOYMENT DISCRIMINATION CLAIM? YOU BE THE JUDGE

I think it’s fair to say that the first question employers ask when threatened with a suit under Title VII for employment discrimination is not: “How fast can I pay this claim and make it go away?” Instead, particularly if the claim is spurious, it is human nature to want to stand up and protest. After all, who wants to give away hard earned money to a problematic worker who didn’t do his job and then has the gall to allege that you somehow discriminated against him after a discharge for cause?

However, one of the first questions I pose to clients is: “If plaintiff is amenable to settlement, what is your drop dead number?” Truthfully, litigation is a long and extremely expensive road and if a client isn’t prepared to follow the path and assume the risk of loss at the end of the game, then settlement strategies should be entertained from the onset. Often, employers do have to work through the stages of emotions and outrage that follow such a claim, particularly if they have been served with a summons and complaint---and that is completely understandable. On many occasions, a quick settlement will be the least expensive settlement as, after depositions, plaintiff’s counsel may conclude that he has an even better case on his hands!

If plaintiff loses (and I am speaking of an individual rather than a corporate entity), try to recover attorneys’ fees from someone who is already broke! It isn’t going to happen. However, if the employer loses, even in part, a recent case from the 9th Circuit Court of Appeals demonstrates a problematic financial outcome from the employer.

In Muniz v. United Parcel Service, plaintiff brought multiple causes of action for employment discrimination including discriminatory demotion, gender and age based discrimination, retaliation, negligent supervision and training, seeking compensatory as well as punitive damages. A jury awarded plaintiff $27,000 on gender based bias but the remaining ones were either abandoned by plaintiff or were dismissed by the court. From that perspective, both plaintiff and the defendant employer won and lost. Following the verdict, both parties requested attorneys’ fees as the prevailing party in the action. The court granted the plaintiff’s request and, after reduction, awarded her attorneys’ fees in excess of 25 times the amount of the recovery. Just so you don’t have to do the math, plaintiff: $27,000; her lawyers: $700,000!!! The employer appealed. The appellate court upheld the award, concluding that the trial court exercised reasonable discretion in awarding the fees because both parties had difficulty segregating out the hours attributable to the winning claim as compared to the unsuccessful ones and the fact that plaintiff did prevail on the gender-bias matter.

The reluctance of courts to restrict attorneys’ fees to a reasonable percentage of a damages award and the gross disparity between plaintiff’s damages, as awarded by a jury, and her attorney’s windfall is instructive as to why plaintiffs’ counsel have turned from automobile negligence and medical malpractice cases to focus on employment litigation in recent years. It also demonstrates why my question to clients very early in the game about settlement numbers is well advised. Sometimes, my task is to get employers past the question of whether they have done something wrong and the potential exposure they risk in pursuing a defense. Clients with deep pockets may have many more options, as a practical matter, than new or stagnant companies.

The time to discuss employment discrimination is before it ever happens. Every employer needs a written anti-discrimination, anti-harassment policy----several pages which are worth their weight in gold---as well as training on how to address problem employees, methods of discipline and creating a paper trail.