The year just ended was a seismic one for employment-related class action litigation, paving the way for more far-reaching judgments, court rulings, and changes to class action law in 2011. Furthermore, in 2010, the value of major employment discrimination class action settlements increased four-fold over the prior year and the top ten settlements of wage & hour, ERISA, and governmental enforcement class actions increased to $1.16 billion, the highest amount ever.
The “tipping point” aspect of these changes is featured in the 2011 edition of Seyfarth Shaw’s Workplace Class Action Litigation Report. The 664-page Report, our Seventh Annual Edition, examines 849 decisions rendered in 2010 against employers in state and federal courts, including private plaintiff and government enforcement actions. The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become to “go to” research and resource guide for businesses and their corporate counsel facing complex litigation.
While shareholder and securities class action filings experienced only a slight uptick in 2010, employment-related class action filings increased dramatically. Anecdotally, surveys of corporate counsel confirm that workplace litigation – and especially class actions, multi-plaintiff lawsuits, and government enforcement litigation – continues to drive corporate legal budget expenditures, as well as the type of legal dispute that causes the most concern for their companies.
In terms of key decisions, there was no class action ruling in 2010 quite like Dukes, et al. v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010), a Title VII gender discrimination case challenging pay and promotions involving 1.5 million class members. On April 26, 2010, an en banc panel of the Ninth Circuit affirmed the certification order in Dukes by a 6 to 5 vote. A detailed analysis of the Ninth Circuit ruling in Dukes is contained in Appendix I at page 617 of the Report. Wal-Mart subsequently filed a petition for certiorari with the U.S. Supreme Court, which was granted on December 6, 2010. A future ruling by the Supreme Court in Dukes is likely to be one of the top class action developments in 2011 and beyond.
Employment discrimination, ERISA, and FLSA litigation filings increased over the past year. FLSA and employment discrimination cases spiked sharply, and outpaced ERISA filings. Based on statistics from PACER filings with the Administrative Office of the U.S. Courts, employment discrimination lawsuits increased to 14,559 in 2010 from 13,720 in 2009; ERISA lawsuits increased to 9,038 in 2010 from 8,944 in 2009; and FLSA lawsuits increased to 6,761 in 2010 from 6,120 in 2009. Since the majority of FLSA filings were on behalf of groups of employees, wage & hour class actions and collective actions out-paced filings of class actions for employment discrimination and ERISA violations. In turn, while plaintiffs continued to achieve initial certification of wage & hour collective actions, employers also secured several significant victories in defeating conditional certification motions and obtaining decertification of § 216(b) collective actions. Given the trickle-down phenomenon of class action settlements (and the increased awareness of wage & hour issues by workers), it is expected that the pursuit of nationwide FLSA collective actions by the plaintiffs’ bar will continue in 2011.
A new case law trend in 2010 focused on workplace arbitration agreements and their enforceability and impact in the class action context. While no one suggests that the sun is setting on workplace class actions, the Supreme Court’s ruling in Stolt-Nielsen S.A., et al. v. Animalfeeds International Corp., 130 S. Ct. 1758 (2010), arms employers with additional ammunition to confront class action litigation through drafting of comprehensive workplace arbitration programs. Stolt-Nielsen quickly spawned several rulings in employment discrimination and wage & hour class actions, thereby demonstrating the importance of this development for employers utilizing arbitration agreements. This development is likely to accelerate, as the Supreme Court considers state law limits on class action waivers in Concepcion, et al. v. AT&T Mobility, a case scheduled for decision in the Spring of 2011.
On the wage & hour front, a confluence of factors contributed to an ever-increasing number of claims. In one respect, 2010 might be termed the “Year of the Misclassified Worker” class action lawsuit based on end-of-the-year figures that show a sharp increase in crackdowns this year by state and federal authorities, and filings by class action lawyers in pursuing private lawsuits against companies that allegedly misclassify employees. Employers utilizing independent contractors were the focus of intense litigation scrutiny on these fronts. Approximately 20 states and scores of municipalities passed laws in the past two years that make it easier to force employers to reclassify independent contractors as employees and seek unpaid taxes, or authorizing claims for “wage theft.” Likewise, the DOL’s enforcement litigation resulted in employers paying $6.5 million in back wages to 5,261 employees in fiscal 2010, up sharply from $2.6 million obtained for 2,190 employees in 2009. The DOL and Internal Revenue Service (“IRS”) also increased their budgets and staffs to identify and audit employers and their classifications of workers, as well as implementing its new “Plan/Prevent/Protect” enforcement strategy.
Due to the enormous financial stakes, trials of class actions continue to be rare, and verdicts in these trials rarer still. However, 2010 witnessed the largest employment discrimination class action trial verdict ever – the $250 million verdict in Velez, et al. v. Novartis Pharmaceuticals Corp., Case No. 04-CV-9194 (S.D.N.Y.) following a seven-week trial in the Spring of 2010. After the verdict, the parties promptly settled the class action for $175 million on July 14, 2010. The settlement is one of the largest employment discrimination class action settlements ever.
If trials of class actions were rare, settlements of class actions in 2010 reflected a continuing trend from past years, in which significant monetary payments were made in mega-class actions with nationwide classes. Settlements in FLSA collective actions and ERISA class actions once again outpaced employment discrimination class action settlements in terms of overall settlement values. In turn, settlement amounts in wage & hour class actions and government enforcement lawsuits experienced significant increases over 2009 figures. In closing the year, plaintiffs secured a $57 million verdict in a wage & hour class action in Rekhter, et al. v. Washington Department of Social And Health Services, Case No. 07-895-5 (Thuston County, WA), on December 20, 2010.
Finally, case law developments under the CAFA accelerated in 2010. The statute has had profound effects on litigation strategy and the structuring of underlying class actions. In this context, the CAFA’s impact on workplace class actions is both varied and evolving. Class actions and collective actions under Title VII, the ADEA, the FLSA, and ERISA typically are brought in federal court. The CAFA may have limited impact on strategic decisions in those cases relative to choice of venue in a federal court or state court. Class actions in state law-based wage & hour litigation are another matter. The plaintiffs’ bar and defense bar alike continue to confront novel CAFA issues in wage & hour cases, as the fight over venue is often a key driver of exposure and risk. On the one hand, employers sued in state law wage & hour class actions are increasingly confronted by plaintiffs’ lawyers seeking to avoid removal to federal court by various stratagems, including prayers for relief of less than $5 million, the filing of multiple “baby” class action claims on behalf of fewer than 100 plaintiffs, and limiting the scope of the class to residents of one state. On the other hand, defense counsel seeking (often successfully) to dismiss state law claims pursued by plaintiffs with FLSA claims in “hybrid” wage & hour class actions in federal court argue that judges should not exercise supplemental jurisdiction over the state law claims. Federal courts, in turn, are increasingly confronted with questions of whether original jurisdiction exists under the CAFA over such hybrid state law claims, and employers also may face a two front litigation war – one in federal court and the other in state court – depending on resolution of those CAFA issues. These litigation issues continue to shape class action practice and defense strategy, and are likely to do so for the foreseeable future.