When You Don’t Want Workers to Be a Class Act

Employee class-action lawsuits, expected just two years ago to become a minor worry, remain a threat and may flare up in 2014.

Despite recent Supreme Court and lower-court rulings that have favored employers in class-action lawsuits brought on behalf of workers, there’s no room for complacency among top corporate executives over the potential for such legal actions to wreak financial havoc on companies.

That’s according to Gerald Maatman, co-chair of the class-action defense group at law firm Seyfarth Shaw and author of the firm’s tenth annual, 819-page “Workplace Class Action Litigation Report,” which analyzes 1,123 class-action rulings in 2013.

“In the past two years we’ve seen a combination of Supreme Court decisions help create a defensive barrier for employers in class-action cases,” says Maatman. “However, plaintiff lawyers have begun to breach this barrier with new theories and approaches. That, combined with increasing and aggressive government enforcement litigation, means employers may once again find themselves facing ‘bet-the-company’ class actions in 2014.” That’s a reference to lawsuits large enough to force a company to change its business model or, in a worst-case scenario, bankrupt it.

"The story for employers is good, but it's not a consistent story." — Gerald Maatman, Seyfarth Shaw

“The story for employers is good, but it’s not a consistent story.” — Gerald Maatman, Seyfarth Shaw

Since June 2011, some observers had assumed that the days of worrying about employee class-action lawsuits of such import were, in large part, gone for good or at least significantly diluted. That was when the Supreme Court issued its ruling in the landmark case, Wal-Mart Stores, Inc. v. Dukes. It was a gender-discrimination lawsuit, but the high court opined on the issue of the requirements for certifying a class.

The business-friendly decision made it more difficult for plaintiff lawyers to file and win class actions against companies. In the workplace arena, it has translated into fewer ERISA (Employment Retirement Income Security Act) and employment-discrimination cases, a lower success rate in those that have been brought and decreased settlement values for those that go plaintiffs’ way, Maatman says. There have also been fewer shareholder-derivative lawsuits stemming from such cases.

But as it turns out, the Wal-Mart case has had little impact on wage-and-hour class actions under the Fair Labor Standards Act, which gave nonexempt workers the right to overtime pay. “When the FLSA was passed in 1938, it basically applied to minimum-wage workers,” says Maatman. “But in the past 10 years there have been an increasing number of cases where, for example, financial analysts earning six-figure incomes have sued for overtime.”

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