As employers and their counsel constantly look for ways to decrease litigation costs and minimize the risks of unfavorable outcomes at trial, an old weapon in the federal litigation arsenal may be gaining renewed interest in the employment field as an effective tool to encourage settlement. Specifically, Federal Rule of Civil Procedure 68 establishes a cost-shifting mechanism — known as the “offer of judgment” — by which a party who rejects a settlement offer but later recovers a lesser award at trial is both precluded from recovering his own costs and is liable for the other party’s costs incurred following the time that the “offer of judgment” is made.

In practice, Rule 68 has not been widely used. Indeed, inherent ambiguities and complexities in the language of the rule have led commentators and courts to question both its scope and applicability, and have led many practitioners to avoid use of the rule altogether. A better understanding of Rule 68 is worthwhile, however, as it can be a useful tactic to facilitate the litigation and settlement processes.

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