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The scenario has become all too familiar. General counsel for a large ormidsize corporation receives a telephone call from a nationally knowncivil rights attorney who says he would like to discuss a problem thatexists within the company. The problem, says the caller, is that the company has systematicallydenied equal opportunities for advancement and compensation to certaingroups of employees. He says this can be proven through the company’sown records and statistics. The solution, he says, is to revamp thecompany’s policies and practices, to submit employment decision-makingto an independent, external task force and to hold a series ofarbitrations to ensure appropriate restitution for past discriminationand adequate compensation for counsel representing the employees.Please note, the caller adds, that if the company is not willing to takethese steps immediately, he is prepared to file a massive class actionalleging systematic discrimination and abuse and to hold a pressconference on the courthouse steps outlining the allegations in thelawsuit. This kind of scenario is not just an imagined threat. Real companiesincreasingly are paying out real dollars in the face of employment classactions. Suing employers has become a growth industry. In 2000, theCoca-Cola Co. settled a widely publicized race discrimination classaction for a reported $192.5 million. Before that, Texaco reportedlysettled a race discrimination class action for approximately $176.1million in 1997. And before that, the Publix supermarket chain wastargeted in a sex discrimination class action that resulted in a widelyreported settlement of approximately $81.5 million. Lately it seems thatvirtually any company with a sizable number of employees is a potentialtarget of a class action. The risks of not taking steps to prepare for, or avoid, employmentlawsuits are very real. Eight- and nine-digit verdicts or settlements,while not usual, are becoming increasingly and alarmingly more common.Companies also are concerned, and rightly so, with the potential damagethat such lawsuits can have on their public image. Many companies viewthis as the larger threat — the “taint” of their product, service or brandname. The potential impact on employee morale and productivity is a lessobvious, but important, factor to consider. A high-profile lawsuitchallenging a company’s employment practices can create dissension,distrust and unnecessary tension in the workplace and can havefar-reaching adverse effects on productivity. With increasing attention on corporate responsibility, directors,officers and shareholders are asking what their companies can do tomanage these kinds of risk. There are a number of steps an employer cantake before receiving that call from a plaintiffs attorney. OFFENSE STRATEGIES The best defense in an employment class action is a good offense, notonly to prepare a positive and compelling case in court and in themedia, but also to take proactive steps to prevent or avoid litigationaltogether. In order to build an effective program for managing theserisks, one must have an understanding of the types of claims, defensesand procedures involved in these types of cases. The early stages of a class action place significant burdens and demandson the defendant-employer. Legal counsel will be required to collect,review and analyze potentially hundreds of thousands, or perhapsmillions, of pages of documents and reams of data as part of the casestrategy and evaluation process as well as the discovery process. Thelogistics alone can be an enormous challenge. The defendant must begin its investigation and prepare an answer withina very short time after receiving a complaint and summons. While theplaintiffs’ attorneys typically have months to research their clients’claims and to gather information from prospective class members beforefiling a complaint, the defendant may have as little as 20 days to filean answer. Preliminary discovery may begin right away, depending on thejurisdiction. Invariably this will involve several months of intense andexpensive activity, including the collection, review and analysis ofdocuments, the preparation of interrogatories and responses, and thedeposing of key witnesses. In many cases, both sides will engagestatistical and other experts to perform complex, detailed analysis ofkey issues. In any class action, a crucial early procedure is to determine whetherthe case is appropriate for class treatment. In most jurisdictions, theinquiry is whether the individuals spearheading the case, the namedplaintiffs and their counsel, can adequately pursue claims on behalf ofthe proposed class and whether the claims are sufficiently common andtypical among members of the proposed class. Because this process isvery fact-intensive, the parties must gather and present compellingevidence to support their respective arguments for or against proceedingin collective form. CLASS-RELATED DISCOVERY A key focus of preliminary discovery is on employee records anddatabases relating to promotions, compensation, terminations and soforth. The plaintiffs’ attorneys typically seek immediate access tothese items so that their statistical and other experts can formulateopinions based on the company’s own data and information. Thedefendant’s attorneys typically conduct intensive discovery with regardto the named plaintiffs and their claims to explore potentiallydivergent claims or interests among the proposed class members. The parties then assemble the record and present their respectivearguments on whether a class should be certified. The outcome of thisthreshold class certification procedure can have an enormous impact onthe potential exposure associated with the lawsuit. These types of casesrarely go to trial. Most cases in which the plaintiffs obtaincertification of a large class of employees result in large settlements.However, cases in which the plaintiffs fail to obtain certificationtypically settle for a fraction of what the plaintiffs’ attorneysinitially hoped, or proceed to judgments on an individual basis. Most employment class actions involve allegations of deficientemployment policies or a “pattern and practice” of allegeddiscrimination in employment decisions. Plaintiffs typically allege thatintentional discrimination is the employer’s “standard operatingprocedure.” In many cases, plaintiffs contend that employers makedecisions based on subjective factors that allow supervisors to engagein intentional discrimination. Supporting evidence often consists ofstatistical and other expert opinions and anecdotal testimony fromcurrent or former employees. Sometimes there are allegations that an employer uses policies orpractices that are facially neutral but have a “disparate impact” onmembers of particular groups. For example, plaintiffs may argue that askills test or other objective or neutral job requirements havedisproportionate adverse results for certain groups. Statisticalanalysis is almost always required to establish a disparate-impactclaim. Other types of allegations frequently seen in employment class actionsare that particular groups are subjected to a “hostile work environment”based on racial or sexual harassment. Supporting evidence typicallyconsists of anecdotal testimony and documents purporting to show thepervasive existence of race- or sex-related comments, conduct ormaterials in the workplace. The defendant may argue at the initial certification stage that thealleged policies or practices are not uniform or cannot have affectedall members of the proposed class in the same or a similar manner. Forexample, in a company with many different divisions and departments,there may be a strong argument that policies or practices in onedepartment cannot be challenged by employees in other departments. Thismay help to establish that the facts and circumstances surrounding thenamed plaintiffs’ claims are not sufficiently similar to those of theproposed class members. Another argument frequently raised by the defendant is thatdecentralized decision-making or the delegation of authority ordiscretion to mid- or lower-level managers does not constitute a uniformpolicy that is subject to challenge on a class basis. At most, thedefendant argues, such delegation of authority or discretion mightsupport individual claims of discrimination relating to particularmanagers’ decisions, but cannot support a classwide claim ofdiscrimination throughout the company. An increasingly effective argument for the defendant is that the claimsof potential class members require so many individualized inquiries thatit would be inappropriate or impracticable to adjudicate all the claimsin a single proceeding. Moreover, to the extent the plaintiffs areseeking compensatory or punitive damages, these individualized inquiriesare even more numerous and complex so that class certification isinappropriate. These types of individualized inquiries can behighlighted through preliminary discovery of the named plaintiffs’claims. BONE UP ON STATISTICS The importance of statistical analysis in an employment class action ismanifest. Plaintiffs can be expected to present figures, charts, graphsand statistical expert reports purporting to show gross disparities withrespect to employment decisions or work-force demographics. The employermust be prepared to respond with more accurate data and more meaningfulanalysis. The earlier the employer and its legal counsel have knowledge of all thepertinent facts about the company’s business operations, organizationalstructure, work-force demographics and decision-making processes, thebetter prepared the employer will be to fight off class certificationand to defend itself in the media. Perhaps the most important message for the employer is: Don’t be afraidto know. The old adage “what you don’t know can’t hurt you” simply isnot true in this kind of litigation. In fact, more often the opposite istrue: Knowledge is power. If an employer is armed with knowledge of the types of claims, defensesand procedures involved in such lawsuits and of the importance ofmastering the relevant information and data, it is well on its way toimplementing a plan for successfully fighting off a challenge in courtor in the media. The key is being able to tell its story accurately,forcefully and quickly. This can happen only if the employer has taken acritical look at its own work force, management structure anddecision-making processes. Activating legal counsel is perhaps the most important first step. Legalcounsel can help ensure not only that the right questions are asked, butalso that the process is protected from disclosure to the maximum extentpossible under attorney-client and work-product privileges. Preparationcan backfire if appropriate precautions are not taken. If legal counselis not directing the process, a company’s self-critical information anddata could be subject to discovery. Once the right legal team is in place, the company can conduct aprivileged workplace statistical audit. Often the best starting place isan examination of the company’s work force, comparing human resourcesdata with demographic information and tracking hires, transfers,movements and career progressions over time with regression analysis.This type of analysis can reveal potential vulnerabilities or, perhaps,strengths on which the company may need to focus attention. HONEST SELF-EXAMINATION It is also crucial to gain a thorough grasp of what employment-relatedrecords are maintained, how they are organized, how long they are keptand, of course, what facts and information they contain. A relatedinquiry is what filings and submissions have been made to governmentagencies or third parties regarding the company’s work force. Manycompanies routinely submit raw work-force data to the governmentpursuant to federal or state regulations. Some plaintiffs’ attorneysobtain government filings through the Freedom of Information Act andbuild their cases on such records well before the companies know theyhave been targeted. The legal team also should take a critical look at existing policies andpractices related to human resources. This should include a detailedanalysis of how decisions are made regarding new hires, promotions andtransfers, compensation, discipline and other types of job actions. Whomakes these decisions? What policies affect or control such decisions?What factors are considered? Are they job-related? How much discretiondo individual managers have? What procedures, if any, are in place formonitoring compliance with equal opportunity policies? These are thetypes of questions an employer is likely to be asked in litigation, andit is well advised to consider such questions with legal counsel inadvance of litigation. Additional steps a company can take include proactive training andmonitoring of managers, establishing effective means of policing thework environment and managing employee perceptions. These steps also canhelp diffuse tensions before they develop into formal legal challenges.Finally, the company should have in place a corporate response plan thatcan be implemented immediately in the event of an employment classaction. This includes a strategy for handling and managing not only thelitigation but also communication with the work force and the mediaabout the litigation. By building a good offense, through self-critical analysis, contingencyplanning and other proactive steps, the company can position itself towin in the early stages of litigation or avoid litigation altogether. W. Christopher Arbery is a partner in the Atlanta office of Hunton &Williams ( www.hunton.com). His practice focuses on labor and employment law. If you are interested in submitting an article to law.com, please click herefor our submission guidelines.

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