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Employment litigation can be a high-stakes lottery. Not only that, it’s one in which the odds are usually stacked against employers. Litigation is expensive and time-consuming, and the outcomes, particularly of jury trials, are wildly unpredictable. As a result, companies often make decisions based on the potential cost of defending employment actions, not on the merits of the case. The good news, however, is that the number of preventative measures available to employers has recently increased. Several decisions in the past few months have broadened the number and strength of measures that companies can put in employment contracts to better manage employment litigation. Companies can require employees to waive the right to a jury trial, accept a shortened statute of limitations and agree to forgo joining putative class action suits. Jury trial waivers can eliminate a significant portion of the potential risk involved in employment litigation. Because jurors have diverse backgrounds and experiences, it’s inherently difficult to predict how they will react to the evidence presented in a trial. And the results of their deliberations can sometimes be staggering. In a recent case in Detroit, a jury awarded over $10 million to a radio host who alleged she was fired after complaining that another employee’s perfume made her sick. Jury waivers are signed long before a dispute arises — typically when employees are hired. In the absence of a jury, cases are tried by a judge. The defense saves time and money because there is no need for jury selection and instructions. The need for “sympathy evidence” is reduced or eliminated, which also saves time. And, not least of all, the outcome of bench trials tends to be more in line with the law. Because allegations of discrimination and harassment typically are based on federal law, most employment disputes are tried in federal court. A plaintiff’s right to a jury trial arises from 1991 amendments to the Civil Rights Act. Jury waivers essentially return employees’ rights to what they were before the 1991 amendments. Employees retain all other procedural and substantive rights. Bench trials are advantageous to employers. A study released in April 2004 by the U.S. Department of Justice, which analyzed verdicts rendered in civil trials in 2001 in 75 of the country’s largest counties, found that in employment discrimination cases that went to trial, plaintiff winners received a median award of $218,000 from juries, but only $40,000 from judges. The duration of jury trials was 4.3 days on average, compared with 1.9 days for bench trials. As important, the time from filing of a case to disposal was shorter with nonjury cases. So far, so good. But can employers compel new hires to sign waivers? That depends. The law surrounding the enforceability of jury waivers in employment cases is limited. Since most discrimination and harassment lawsuits are filed in federal court, enforceability usually is a matter of federal law. The U.S. Supreme Court has held that federal law should be applied to questions in federal court regarding jury trials, and federal courts have enforced jury waivers in some employment agreements. In Brown v. Cushman & Wakefield Inc., a terminated employee filed a discrimination claim under Title VII and demanded a jury trial. The employee had, however, signed an employment agreement that contained a jury waiver. The court held that because he signed the waiver “knowingly and voluntarily,” it was enforceable. The Brown decision is consistent with decisions that enforce jury waivers in commercial contexts. Jury waivers are more likely to be enforced when combined with agreements to mediate Equal Employment Opportunity Commission disputes at an employer’s cost. Early mediation can be useful for both parties and may be viewed by a court as a benefit provided to the employee in exchange for obtaining a jury waiver. This mediation dispute process also should be supplemented by an educational component describing the employer’s EEOC policy, its mediation program, and its jury waiver requirement. In addition to being a smart litigation strategy, a program that provides for early mediation and jury waiver may lead to fewer claims, due to employee education and prelitigation efforts to resolve disputes. Companies should also protect themselves from having to defend suits arising from behavior that occurred long ago. This can be done by having new employees sign an agreement that shortens the period in which employment suits may be brought. The 6th U.S. Circuit Court of Appeals recently enforced such a shortened statute of limitations. In Thurman v. DaimlerChrysler Inc., the employer included the following language in its employment application: “I agree that any claim or lawsuit relating to my service with Chrysler Corporation or any of its subsidiaries must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.” In the employment contract, this clause was preceded by the words “Read Carefully Before Signing,” set in bold capital letters. The plaintiff, who alleged sex and race discrimination and several torts, did not file suit within six months of the actions that were the subject of her case. The trial court granted Chrysler’s motion to dismiss the case, and the 6th Circuit affirmed. The 6th Circuit looked to Michigan state law to analyze the enforceability of the six-month limitation. While the clause was viewed as permissible in Michigan, several states have statutes that appear to prohibit such agreements (Florida, Missouri, New Hampshire, Oklahoma, and South Dakota). But even in some of these states, the issue is not resolved. At any rate, it makes sense for companies to require employees to agree to an abbreviated period for filing suit because it is better to become aware of disputes sooner rather than later. Employers also should consider requiring employees to agree to forgo participation in putative class actions. In recent years there has been a tremendous increase in the number of employment-related class action suits. Employees who have no plans to file suit individually may join a class action because it is essentially painless to do so. Courts address class action waivers on a case-by-case basis, but such clauses stand a good chance of being enforced because courts are more willing to enforce waivers of procedural rights than substantive rights. Because an employee maintains the right to sue as an individual, forgoing the right to join a class is considered a procedural waiver. The Supreme Court has held that an employee may waive his right to sue as part of a class even though the Age Discrimination in Employment Act expressly references a right to class remedies, in Gilbert v. Interstate/Johnson Lane Corporation. Several lower courts also have upheld class waivers. For example, in 2004 the 5th U.S. Circuit Court of Appeals held that the inability to proceed as a class does not deprive the plaintiffs of substantive rights under the Fair Labor Standards Act. Employers have much to gain by requiring employees to agree to waive the right to a jury trial, accept a shortened statute of limitations, and forgo class action participation. Attempts to improve the odds of the litigation lottery may not always pay off. But these provisions can reduce the number of employment actions filed and greatly lower litigation costs. Together these measures represent a lottery ticket well worth the purchase price. Chad Shultz is a partner in the Atlanta office of Ford & Harrison.

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