“No.” At the bargaining table, that’s the most powerful word in the English language. Although in-house counsel may desperately want to say “no” to a high settlement demand from an employee-turned-plaintiff, defense costs can force a company to settle for nuisance value. Getting a handle on those costs can empower a company to do the right thing.
A solid dispute-resolution system—whether it’s an arbitration policy fortified with some key provisions or a plain old jury waiver—is key to taming even the most ferocious defense costs. Enforcing a lean mentality among litigators is the final step in crafting a company’s winning strategy.
Arbitration has gotten a bad rap among in-house counsel, due to its extensive court-style discovery, nearly useless dispositive motions and scant appellate review. But there’s no need for a company to get stuck footing those discovery bills. An arbitration policy can explicitly limit paper and deposition discovery.
Arbitrators normally respect those limits. But remember that the arbitrator may not be the final decision-maker. A company that overreaches might find its arbitration policy thrown out by a judge who later views that policy as unconscionable.
The real juice in an arbitration policy is the chance to make class actions obsolete. With a class-action waiver, employees promise to pursue any arbitration claims mano a mano. By shrewdly drafting the arbitration policy to include class-action waivers, the company can kiss class or collective actions goodbye. That’s bound to make executives smile because overtime collective actions can be some of the highest-dollar employee claims.
Class waivers aren’t risk-free. The National Labor Relations Board believes that having one constitutes an unfair labor practice. The U.S. Court of Appeals for the Fifth Circuit rebuffed the NLRB in D.R. Horton Inc. v. NLRB in December 2013, but the NLRB very well may stick to its guns until the Supreme Court weighs in.
How will the high court rule? In the past, it has found arbitration class waivers enforceable in a consumer contract. There’s a good argument that the high court should find them enforceable in an employee arbitration policy, too.
Likewise, requiring employees to sign jury waivers takes the wild card of a jury out of the picture. That’s good news for defense costs because it means only dispositive motions and a bench trial, not expensive jury questionnaires, jury consultants and jury surprises.
Jury waivers are best if the company’s biggest risk in its workforce is individual claims, not overtime collective actions. That’s because summary judgment knocks out individual claims more often than overtime claims.
Most states, like Texas, enforce a jury waiver when it’s knowing and voluntary. Only a few states, like California and Georgia, won’t enforce one at all. Enforcing one is a pretty good bet if in-house counsel checks state law where the company bases its employees. And, in contrast to class-action waivers, the NLRB won’t bat an eye at a jury waiver.
Once the full-octane arbitration policy or jury waiver is in place, it’s time to make sure that litigation counsel thinks lean.
Solid case assessment is fundamental. Defense counsel sifts through documents and talks with witnesses focused on one primary goal: Find the pressure points. Those are the strong defenses where counsel can exert the least effort to get the most impact. Start with what the employee will need to prove and find evidence to thwart him.
For example, a court might dismiss a retaliation claim if managers decided to terminate the employee before he went to HR to report discrimination. Early discovery could nail down exactly when the employee went to HR. Then, defense counsel can move in for a quick favorable settlement or a summary judgment later on.
Work discovery and dispositive motions in stages. Each stage hones in on at least one pressure point, leaving other work for later.
Don’t overlook the importance of a working timeline. Defense counsel without one will burn money reviewing the same documents seven times for seven different reasons.
Working lean also means keeping an eye out for ways to end the suit that hinge on human psychology. For example, folks with a new job tend to lose interest in suing the last boss. A plaintiff employee who lands a new job making decent money a few months into the suit might be more receptive to a settlement offer than he was when he was still sitting at home, nursing his hurt feelings. His interest might rise when he learns that damages for his lost wages are fixed. Dealt a hand like that, defense counsel might double-time work toward the next pressure point and open up settlement talks.
Steep defense costs don’t have to coerce in-house counsel into overpaying on employee disputes. It just takes thinking differently. Choosing the litigation battleground for future employee disputes gives the company a key advantage. A company does that by creating a robust dispute-resolution system. If litigation counsel also thinks lean, in-house counsel will be better positioned to say “no” to a high settlement demand from an employee-turned-plaintiff.