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Firms Say Labor Litigation Is Top Legal Concern

A new survey finds that employment disputes continue to be the top litigation concern for companies. But experts say simple steps—including better listening—can help prevent workers from suing.

November 26, 2006
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A new survey finds that employment disputes continue to be the top litigation concern for companies. But experts say simple steps—including better listening—can help prevent workers from suing in the first place.

The study of U.S. corporate law departments by the law firm Fulbright & Jaworski found that 54 percent of in-house counsel cited labor and employment as one of their top three lawsuit worries. That figure far outpaced the results for other areas of dispute, including contracts, intellectual property and securities class-action cases.

Fulbright & Jaworski surveys from 2004 and 2005 also found labor disputes to be the chief litigation concern.

But there’s hope for organizations that want to avoid facing off against their workers in court, says Shauna Clark, a partner at the Houston-based firm. She says keys to preventing disputes include consistent training and a review of company policies. Even more critical is the willingness of managers to listen, Clark argues.

"The most important action a company can take is to have an open-door policy," she says.

When it comes to preventing overtime litigation in particular, asking workers what’s on their minds is vital, says Jonathan Kane, chairman of the labor and employment group at law firm Pepper Hamilton. In addition to conducting internal audits of actual job duties, examining positions added through mergers and conducting exit interviews, companies should get managers to simply talk with employees, he says.

"Employers should train their managers to ask employees how things are going and find out what their issues are," Kane said in a statement. "Take a proactive approach to uncovering problems, rather than reacting to those that crop up."

According to Pepper Hamilton, the number of multi-plaintiff lawsuits filed under the Fair Labor Standards Act doubled from the 1990s to 3,617 in 2004, the last year for which statistics are available.

Among the organizations hit with employment-related lawsuits in recent years are Wal-Mart, IBM and Wells Fargo. Employment suits often end with settlements in the millions of dollars and a black eye for employers.

A recent ruling by the National Labor Relations Board promises to curtail employee overtime suits by expanding the number of workers considered supervisors. But the September decision is under fire. Plaintiffs’ attorney Robert Huntley believes the ruling will be overturned in the courts.

Huntley, who has brought employment cases against companies including computer maker Hewlett-Packard and the Ore-Ida unit of food company Heinz, argues that firms break overtime rules and discriminate against employees because they get away with it much of the time and are willing to cough up money when they don’t. "They don’t really care," Huntley says. "I think they just factor it in as a cost of doing business."

Clark, of Fulbright & Jaworski, has a different view. She says most companies want to avoid employment lawsuits, partly because the suits can be poisonous to workplace morale. "Most companies truly want to work cooperatively with their employees," she says.

Ed Frauenheim

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