How to Respond to Class Actions

Class action lawsuits against employers, often involving wage and hour issues, can result in lengthy litigation, but responding early can reduce the damage. This article, the first in a two-part series on class action lawsuits, examines strategies for responding to such lawsuits, including how to interact with current employees seeking information about a lawsuit. The second part explains the differences between class, collective, and representative actions.

“Over the past decade, class action lawsuits in the workplace have exploded in proportion to their prevalence and complexity,” said Jennifer Riley, an attorney at Seyfarth in Chicago. The class action mechanism allows plaintiffs’ attorneys to increase the scope and risk of litigation exponentially, she added. “As a result, class action lawsuits in the workplace remain high on the list of challenges facing business leaders,” she said. “Managing and combating class action threats in the workplace requires an evolving and strategic approach.”

DOS

Riley said the first 90 days of a class action lawsuit are critical. She recommended the following steps:

• Develop a document retention plan that includes the preparation and distribution of a “retention notice.” Records to be retained should include electronic records.
• Developed a strategy and plan to defend plaintiffs’ claims.
• Align next steps, such as investigating and preparing responsive briefs, with the organization’s overall defense strategy.

In addition to consulting with an attorney, the claim should be investigated, recommended Mike Kun, an attorney at Epstein Becker Green in Los Angeles.

“The most common situation I see is the former employee who believes he or she was hurt in some way and is seeking recourse against his or her former employer,” said Mark Wallin, attorney at Barnes & Thornburg in Chicago. “Any time a class or class action lawsuit is filed, it pays to review the underlying policies and practices, not only to understand and defend against the allegations, but also to ensure compliance going forward.”

Nonetheless, it’s not as uncommon as it used to be for current employees to file class-action lawsuits, Kun said.

Don’ts

“Local managers sometimes interact with plaintiffs in a way that puts the corporate defendant at legal risk,” Riley said. “We call it the problem of unintended retaliation.” One way to limit that risk is to send a memorandum to managers to whom plaintiffs report, with instructions on how to deal with situations involving plaintiffs and a guide to frequently asked questions about the lawsuit, she noted.

In response to class action lawsuits, Kun said employers shouldn’t panic. “Panic leads to bad decisions,” he said. Class action lawsuits are common and don’t necessarily mean a company has to pay millions or did anything wrong, he noted.

Kun also said:

• Do not immediately call the plaintiff’s attorney to discuss the case. “Nothing good will come of this and whatever you say will not only enlighten this attorney but they may later try to use it against you.”
• Don’t rush to speak to your employees or the media.
• Do not attempt to discuss the case with the plaintiffs themselves.
• Do not send e-mails or memoranda about the case to others. Such emails or memoranda “often will not be privileged, meaning you will present them to plaintiffs in the lawsuit.”

At the beginning of the employment relationship, “employers should also consider arbitration agreements with class and tariff waivers,” Wallin said. “These agreements are not a panacea, but they can be useful when it comes to class and collective actions in the workplace.”

Current employees seeking information on lawsuits

Despite the risk of retaliation, employers sued by current workers should be aware that those workers may be attempting to gather information for use in their lawsuit and may have been directed to do so by their attorneys, Kun said.

“Except in special circumstances, it’s wise to educate managers not to talk to those employees about the lawsuit or the issues surrounding it, even if those employees initiate the conversation,” Kun said. “Even when managers are careful about what they say, what they say could be misunderstood or worse, skewed,” he said.

However, Keith Kopplin, attorney for Ogletree Deakins in Milwaukee, said: “Employers are generally permitted to decline liability, say they take the claims seriously and state that the court has not ruled on the merits of the claims. “

If employees involved in a litigation want records to use in their litigation, their attorneys must request them as part of the litigation, Kun said. “Employees are not entitled to use the employer’s documents. This applies in particular to confidential information.”

If an employer discovers that an employee is taking documentation for use in the litigation, they should immediately contact their attorneys for immediate attention, he added. “Such behavior could be grounds not only for the employee’s termination, but also for sanctions or the expulsion of the employee’s attorney,” he said. “In general, attorneys are not permitted to accept stolen property, let alone use it to their advantage in litigation.”

Employers should be particularly sensitive to employees who have access to confidential information and documents through the employer’s computer system, he stressed. “In general, employees do not have the right to search an employer’s computer system to look for information related to their litigation,” he noted.

Employees are also not authorized to give their attorneys their ID and password information so their attorneys themselves can search the employer’s computer system to look for documents for their case, Kun added, saying he did so in a several years ago Class action filed.

“If you learn that this has happened, you should contact your lawyers immediately,” he recommended. This could not only be grounds for termination for the employee, but also grounds for sanctions and the disqualification of the attorney – perhaps even a criminal complaint or an ethics complaint.