Class-action lawsuits have become an unfortunate reality for restaurant operators across the country, mostly involving wage-and-hour complaints. But changes in the legal landscape in 2018 offered good and bad news for employers hoping to stem the rising tide of such costly court battles.
So contends the latest annual Workplace Class Action Litigation Report by law firm Seyfarth Shaw, which looked at 1,453 class-action rulings across the country last year involving all industries. The firm has conducted the annual evaluation for 15 years and has analyzed 13,500 cases overall.
Co-author Gerald Maatman Jr., a partner in the firm’s New York and Chicago offices, said there are key litigation themes that will help employers know what to expect in 2019, in particular restaurant industry employers, who are particularly susceptible to wage-and-hour lawsuits involving complaints like use of the tip credit, off-the-clock work or misclassification of overtime-exempt workers.
An overarching theme of the report is that employers overall appear to be learning from their mistakes and getting it right, he said, and that’s true in the restaurant industry as well, where operators are realizing they won’t be able to compete for talent or customers by shorting their employees.
“I think restaurateurs did a better job, comparatively speaking, in 2018 than they might have done three or four years ago because they’re focusing on the risk and trying to do right by the law,” he said.
Here are five key takeaways:
1. SCOTUS took center stage in 2018.
The U.S. Supreme Court in 2018 offered some key opinions that will continue to shape employment law and class-action dynamics going forward. For restaurant operators, the most transformative was the ruling that upheld the legality of class-action waivers in mandatory arbitration agreements.
Maatman said the clarity the Supreme Court brought to the issue gives employers an effective tool for minimizing class actions — at least outside California, which has its own limits regarding use of arbitration agreements.
“What I’ve seen in the last six months in the hospitality industry in general, and restaurants in particular is hard work and thought given to the onboarding process in terms of getting a very easily understood, practical, workable, efficient workplace arbitration program in place to cut down on the susceptibility of the business to these sorts of collective actions and class actions,” he said.
If President Trump is given the opportunity to fill other seats on the Supreme Court in 2019, Maatman said that could further reshape the playing field for workplace class actions.
2. Government enforcement litigation hit a three-year high.
Employers may have been expecting a more business-friendly climate under the Trump Administration, “but 2018 did not reflect a head-snapping pivot from the ideological pro-worker outlook of the Obama Administration to a pro-business, less regulation/litigation viewpoint,” the report said. Instead, there was an uptick in government enforcement lawsuits. The U .S. Equal Employment Opportunity Commission alone brought 199 lawsuits in 2018, up from 184 in 2017 and 86 in 2016.
This could reflect a carryover from the Obama Administration, the report said, or a slow transition of policy makers at agencies like the EEOC or Department of Labor. The report predicted a lower volume of government enforcement litigation in 2019.
3. Plaintiffs are winning.
For wage-and-hour cases specifically, plaintiffs saw a 79-percent success rate. Employer efforts to successfully decertify such cases also declined — employers won only 52 percent of second-stage decertification rulings, down from 63 percent in 2017.
However, Maatman noted that in wage-and-hour litigation, like real estate, location is everything. There are “judicial hellholes,” like California, where class actions have a much higher rate of success, and attorneys know how to choose their locations carefully.
“Although the news is positive on the federal side, you have to be aware of the state side,” he said. “To the extent there is a rollback in obligations of employers and the rights of employees at the federal level, they’re going to be protected at the state level.”
4. But settlement values plummeted.
Plaintiffs may be winning but the amount of settlements is declining. After reaching an all-time high of $2.72 billion in 2017, the monetary value of the top workplace class-action settlements across all industries decreased by more than half in 2018 to a five-year low of $1.32 billion last year. That trend was also true among government actions — the top 10 EEOC settlements declined to $126.7 million in 2018 compared with $485.3 million the prior year. Settlements of wage-and-hour class actions specifically, for example, declined to $253 million in 2018, compared with $525 million the prior year.
Maatman said that trend is in part because courts have tightened up defenses to make it easier for employers to defend themselves. But fundamentally it also reflects the fact that employers are spending more money and time on compliance with federal and state laws.
“As a result, although lawsuits are being brought, they’re easier to defend, more of them are being won and, to the extent they’re being settled, they’re being settled with smaller dollars, and so I think the tide has turned,” he said.
Employers are “learning from their mistakes; they’re focusing more on court precedence and labor opinion letters and getting it right,” he added. “I think it’s a good signal.”
5. #MeToo gained momentum.
It should come as no surprise that the #MeToo movement had an impact on workplace litigation. The report found that 74 percent of the EEOC’s discrimination filings in 2018 targeted sex-based discrimination, up from 65 percent the prior year. Sex discrimination lawsuits that included claims of sexual harassment also grew to 41 cases, up from 33 in 2017.
Restaurant employers in particular need to focus in 2019 on making sure everyone on staff is aware of anti-harassment policies and procedures for handling complaints, said Maatman.
“The blocking and tackling HR fundamentals are even more important today than they might have been before because of the #MeToo social media and newsworthiness of that issue,” said Maatman. “And probably in 2019 we’ll see more states and municipalities passing those sorts of laws.”
Contact Lisa Jennings at [email protected]
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