Defense and Prevention of Class Action Claims Alleging Labor Law Violations

May 10, 2006 | By: Michael J. Hassen

Labor law class action claims are on the rise. Congress and the courts have noted with dismay the widespread abuse of class actions. For example, in the House Conference Report accompanying what later became the Private Securities Litigation Reform Act of 1995 (PSLRA), 109 Stat. 737 (codified at 15 U.S.C. §§ 77z-1 and 78u-4), Congress explained that class actions were hurting “the entire U.S. economy.” H.R.Rep. No. 104-369, p. 31 (1995). The House Conference Report identified widespread abuse, including frivolous lawsuits, burdensome discovery requests (aimed at extorting settlements), targeting deep-pocket defendants, and “manipulation by class action lawyers of the clients whom they purportedly represent.” Id. Perhaps nowhere is this abuse more prevalent than in the meteoric rise of class actions alleging labor law violations.

In the litigious society we live in, the knee-jerk reaction of individuals who are fired for valid grounds such as theft, incompetence, disruptive behavior, etc. is a lawsuit back against the company for alleged labor law violations. This vehicle provides the means for the disgruntled employee to exact his or her “pound of flesh.” Unfortunately, all too often the employee simple desire to exact vengeance is manipulated by plaintiff’s counsel into a purported class action, “identifying” patterns of abuse that exist only in the imagination of plaintiff’s counsel.

This is not to suggest, of course, that an employer can do no wrong. Certainly if a company is violating state or federal labor laws, litigation is an appropriate vehicle to rectify such deficiencies. Not all such class actions are frivolous: as with every profession and every field, there are many honest and talented attorneys who devote their energies to carefully investigating “facts” reported to them by prospective clients, and to filing class actions that seek to redress what they in good faith believe to be a pattern and practice of employee abuse. If personal experience is any guide, however, these attorneys represent the minority of those who file class actions.

Unfortunately, many plaintiffs’ class counsels apparently believe that they need not have a good faith belief in the merits of the class claims they advance. Perhaps they believe that “vigorous advocacy” of their clients’ interests means using the threat of class certification, multi-million dollar judgments and bankruptcy (rendering unemployed the very class they purport to represent) to “persuade” i.e., extort a settlement for their clients (and, cynically, an unduly large attorney fee award for themselves). Whatever the motivation of class counsel, these lawsuits are very expensive to defend.

No incantation can insulate a company from this type of lawsuit. But there are steps a company can take to be proactive and to minimize the risk of liability, if not litigation, for alleged labor law violations:

  • Retain labor counsel to prepare, review or revise the company’s employee handbook.
  • Consult with labor counsel concerning compliance with state as well as federal laws. In certain states, such as California, there are significant differences, and an employer may unintentionally violate state law while acting entirely within the dictates of federal law.
  • Review with labor counsel company rules regarding rest periods and meal breaks, and regarding procedures for and tracking of employee overtime.
  • Retain labor counsel to review, and if necessary revise, employee job descriptions and classification of employees, particularly with respect to whether such employees are exempt or non-exempt.

I recommend directing any specific inquiries on these or other labor law topics to my partner, Luzann Fernandez.

It may be expensive to correct a mistake in the way in which the company is operating. It will be far more expensive to correct such mistakes as the result of a judgment or settlement.

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