How to Protect Your Company From a Discrimination Class Action

Recent class action decisions (see Employers Face Changing Class Action Landscape), including the 9th Circuit ruling certifying the largest class ever in Dukes v Wal-Mart and the record-setting federal jury punitive damage award in a discrimination case in Velez v Novartis put in-house counsel on notice of the high price of employment class actions. Employment law experts say the best defense against a discrimination class action is a strong offense.

"The best remedy is effective prevention," through continuous training on equal employment and harassment issues, says Barbara Hoey, a shareholder at Littler Mendelson. She adds that companies sometimes err in thinking that if they have conducted training once, it is enough.

Companies also must appropriately respond to employee complaints.

"You can't prevent every bad act, but you can be sure the company responds correctly," she says.

Angelique Lyons, a partner at Constangy, Brooks and Smith, agrees. "It's important when a bad apple is identified that proper remedial action is taken," she says. You are never going to be able to control how people act, but you have to nip it in the bud as soon as it happens."

Open communication will help diffuse complaints before they become lawsuits, adds Ann Margaret Pointer, a partner at Fisher & Philips.

"Whether we are talking about pay, promotions or practices, employers should be as open as they can about what the processes and decision factors are," Pointer says. "An atmosphere that allows people to ask questions makes people less inclined to challenge any particular decision."

Additionally, Pointer endorses "safety valves" to allow people to voice their complaints. That need has grown in the current economic climate where the need to restrain costs and increase productivity has put managers and supervisors under stress.

"There is substantial risk if employees lose confidence that their managers and decision makers are trying to do the right thing and are willing to answer their questions," she says.

Pointer also advises a proactive approach to preparing for potential litigation, particularly for companies in industries where the plaintiffs bar has targeted other companies.

"Savvy counsel go ahead and look at what they need to do to know whether they have a problem that someone else in their industry is accused of," she says. "If you know you are in an industry that is vulnerable to plaintiffs shopping an issue, take a look at yourself."

Preparing in advance is valuable, she adds. After litigation commences, "There is never enough time to evaluate your data as much as you would like to, and to recheck how your processes under attack have been adopted and implemented."

Once a class action claim has been filed, a company should look closely at the plaintiffs' evidence before determining its strategy, Hoey adds.

"Any company looking at a class claim has to take a hard look at the Novartis verdict and the Wal-Mart case," she says. "There are a lot of lessons to be learned. The biggest one for defendants is - as much as it may pain you - to think about whether to settle. If there is bad evidence out there and the judge hasn't given you some kind of protection, you will have trouble."

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