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Bias suits pick up in 2012, but growth levels off in wage-hour litigation, according to Fulbright survey of law departments

March 5th, 2013  |  Lisa Milam

U.S. employers had more litigation on their hands in 2012 — with labor and employment litigation and contract disputes leading the way, according to the latest litigation trends survey by Fulbright & Jaworski, LLP. “Consistent with past surveys, labor and employment disputes continued to occupy legal departments, a trend that was evident in companies of all sizes,” according to the law firm.

The findings are the result of Fulbright’s ninth annual survey of corporate law departments, which gathered input from 392 in-house attorneys, including 275 U.S. respondents, on litigation issues and trends. The results were released February 26.

Litigation trends, costs. As for class litigation generally, labor and employment actions still lead (along with consumer cases). For the fifth year in a row, however, class actions remained flat, with only a quarter of all respondents (and about 40 percent of larger companies) facing one or more class or group action in court over the past 12 months. Respondents reported major decreases in the number of class actions that were settled or dismissed through litigation—indication, perhaps, that class action reform is working in the U.S., Fulbright suggested.

The costs of labor litigation are up across the board. In the U.S., 41 percent of companies reported an average cost to defend a single employment arbitration suit — excluding settlement — of $100,000 or more (up from 34 percent the previous year). The average cost to defend a single plaintiff employment suit was also higher: 61 percent of companies (up from 59 percent in 2011) report a cost of $100,000 or more. The average cost to arbitrate an employment class action was more than $200,000 for 54 percent of companies (up from 45 percent in 2011). The average cost to litigate a single plaintiff employment action was $100,000 or more for 67 percent of companies (up from 51 percent).

Labor and employment, E-discovery, and contracts litigation have been perennial cost centers for survey participants, Fulbright reported. Year after year, companies expect their budgets in those areas to see double-digit percentage increases.

According to the survey, 42 percent of U.S. companies retained outside counsel for one or more internal investigations in the past 12 months. Ninety-six percent of smaller companies and 93 percent of private companies expect the number of internal investigations involving their company to increase or stay the same in the coming year (compared to only 85 percent of larger companies and 83 percent of public companies).

Growth slows in wage hour litigation; bias claims rising. Labor and employment litigation eases as the U.S. unemployment rate declines, Fulbright noted. Across all areas — from race discrimination to retaliation suits — there is a fall-off in U.S. employers reporting a rise in labor and employment litigation, with the most pronounced drop in wage and hour disputes.

Looking at the volume of “multi-plaintiff” litigation in particular (class, collective, or significant multiple plaintiff actions), while 25 percent of U.S. companies reported an increase in wage-hour actions in the previous survey, this year only 12 percent of respondents cited an uptick. The vast majority of wage and hour disputes filed against U.S. companies are brought in state court, according to the survey.

Last year’s survey noted that the employment litigation landscape appeared to be shifting toward discrimination suits. Indeed, even though employment litigation was down in 2012, discrimination suits continued an upward trend, Fulbright reported. About a quarter of companies listed discrimination as the area with the greatest increase in the past 12 months; more than one-third of respondents anticipate that discrimination suits will also mark the greatest increase in the coming 12 months. Sex discrimination has trumped disability claims as one of the top areas of growth in employment causes of action.

On the other hand, wage-hour cases still represent a significant bulk of employment litigation. Overtime (64 percent) and misclassification (45 percent) claims continue to be the most common types of FLSA claims, followed by meals/rest breaks (31 percent). Wage-hour litigation also represents the area of greatest monetary exposure, according to 40 percent of respondents, followed by age discrimination (28 percent of respondents); retaliation (22 percent), and race (21 percent). Discrimination and wage and hour cases remain the “dominant concerns” among employers of all sizes; retaliation is next on the list.

Worries over whistleblower allegations continued as well—and for good reason, the survey suggests: the number of allegations made remained high during the past 12 months, particularly among larger companies, and could climb higher, according to the survey findings. More than one-quarter of U.S. respondents reported being subject to allegations by a whistleblower. Larger companies—as well as those from engineering, health care, and manufacturing—were more likely to see whistleblowers emerge.

Social media, mobile devices, and data preservation. Nearly one-third of all respondents encountered issues involving privacy and/or data protection in disputes or investigations in the past 12 months. Issues arose most frequently in the context of collecting data from company equipment and from employees’ personal equipment.

Last year’s survey found that while 91 percent of companies allowed their employees to conduct business on mobile devices, only 30 percent had to preserve or collect data from those devices for a litigation or investigation. This year, that gap has narrowed: 41 percent of employers have had to preserve or collect data from an employee’s mobile device for a dispute.

In addition, about one-fifth of all companies — slightly up from last year’s survey — have had to preserve or collect data from an employee’s personal social media account in connection with a dispute or investigation. But only 9 percent of companies reported having to actually produce, as part of discovery, information stored on social media.

“With Facebook exceeding 1 billion members and Twitter having more than 500 million registered users, social media is no longer a niche area of life online. Given its ubiquity, companies must adapt policies to address how information on social media impacts litigation,” Fulbright’s release noted.