If We Win, Can We Get Attorneys’ Fees From the Employee?
When asked to defend all types of employment litigation, the attorneys at Foley will frequently be told by the client the case has no merit. This statement is often followed by the question, “When we win, can we get our attorneys’ fees and costs from the employee?” The answer most of the time is “no.” However, a recent court decision gives insight into what facts and circumstances are necessary for a defending employer to be awarded fees.
In Lioashen Zhang v. Honeywell International, Inc., a former employee sued in federal court in Arizona on a myriad of sex, race, national origin, and disability discrimination claims. Honeywell asked the court to throw the case out, which the court did stating, “Ms. Zhang’s claims were utterly lacking in legal merit.” What also is important to know is that Ms. Zhang was labeled by the court as a “serial and bad faith pro se [she represented herself] litigant who aggressively pursued frivolous claims against Honeywell that had no basis in law or fact.”
After the court threw out Ms. Zhang’s case, Honeywell asked the court to award it the fees they incurred in defending the action. In its request, Honeywell made the following points:
- We are a big company that is sued all the time. Yet rarely, if ever, have we sought fees from a plaintiff.
- The evidence is clear that Ms. Zhang is not someone who incorrectly, but reasonably, believes she was wronged by her employer.
- Honeywell spent more than $250,000 in attorneys’ fees in just this case, partly due to Ms. Zhang’s 1,300-page Brief in Opposition to Honeywell’s attempt to have the case dismissed. Nevertheless, Honeywell requested only $56,700 in fees.
Under these circumstances, the court granted Honeywell’s request. The court’s analysis began with a provision in Title VII of the Civil Rights Act (one of the many the non-discrimination laws on which Ms. Zhang based her lawsuit), which says the court “may” allow the prevailing party its reasonable attorneys’ fees and certain costs. The court also has the power to grant attorneys’ fees as a sanction for improper conduct.
Readers should be aware that courts are very reluctant to grant fees against a losing employee. First, the courts are concerned about the “chilling effect” fee awards may have on employees who have legitimate claims. Secondly, many judges presume that litigation is one of the many costs of doing business in 21st century America. Finally, defendants may have insurance to help insulate employers from the direct costs of litigation.
What then can businesses do? First, conduct yourself in an above-board and legally compliant manner. Litigate fairly and in conformance with the laws and rules of court. Second, analyze your rights to claim fees under state and local laws, which are frequently more liberal when it comes to awarding fees to defendants. Finally, when sued, carefully consider all of your options to bring well-founded counterclaims. A counterclaim is when the defendant, after being sued, sues the plaintiff back. For example, a terminated employee sues on some theory of discrimination. Knowing the employee stole money from the company, the employer counterclaims for the amount taken, claiming breach of an employment agreement that allows for attorneys’ fees. The decision to bring counterclaims, however, should be weighed carefully and discussed with your counsel. Bringing unsuccessful counterclaims can result in additional fees or court sanctions being assessed against you. Even when courts, like the one in Arizona, order an employee to pay fees, there is no guarantee the company will collect. A judgment against an unemployed, ex-employee with no assets is literally not worth the paper on which it is written.
Supreme Court Muddies the Water Regarding Timely Filing of “Disparate Impact” Claims
If an employer adopts a practice that has an adverse effect on a particular race of employees, can those employees sue years later, if the employer uses that practice to make additional employment decisions that negatively affect those employees? According to the Supreme Court, in its recent opinion in Lewis v. City of Chicago, the answer is “yes.”
The plaintiffs, six African-American firefighter candidates, alleged that the City of Chicago’s practice of selecting only those classified as “well qualified” on a written entrance examination adversely affected them (and the more than 6,000 other African Americans that had taken the exam) more than Caucasians in violation of Title VII of the Civil Rights Act of 1964. The main issue for the court was whether the candidates could assert a claim even though the test had been administered more than 300 days prior to the filing of the complaint. The firefighters asserted they could because the City was still using the test results for further applicant considerations.
As you may know, Title VII prohibits employers from using employment practices that cause a “disparate impact” on the basis of race. It also requires employees (or applicants), before beginning a federal lawsuit, to file a timely charge of discrimination with the EEOC. A timely charge must be filed within 300 days after the claim comes into existence. In Lewis, the City administered its written exam to firefighter applicants in 1995. Depending on an applicant’s score, he or she was ranked as “well qualified,” “qualified,” or “not qualified.” The City maintained the list of those identified as qualified and well qualified, and over the next six years, used the list to select applicants to advance to the next stage of the hiring process in order to fill vacancies.
The claimants, all classified as qualified, filed EEOC charges in 1997, after they were not selected for advancement in the hiring process. Although the claimants initially won at the trial court, the federal appeals court reversed the verdict, holding that the lawsuit was untimely because the earliest EEOC charge was filed more than 300 days after the only discriminatory act — sorting scores into well qualified, qualified, and not qualified. According to the appeals court, the later hiring decisions using that list were an automatic consequence of the test scores, not new discriminatory acts.
The Supreme Court did not agree, ruling instead that a claimant who does not file a timely charge challenging the adoption of a practice may nonetheless assert a disparate impact claim in a timely charge challenging the employer’s later application of that practice. The court distinguished disparate-impact cases from disparate-treatment cases, where intent is required. The court noted that for disparate treatment cases, a claim is only viable if the claimant demonstrates deliberate discrimination within the limitations period. No such demonstration is needed for disparate impact claims.
So what does this mean for employers? Lewis opens the door for employees to file disparate-impact suits for practices their employers have used for years, as long as there is a claim that the practice disparately impacts them within the most recent 300-day period. Employers should be very cautious when using tests or sorting as a basis for future employment actions because those actions may give rise to new and distinct claims and may open up the potential for class actions.
Legal News is part of our ongoing commitment to providing legal insight to our clients and colleagues. If you have any questions about or would like to discuss these topics further, please contact your Foley attorney or any of the following individuals:
Authors
Mark J. Neuberger
Miami, Florida
305.482.8408
[email protected]
Jeffrey S. Kopp
Detroit, Michigan
313.234.7140
[email protected]