Managing Employment Law Risk is a Wise (and Cost-Effective) Investment

30 May 2023 Labor & Employment Law Perspectives Blog
Author(s): Christopher Ward

Late last year, I wrote about approaching compliance challenges by thinking as much about the “why” as about the “what” of the compliance requirement. The point I hoped to convey was that inquiring into the question of why a compliance requirement exists might help employers better approach implementing a strategy to align with their broader organizational goals and cultural identity.

In that spirit, I often try to persuade my clients and employers generally to look at managing risk of employment-related litigation — and perhaps more precisely, the incredible cost of legal services in the context of litigation — from a perspective of proactive investment rather than a reactive (and typically unbudgeted) financial hit.

Even as I perhaps flatter myself to think my time is worth every dollar it costs, I will still be the first person to concede that lawyers, and legal services more generally, can be quite expensive. And this is particularly true in the context of litigation. Even a completely frivolous employment lawsuit — or worse yet, a specious wage and hour class action — will often get past an early motion to dismiss because the nature of the American pleading system intentionally promotes individuals having their “day in court.” And once a case is “at issue,” winning even a patently meritless case requires significant time and expense.

The plaintiff’s counsel has the incentive to drive up costs through invasive tangential discovery, and a good summary judgment motion typically requires a thorough plaintiff’s deposition and significant time devoted to quality briefing materials. This all gets magnified to an even greater degree in a class action. Unfortunately, prevailing on even a clear winner of an employment case is often a six-figure expense to the employer. It’s no wonder so many frivolous cases still end up in settlement as a way to mitigate that financial expense — which then, of course, keeps turning the mad carousel that incentivizes future meritless claims.

The best strategy to avoid that kind of financial complication is to avoid litigation altogether. No big revelation there, of course (and easier said than done). However, notwithstanding the obvious statement that the best defense against litigation is not to have it, I often find employers balk at proactively using their legal services partners because of the perceived expense of lawyers’ time not directly tethered to an immediate and mature legal matter, such as litigation.

But if you think about it, even “a lot” of lawyer time consulting on a difficult termination (and for mathematical purposes, we will use ten hours as “a lot” for a termination) will cost the employer far less than the dozens, or more likely hundreds, of hours defending litigation a proactive use of counsel might have avoided altogether. That kind of equation shows that spending the money up front — even if it is for “a lot” of time — is always a good investment. The same is true when making any changes to policies and, in particular, to determining how a company classifies positions and compensates employees. Partnering with counsel before implementation can have huge dividends in terms of avoiding unintended wage and hour risk — or worse, liability.

Obviously, there is no guarantee that proactive work with counsel avoids litigation. But even when matters do go to litigation, proactive work with counsel can pay big dividends in terms of reducing cost by managing the risk magnitude. Working with counsel can help make a strong case for termination even better positioned for a winning defense in litigation. Such moves can significantly change the perceived settlement value and likelihood of successful summary judgment, versus having to take a case to trial. And that is my favorite part of the job (even as I will flatter myself all the more by saying I am a darn good litigator and trial lawyer): helping clients use their resources to manage their risk and control (and often properly budget) their legal spending.

This kind of partnership starts with a client understanding the value of having an “investment” mindset working with its counsel. If you currently work with Foley & Lardner LLP labor and employment attorneys, I hope we have shown you over the years how much we value that kind of relationship and have taken advantage of the many creative strategies and solutions we use to deliver “problem-avoidance and management” solutions to reduce the time spent on “problem clean-up” practice, like litigation. And even if you do not work with Foley, I strongly suggest your business consider the big-picture value of a proactive approach to using legal services and what having a partnership with counsel that supports that approach can deliver.

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