Curbing Runaway Discrimination and

Harassment Costs
Alan Rupe (/authors/421-alan-rupe/articles)
August 7, 2007
Employers, general counsels and human resource professionals who have been through
litigation know the cardinal rule of employment law: "Winning isnt everything. You still owe
attorneys fees."
An employer called upon to defend a charge of discrimination before a human rights
agency such as the federal Equal Employment Opportunity Commission or a state
equivalent will pay attorneys fees ranging from $2,500 to upwards of $10,000 for
preparation of a response. Defense of a lawsuit will cost even moretypically $35,000 to
$100,000, depending on the number of plaintiffs, types of claims, number of witnesses and
exhibits involved and, of course, the adversarial level of the opposing party. Your lawyer will
expect to be paid, win or lose.
Adding insult to injury, federal courts have begun to allow the EEOC to continue pursuit of
discrimination claims for employees who have already settled their claims through mediation
or arbitration. One federal court compelled a Michigan company to pay the EEOC $500,000
after a group of former employees settled their claims for race discrimination.
Faced with the prospect of endless rounds of attorneys, attorneys fees, costs, employee
downtime and emotional disruption, employers, general counsels and HR professionals
have become resourceful in developing ways to reduce or even avoid employee claims and
the subsequent expenses. Strong, closely enforced anti-harassment policies, statute-of-
limitation waivers, employment agreements requiring mandatory arbitration of employment
disputes and "anti-discrimination bonds" are all tools used by employers to curtail the
runaway costs of discrimination and harassment. The most useful tool of all may soon come
into play as well. More about that later.
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Sexual Harassment Policy and Training: With the 1998 decisions in Burlington
Industries Inc. v. Ellerth and Faragher v. City of Boca Raton, the U.S. Supreme Court
provided employers with a road map to reduce liability for harassment. Implementation of a
strictly enforced anti-harassment policy with adequate complaint procedures allows
employers to avoid liability altogether. And the big-ticket item, punitive damages, can be
avoided completely in those cases where employers make good-faith efforts to prevent
discrimination through education and training. According to the court, "[T]he purposes
underlying Title VII are advanced where employers are encouraged to educate their
own personnel on Title VIIs prohibitions."
At least three state legislatures have answered the Supreme Courts call: Connecticut,
Maine and California have statutorily mandated training on the prevention of sexual
harassment, requiring a minimum amount of training for supervisors. In Maine, all
employees are required to have such training.
When compared with the price tag for defending a sexual harassment claim or lawsuit, a
simple dollars-and-cents analysis of the cost of developing a policy and training employees
makes this decision a no-brainer.
Statute-of-Limitation Waivers: Limiting the time in which an employee may file a
discrimination claim is not a new idea, but such an agreement, carefully crafted, can be the
impetus for either a quick resolution of a complaint or ultimate dismissal of a plaintiffs case
because of the shortened statute of limitations. In this case, time is money, and early
resolution or dismissal almost always reduces time and expense for an employer.
Mandatory Arbitration: Mandatory arbitration of employment disputes can also be
extremely effective at reducing both time and costs of litigation. The EEOC has mediated
more than 50,000 cases since 1999, and more than 6,500 of those mediations resulted in
non-monetary settlement.
Most employers are subject to the Federal Arbitration Act. The U.S. Supreme Court has
held that employment arbitration agreements are enforceable under that law, and that
courts can compel arbitration. Some state courts (Colorado is one example) have chosen to
follow the federal court lead and often resolve employee disputes in favor of arbitration.
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Another benefit of employment arbitration agreements is that in some states, employees
are not required to sign the agreement in order for it to become binding. In one recent case,
a New Mexico federal court held that despite the fact that the employee never signed nor
objected to the employers arbitration agreement, the employees continued appearance at
work after the agreements effective date constituted her assent to the terms of the
agreement.
Benefits arising from the implementation of mandatory arbitration agreements include the
employers ability to manage discrimination issues internally, in less time and with lower
cost. However, before implementing a mandatory arbitration agreement, employers should
check both federal and state law to ensure that such an agreement will be beneficial, given
the employers geographical location and the type of work performed.
Anti-Discrimination Bond: This idea, suggested by Anne Marie Knott, assistant
professor at the Olin School of Business, Washington University at St. Louis, has the
possibility of reducing employment litigation. According to Knotts concept, the employee
has the option of contributing to an individual savings account much like a 401(k). If the
employee sues the employer, the employee forfeits the funds in the account as an offset to
the expenses incurred by the employer in the subsequent litigation.
This seems to be a classic instance of putting your money where your mouth is and
underscores the creative measures businesses seem to be willing to take to reduce what
they perceive as unnecessary expenses. No comment or legal opinion from me, however,
on the legality or advisability of this action.
Recovery of Attorneys Fees: Heres what would really make a difference for
employers: Allow them to recover attorneys fees and expenses when they win. Given the
Supreme Courts recent undeniable swing to the strict construction of federal laws, it may be
time for a review of two federal statutes: 42 U.S.C. 1988 and its Title VII counterpart, 42
U.S.C. 2000e-5(k). These two statutes provide that in federal civil rights actions, "the
court, in its discretion, may allow the prevailing party, other than the United States, a
reasonable attorneys fee as part of the costs."
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The 1978 U.S. Supreme Court, in the case of Christianburg Garment Co. v. EEOC, made
a distinction between a prevailing defendant and a plaintiff. The court did not apply the plain
reading of the statute ("prevailing party gets fees"), but determined that a prevailing
defendant could recover attorneys fees only "upon a finding that the plaintiffs action was
frivolous, unreasonable or without foundation, even though not brought in subjective bad
faith."
The 2007 Supreme Court, however, may likely differ. Consider the two very different
outcomes of two recent employment law decisions.
In Burlington Northern & Santa Fe RR v. White, the court seemed purely "pro-employee,"
looking at the statute itself to define an adverse employment action. The court ignored
previous court rulings interpreting that same statute and instead relied on its plain language.
But in the same term, the Supreme Court flipped 180 degrees from its pro-employee
decision and gave us the pro-employer case of Ledbetter v. Goodyear Tire & Rubber Co.
Again, the court ignored past interpretations of the statute, and made its determination
regarding the statute of limitations for filing a charge of discrimination on the strictly
construed language of the statute.
As Burlington and Ledbetter illustrate, it appears as if the current Supreme Court will look
at the plain meaning of employment statutes rather than other earlier court decisions
interpreting the text. In Ledbetter, the court concluded that "[u]ltimately, experience teaches
that strict adherence to the procedural requirements specified by the Legislature is the best
guarantee of evenhanded administration of the law."
The federal statutes, 42 U.S.C. 1988 and 42 U.S.C. 2000e-5(k), make no distinction
as to whether the "prevailing party" is plaintiff or defendant, and courts have ignored both
statutes plain language with regard to the award of attorneys fees. Now may be the time
for this issue to be addressed by the nations highest court. With the prospect of paying fees
and costs to the company it just sued, plaintiffs attorneys may be a little more reluctant to
file a lawsuit when the facts and law are not clear, and employees may be more inclined to
take advantage of other methods of dispute resolution such as internal grievance
procedures or arbitration.
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