For the past nine years, the employment law firm of Seyfarth Shaw LLP has published a Workplace Class Action Litigation Report. Their analysis provides valuable insights into what legal developments employers should prepare for in the coming year.

On January 14, the firm released the latest Litigation Report, in which they noted several trends they think will be important for 2013.

Changing Class Action Litigation and Settlement Strategies

One continuing influence is the case of Wal-Mart Stores Inc. v. Dukes, which was decided by the U.S. Supreme Court in June of 2011. In that landmark gender discrimination case, the plaintiffs sought to certify a class of 1.6 million current and former female employees of Wal-Mart in the USA.

The court eventually ruled that the class should not be certified. The idea of a class is that everyone in the class is “similarly situated” — that is, they do the same kinds of jobs, face the same working conditions and are subject to the same policies and rules. But the court found the members of the proposed class didn’t have enough in common to constitute a “class.”

The reasoning used by the majority of the court to support the decision cascaded down to smaller class action suits. The Supreme Court ruling was cited in 541 court cases in 2012. In court after court, plaintiffs suing for discrimination found it harder to be certified as a class in the aftermath of the Dukes decision.

This resulted in a huge reduction in the number and amount of settlements for discrimination lawsuits. In 2010, prior to the Dukes decision, the top 10 settlements totaled $346.4 million. In 2012, after the decision, the top 10 settlements totaled only $48.65 million, the lowest level since 2006.

However, the warning from Seyfarth Shaw is that plaintiffs’ lawyers are working hard exploring new approaches. According to Gerald L. Maatman Jr., author of the report and co-chair of the firm’s Class Action Defense group, “You’re seeing this shake-out period where plaintiff lawyers are rebooting and retheorizing how they can still certify a case.”

In short, he says if you’re an employer facing a discrimination lawsuit, Dukes is still in place but it’s “not the last word.”

The takeaway: The Dukes case and others began a new wave of creative strategies in how plaintiffs’ lawyers pursue class certification in discrimination lawsuits. While the number and size of settlements was down significantly in 2012, employers can’t count on this trend continuing.

Wage and Hour Litigation Continues to Grow

Unfortunately for wage and hour defendants, employers have been largely unsuccessful extending the Dukes ruling to class actions related to wage and hour. These types of class action claims continue to rise rapidly, with no end yet in sight.

In fact, wage and hour litigation continued to outpace all other types of workplace class action suits in 2012. In 2011, there were a record-setting 6,779 Fair Labor Standards Act (FLSA) class actions filed. In 2012, that record was broken, with 7,672 lawsuits filed — an increase of over 13 percent.

The authors of the report expect this trend to continue in 2013.

One contributing factor they note is continued weakness in employment. Following termination, displaced employees may feel resentment toward their former employer. This sometimes translates into a lawsuit. When former employees have difficulty finding another job, this can give them additional incentive to sue.

Another factor is increased government emphasis on compliance. As I noted in last month’s newsletter article, the Department of Labor has increased the money budgeted toward compliance and enforcement. The report’s authors also expect even more government enforcement activity in 2013, at both the federal and state levels. In fact, they consider this issue “white hot.”

This makes it more important than ever for employers to make sure they comply with all applicable federal, state and local wage and hour laws and regulations. Of course, an important first step is to make sure you’re recording your employees’ work time accurately.

The takeaway: In 2013, you can expect more enforcement actions from the government and a continuing rise in wage and hour lawsuits. Prudent employers will take the time to audit their procedures and policies to ensure they’re in compliance. If you don’t already have a good workforce management / time tracking system in place, now’s the time to set one up.

2013: High-Stakes Challenges for Employers

While the decrease in discrimination settlements in 2012 was a welcome development for employers, they should not relax in 2013. With renewed emphasis on compliance at both the federal and state levels, more organizations may find their employment and payroll policies facing scrutiny.

Wage and hour litigation continues to increase at a rapid pace. These types of lawsuits can be expensive, and in many cases carry the potential for liquidated damages and significant other penalties in addition to back wages owed.

Even smaller employers that may not face as much risk of class action suits should pay attention to these legal trends. Here are a few steps to help minimize your risk in 2013 and beyond:

  • Consult with your employment law advisor to ensure your policies and procedures comply with applicable regulations. Do not make any subsequent changes to your timekeeping, payroll or employment policies without first verifying they won’t cause problems.
  • Educate yourself and your supervisors and managers so you all understand employment law and how it affects your interactions with your workers. Do not tolerate discriminatory actions or retaliation against employees who complain of violations.
  • Keep complete, accurate records of employee time worked and all employment actions you take.

The coming year will bring significant challenges for employers. In the words of Sgt. Phil Esterhaus on Hill Street Blues, “Let’s be careful out there!”