Thursday, May 19, 2011

To Settle or Not To Settle, That is the Question

“I’m not paying him one penny –we didn’t do anything wrong!”

That is the battle cry of every employer who has ever been served with a complaint. So why does every attorney invariably bring up the idea of settlement? It isn’t necessarily because you made a mistake (though it can be dismayingly easy to inadvertently step on the wrong side of the law), and it isn’t because the law is unfairly skewed in favor of the employee (though sometimes it is).

Here’s what happens. Before your attorney can launch a defense or even advise you properly, he’ll need to look at every document that might remotely be relevant, interview every witness, review your employee handbook, find out about past practices, and get a detailed timeline of the employment history of the complaining party. That takes time—which costs you money. Then there are depositions, discovery battles, demands for a forensic review of your electronic records, drafting an Answer to the Complaint, drafting and responding to preliminary motions, and arguing those motions before the judge. (Even with an administrative agency complaint, there are scaled-down versions of these activities). That takes time—which costs you money. At trial, witnesses change their stories, and opposing counsel comes up with evidence you didn’t even know existed—which can change a “rock solid” defense into a losing battle. Even if trial goes well, jurors are people, and that means they’re unpredictable. Ultimately, even if you win, you’ll have paid for a lot of attorney time (and hard costs, like court reporter fees, filing fees, and expert witness fees) to get there. On top of that, almost all claims an employee can bring carry attorney fees for the employee—so if she’s awarded the proverbial “one penny” you swore you’d never pay in settlement, you’ll also end up paying her attorney’s fees. Some (but not all) statutes carry attorney fees for a successful defendant, but those are rarely awarded.

There are times when fighting is necessary. Most employers are justifiably reluctant to set a precedent (“Sue us and we’ll immediately pull out the check book”). Sometimes the claimant/plaintiff isn’t interested in settlement. And sometimes you’ll decide to stand on principle to avoid giving in to what feels like extortion, on a claim you truly believe is frivolous. But because it is so expensive to fight, your attorney wouldn’t be doing her job if she didn’t let you know that settlement is probably the least expensive and least time-consuming option. At that point, you can make an informed decision: settle, or fight.


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    Employee Handbook

  2. Thanks! Guest columns are welcome, so if you've got an opinion or experience to share, please contact