Posted on March 28th, 2017
In California, class action lawsuits against employers are becoming increasingly prevalent.
In order to combat unfair laws and egregious, unwarranted claims, business owners need to be armed with the knowledge and means of prevention to defend against class actions that threaten their businesses.
Our mission is to provide an informational resource for business owners, as well as policy safeguards to preemptively protect your business against these types of suits.
LET’S GET STARTED:
What is a Class Action Law Suit?
A class action lawsuit is filed by a person or group of people, representing a larger group of people (the class), who are all claiming to have suffered the same or similar legal violations against them.
In traditional lawsuits a plaintiff sues the defendant or defendant’s and all parties are present.
With a class action lawsuit, instead of each person individually suing, the “class” sues on behalf of all persons harmed, including absent parties and parties unaware that they have been “harmed” at all.
That’s right, you’re potentially paying money to people who don’t even know they sued you!
In labor law, these class action lawsuits typically take form as transgressions based on unpaid wages, meal breaks, rest periods, or some form of discrimination.
Plaintiffs side attorneys love to go after large multi-million dollar corporations like Walmart and Wells Fargo but California’s small to medium sized business owners are also regular targets if they are perceived to have deep pockets.
In fact, the more employees you hire and the more profit you make, the better chance you will one day defend a class action lawsuit.
Business owners who have mindfully invested their time, money and sweat equity to finally build a successful business, have a serious risk of being on the wrong end of a financially crippling class action lawsuit.
The likely result?
One former employee gets rich; one attorney gets very rich; a business owner closes its doors; the remaining employees lose their jobs.
How many employees have to file for it to be a class action?
Only one employee is needed to represent the class.
Once filed, all employment records have to be turned over to the plaintiff’s attorney including a list of all current and former employees with their last known contact information.
The attorney then contacts each employee that has worked for the employer within a 3 year period and tries to convince them into joining the class. The more employees that join, the more money for the attorney.
How many employees have to join the class to be consider a class action?
The law says a class is required to “be so numerous that joinder of all members is impracticable….” which basically means there are enough plaintiffs that requiring a separate case for each would be impractical.
While there is no exact number for a case to qualify as a class action, generally class actions tend to be 20 or more employees and former employees.
Strategies to Combat a Class Action Lawsuit
Prevention, Prevention, Prevention! –
The best ways to avoid a class action lawsuit are:
(1) to ensure that you are complying with the law;
(2) document all employee issues at the time they arise; and
(3) (most important) have a solid alternative dispute resolution package in place that includes a mandatory non-binding mediation agreement and a mandatory binding Arbitration Agreement.
These two documents should comply strictly with the letter of the law to avoid being pierced and should contain a provision that requires each side to pay its own attorneys fees.
It is less likely that a plaintiff’s side attorney will want to file a class action if they are not going to get statutory attorney’s fees from you the employer.
The only way to do this under current law is to have a valid and binding arbitration agreement that also shifts attorneys fees.
Otherwise you are likely to pay all of your attorneys fees and all of the employee’s attorney fees in addition to any award given by a jury.
You have to make yourself the most unattractive target possible for attorneys and ex employees trying to exploit you.
This method is highly effective in avoiding class action lawsuits because an arbitration agreement made upon hiring is unattractive to plaintiff’s attorneys.
That means avoiding courts, avoiding outrageous awards and avoiding excessive legal fees paid to the employee’s attorney.
The fact that Arbitration agreements are under attack by employee side lawyers who seek to dismantle these agreements only further drives home the point of how valuable an asset they are to your business.
For employee side attorneys, no Arbitration agreements mean one thing, no obstacles to collecting their outrageous attorney fees from employers.
Conclusion
Now that you have a better understanding of just how much class action lawsuits can suck for employers, you can see why measures should be taken to avoid them at all costs.
Even if you have a solid and profitable business, the financial (and emotional) strain of a class action can be absolutely crushing and can put you out of business.
If you have an employee related class action against your business contact us right away for a consultation.