Companies Report Rise in Labor and Employment Class Actions

Aggressive regulatory action and an increase in workplace safety claims, including many related to the COVID-19 pandemic, have fueled a rise in labor and employment (L&E) collective claims, including “follow-on” class actions, according to Carlton Fields’ 2022 class action survey. 

3.1% Increase in 2021

In 2020, L&E class actions comprised 22.5% of all such claims managed by companies participating in Carlton Fields’ survey. In 2021, they rose just over three percentage points to 25.6%.

L&E cases remain the largest category of class actions. In 2020, they were just ahead of consumer fraud class actions, but between the increase in L&E class actions and a decrease in consumer fraud class actions, the L&E cases now hold a more significant lead as the largest type of class action.

Companies continue to report L&E class actions as one of the most concerning and costly categories of collective claims. In addition to the costs directly associated with the claims (including defense and settlement costs), companies also report concern over indirect costs such as negative publicity and reputational harm.

What’s Contributing to Jump

Several factors likely contributed to the increase in L&E class actions:

• The pandemic very likely played a role, as many companies were hit with class actions related to workplace safety and vaccine issues.
• Wage and hour claims also were on the rise, potentially because of economic conditions including inflation and an employee-friendly job market, which may have made workers more confident in acting on grievances about their wages.

Silver Lining

At least there’s some good news. Some companies are reporting success in avoiding L&E class actions.

In addition to resolving the claims and other disputes, businesses are being proactive in taking corrective action and implementing policies and procedures to avoid going to court. Several businesses also continue to use arbitration clauses with class action waivers, but the waivers have faced increased scrutiny as of late.

Road Ahead

Employers expect L&E class actions to remain one of the largest categories of such claims, if not the largest. Spending and risk associated with the claims are similarly expected to remain high. A number of factors will influence the trend in the coming year:

Increased regulatory action. It seems likely we can expect the increase in regulatory actions, which can create follow-on (or “stacked” class actions), to continue. At the federal level, for example, the summer months are expected to be very active for the Equal Employment Opportunity Commission (EEOC).

Beginning in July, the EEOC will have a majority of its commissioners appointed by Democrats for the first time during the Biden administration. Commentators speculate the agency will use the new majority to enact significant changes likely leading to new rules, additional enforcement, and, in all likelihood, follow-on class claims.

Economy (including unemployment rate). While not exactly a science, intuition suggests employees who are confident in their ability to find work elsewhere are more likely to challenge their employers’ pay and other practices by, among other things, asserting class claims.

When combined with beliefs that pay raises aren’t keeping pace with inflation and the cost of living, circumstances are ripe for more wage and hour claims. Of course, that can change quickly, particularly with warning signs about the economy already emerging and the stock market in a significant dip.

Politics. Increased political activism associated with employee rights also may lead to an increase in claims as workers try to flex newfound muscle. The media have closely followed unionization efforts at major companies, for example, and the coverage may encourage employees to exercise legal rights such as attempting to file class or collective actions over pay.

COVID-19. With any luck, the pandemic will finally wind down or, at the very least, won’t require new actions that could result in new claims like vaccine mandates did. That is, new claims could decrease, but we’ll have to wait and see.

Bottom Line

Whatever the future holds, it seems very likely that L&E cases will remain a major source of class action litigation this year and for the foreseeable future. Wage and hour claims in particular may be poised for a significant increase.

Brendan N. Gooley is an employment attorney with Carlton Fields in Hartford, Connecticut. You can reach him at bgooley@carltonfields.com. 

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