Managing Rules And Risks: Are You Ready For The New Regs?Wednesday, September 15, 2004

Welcome Moderator, Mike Orren

Publisher, Texas Lawyer

Balancing Employment Risks and

Managing Risk-Shifting Strategies

Vicki Birenbaum Doug Haloftis Brian Pudenz

EEOC Charge StatisticsFY 1992 Through FY 2003

The number for total charges reflects the number of individual charge filings. Because individuals often file charges claiming multiple types of discrimination, the number of total charges for any given fiscal year will be less than the total of the eight types of discrimination listed.The data are compiled by the Office of Research, Information, and Planning from EEOC's Charge Data System - quarterly reconciled Data Summary Reports, and the national data base.

FY 1992 

FY 1993 

FY 1994 

FY 1995 

FY 1996 

FY 1997 

FY 1998 

FY 1999 

FY 2000 

FY 2001 

FY 2002 

FY 2003 

Total Charges

72,302 87,942 91,189 87,529 77,990 80,680 79,591 77,444 79,896 80,840 84,442 81,293

Race29,548 31,695 31,656 29,986 26,287 29,199 28,820 28,819 28,945 28,912 29,910 28,526

40.9% 36.0% 34.8% 34.3% 33.8% 36.2% 36.2% 37.3% 36.2% 35.8% 35.4% 35.1%

Sex21,796 23,919 25,860 26,181 23,813 24,728 24,454 23,907 25,194 25,140 25,536 24,362

30.1% 27.2% 28.4% 29.9% 30.6% 30.7% 30.7% 30.9% 31.5% 31.1% 30.2% 30.0%

National Origin

7,434 7,454 7,414 7,035 6,687 6,712 6,778 7,108 7,792 8,025 9,046 8,450

10.3% 8.5% 8.1% 8.0% 8.6% 8.3% 8.5% 9.2% 9.8% 9.9% 10.7% 10.4%

Religion1,388 1,449 1,546 1,581 1,564 1,709 1,786 1,811 1,939 2,127 2,572 2,532

1.9% 1.6% 1.7% 1.8% 2.0% 2.1% 2.2% 2.3% 2.4% 2.6% 3.0% 3.1%

Retaliation

All Statutes

11,096 13,814 15,853 17,070 16,080 18,198 19,114 19,694 21,613 22,257 22,768 22,690

15.3% 15.7% 17.4% 19.5% 20.6% 22.6% 24.0% 25.4% 27.1% 27.5% 27.0% 27.9%

Title VII10,499 12,644 14,415 15,342 14,412 16,394 17,246 17,883 19,753 20,407 20,814 20,615

14.5% 14.4% 15.8% 17.5% 18.5% 20.3% 21.7% 23.1% 24.7% 25.2% 24.6% 25.4%

Age19,573 19,809 19,618 17,416 15,719 15,785 15,191 14,141 16,008 17,405 19,921 19,124

27.1% 22.5% 21.5% 19.9% 20.2% 19.6% 19.1% 18.3% 20.0% 21.5% 23.6% 23.5%

Disability*1,048 15,274 18,859 19,798 18,046 18,108 17,806 17,007 15,864 16,470 15,964 15,377

1.4% 17.4% 20.7% 22.6% 23.1% 22.4% 22.4% 22.0% 19.9% 20.4% 18.9% 18.9%

Equal Pay Act

1,294 1,328 1,381 1,275 969 1,134 1,071 1,044 1,270 1,251 1,256 1,167

1.8% 1.5% 1.5% 1.5% 1.2% 1.4% 1.3% 1.3% 1.6% 1.5% 1.5% 1.4%

* EEOC began enforcing the Americans with Disabilities Act on July 26, 1992.

Nationwide Plaintiff Recovery Probability for

Employment Practice Liability Overall (1996-2002)

58% 59%63%

69% 67%71%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nt

1996 1997 1998 1999 2000 2001 2002

Year

Source: Employment Practice Liability: Jury Award Trends and Statistics (2003), Jury Verdict Research

Nationwide Plaintiff Recovery Probability for Sex

Discrimination

64%69%

66%71% 72%

67%

76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nt

1996 1997 1998 1999 2000 2001 2002

Year

NationwidePlaintiff Recovery Probability for Race

Discrimination

44%

36%

56%59% 57%

63%

71%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nt

1996 1997 1998 1999 2000 2001 2002

Year

NationwidePlaintiff Recovery Probability for Age

Discrimination

55% 57% 57%

75%

61% 59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pe

rce

nt

1996 1997 1998 1999 2000 2001

Year

NationwidePlaintiff Recovery Probability for Disability

Discrimination

63%58% 57%

68%

58%

72%67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Pe

rce

nt

1996 1997 1998 1999 2000 2001 2002

Year

Nationwide Statistical Trends in Discrimination Awards

The compensatory award median, probability range, award range and award mean for all plaintiff verdicts collected for the years 1996 through 2002 involving

discrimination are analyzed in the table below.

Year Award Median Probability Range Total Range Award Mean

1996 $128,000 $35,000 - $375,000 $1 - $19,395,376 $422,982

1997 150,000 45,000 - 401,905 1 - 6,729,073 384,092

1998 170,000 50,000 - 402,200 25 - 80,700,000 781,108

1999 139,985 50,000 - 445,987 1 - 21,000,000 683,081

2000 192,500 55,578 - 680,624 832 - 10,160,000 737,033

2001 171,000 40,250 - 453,875 1 - 5,000,000 391,779

2002 222,158 71,800 - 589,275 3,000 - 1,600,000 403,251

Overall 161,818 50,000 - 464,485 1 - 80,700,000 606,234

Award Range Percentage

To - $ 4,999 45,000 - 9,999 310,000 - 24,999 725,000 - 49,999 1050,000 - 74,999 875,000 - 99,999 7100,000 - 249,999 20250,000 - 499,999 17500,000 - 749,999 8750,000 - 999,999 41,000,000 - 1,999,999 72,000,000 - 4,999,999 45,000,000 + 2

Distribution of Discrimination Awards, Overall (1996-2002)

The following table provides the distribution of compensation awards and percentage of the total number of awards within specific dollar ranges for

overall discrimination awards. This category included a combination of age, disability, national origin, pregnancy, race, religion, sex and sexual orientation

discrimination.

Nationwide Median Awards for Retaliation Cases (1996-2002)

Dolla

rs

228,012

158,000

326,250

46,248

138,596 139,900

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Filing DiscriminationClaim

Filing SexualHarassment Claim

WhistleblowerClaim

Filing Workers'Compensation

Retaliation, OtherRetaliation, Overall

Award Range for Retaliation Cases Percentage

To - $ 4,999 45,000 - 9,999 510,000 - 24,999 825,000 - 49,999 1150,000 - 74,999 875,000 - 99,999 6100,000 - 249,999 18250,000 - 499,999 19500,000 - 749,999 8750,000 - 999,999 41,000,000 - 1,999,999 52,000,000 - 4,999,999 25,000,000 + 1

$214,643

$200,000

$125,173

$169,625 $165,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Government Entities Manufacturing/IndustrialCompanies

Service/Retail Entities TransportationCompanies

Overall

Median Award by Defendant Type For Discrimination, Federal District

Court Cases (1997-2003)

Defendant TypeSource: Employment Practice Liability: Jury Award Trends and Statistics, 2004 Edition.

Analysis by Defendant TypeThe following pie chart reveals the industry breakdown of defendant

types based on plaintiff and defendant verdicts rendered from 1996 through 2002.

Nationwide Employment Practice Liability Settlements (1996-2002)

Liability Award Median

Probability Range Total Range Award Mean

Discrimination, Overall $55,000 $22,500 - $150,000 $1 - $508,000,000 $1,262,128

Constructive Discharge 60,000 25,000 - 154,958 2,000 - 2,750,000 196,012

Hostile Work Environment

59,581 29,750 - 121,125 1,500 - 6,750,000 239,465

Retaliation, Overall 39,500 18,750 - 121,250 2,001 - 1,250,000 120,335

Sexual Harassment 61,000 22,250 - 172,500 1 - 1,250,000 150,615

Wrongful Termination 50,000 20,000 - 135,000 121 - 55,000,000 406,654

Employment Cases, Overall

56,750 25,000 - 157,875 1 - 508,000,000 1,252,622

The settlement median, probability range, total range and mean for all settlements collected for the years 1996 through 2002 are analyzed in the

table below.

Nationwide Settlement Trends (1996-2002)

The following table provides the distribution of settlements and the percentage of the total number within specific dollar ranges for the

years 1996 through 2002. Distribution of Settlements

Texas Median Awards for Employment Cases

(2002-Present)

Dolla

rs

Source: Information collected from Westlaw Data Base.

115,000

71,500

103,025

127,000

149,425

17,250

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Title VII Awards ADEA Awards ADA Awards W/C RetaliationAwards

TCHRA Awards FMLA Awards

EPL Considerations

• Nexus Between Retention $’s and Claims

→ Trends→ Employer size

• Relationship to Median

Verdicts/Settlements

• Impact→ Early claim evaluation→ Claim management paradigm

EPL Considerations (Cont’d)

• Duty to Defend Policies→ Pro’s

o Timing of financial contributiono Less worry about allocation

→ Con’so Limitations on lawyer selectiono Constraints of litigation guidelines

• Panel Counsel Evaluation

EPL Considerations (Cont’d)

• Settlement→ Usually require insured’s consent→ “Hammer” clause

• Tension between Economic and Reputational Concerns

→ Common denominator: competent counsel

EPL Considerations (Cont’d)

• Coverage Issues→ Defense costs included within policy limits→ Same policy forms unclear→ Notice of claim

• Exclusions→ “Bodily injury” only excluded→ “Bodily injury and personal injury” exclusion→ Exception to injury exclusion: emotional distress, mental anguish, and humiliation→ Assault and battery

EPL Considerations (Cont’d)

• Breach of Contract→ Within “wrongful act” definition→ Written contract exclusions→ Express contract exclusions→ Oral Contract exclusions

• FLSA Exclusions

EPL Considerations (Cont’d)

• Recap→ Purchase considerations:

o Packageso Inter-corporate coordination

→ Paradigmo Exposureo Retentiono Priceo Counsel relationshipso Scope of coverage

The Fair Labor Standards Act:Old Law, Brand New Regulations

Bill Belt Carrie Hoffman Ron Gaswirth

Collective Actions

Settlements and Judgments

• Shoney’s – $18 MM

• Radio Shack – $27 MM

• Eckerd – $ 8 MM

• Rite-Aid – $25 MM

• Albertsons – $37 MM

• Taco Bell – $13 MM

• Farmers Insurance – $90 MM *

• Pacific Bell – $28 MM

• Wells Fargo – $4.6 MM

Collective Actions

• Section 16 B– Court can order mailed notice

• No Rule 23– Opt-in only

– lower number of plaintiffs

• No res judicata– 2-year statute of limitations

– 3-year willful

Certification – 5th Circuit

• Similarly Situated– Lenient standard to be certified: similarly situated in

job and pay provisionally after close of discovery

– Stringent standard applied at de-certification stage

• Issues– Names and Addresses Produced– Court Ordered Notice

De-certification

• Opt-in Plaintiffs not similarly situated

What To Do?

• Audit– Exempt jobs– Off-clock work– Rules– Wait time– Travel time– Break time

• Make sure overtime is calculated correctly

New Wage and Hour Regulations

Brand New Regulations• DOL issued final regulations on April 20, 2004

• Became effective on August 23, 2004

• Not all of the proposed regulations remain, especially the elimination of the “discretion and independent judgment” duty requirement

• The increased salary requirements remain in the final regulations, but were increased further

• The final rule includes many significant changes that take into account 75,280 comments from the public

New “Fair Pay” Regulations• So-called “white collar” overtime exemptions

• Eliminates the short and long tests and replaces them with one “standard test” per exemption

• Increases the minimum salary paid to a white collar exempt employee (executive, administrative, professional)– From $155/week ($8,060/year) – Former long test– To $455/week ($23,660/year) – New standard test

New “Fair Pay” Regulations• Overtime exemptions do not apply to certain

classifications of employees, regardless of salary:

– “Blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy

– Police officers, fire fighters, paramedics, emergency medical technicians and similar safety and first responder employees

– Licensed practical nurses and other similar health care employees

• Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties or responsibilities of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

New “Fair Pay” Regulations

Executive Exemption• NEW: The employee must be compensated on a salary

basis at a rate not less than $455 per week;

• The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

• The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

• NEW: The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption• NEW: The employee must be compensated on a

salary or fee basis at a rate not less than $455 per week;

• The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption - Learned

• NEW: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week;

• The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominately intellectual in character and which includes work requiring the consistent exercise of discretion and independent judgment;

• The advanced knowledge must be in a field of science or learning; and

• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Professional Exemption - Creative

• NEW: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week;

• The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic endeavor.

To qualify for the computer employee exemption, the

following tests must be met:

- The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 per hour;

- The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

Computer Employee

To qualify for the computer employee exemption, the

following tests must be met:

- The employee’s primary duty must consist of:- The application of systems analysis techniques and procedures,

including consulting with users, to determine hardware, software or system functional specifications;

- The design, development, documentation, analysis, creation, testing or modification of computer systems or program, including prototypes, based on and related to user or system design specifications;

- The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

- A combination of the aforementioned duties, the performance of which requires the same level of skills.

Computer Employee (Cont’d)

Outside Sales• The employee’s primary duty must be making

sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

• The employee must be customarily and regularly engaged away from the employer’s place or places of business.

• Salary requirements do not apply.

Maximizing Lawsuit and Class Action Avoidance:  Creating The

Right Work Environment and The Data To Prove It

Kenneth Broodo

LAWFUL, adj.Compatible with the will of a judge having jurisdiction.

LAWYER, n.One skilled in circumvention of the law.

LITIGANT, n.A person about to give up his skin for the hope of retaining his bones.

LITIGATION, n.A machine which you go into as a pig and come out of as a sausage.

-Ambrose Bierce, The Devil’s Dictionary

Maximizing Lawsuit and Class Action Avoidance

Maximizing Lawsuit And Class Action Avoidance: Creating The

Right Work Environment

Work Environment/CorrectionHR Organization and PurposeAnti-Discrimination Practices

Statistical Analysis/MeasurementData Collection and CodingMonitoring and Feedback

Decision-Making Processes/PreventionNotice and OpportunityStandards and Consistency

Work EnvironmentHR Organization and PurposeAnti-Discrimination Practices

“Sometimes a cigar-is just a cigar.”

-Sigmund Freud

A. HR Organization1. Functional Integration2. Role of Operations3. Ombudsman

B. Anti-Discrimination & Diversity Measures

1. Posted Non-Discrimination Notice

2. Publication of Revised EEO Policy

Statement

* Review of Value-Based Policy Issues

3. Diversity Training

4. Written Communications

5. Diversity Incentives

C. Discrimination Complaints and Non-Retaliation

1. Program Review2. Written Complaint and Investigation

Procedures3. Non-Retaliation Policy

Statistical Analysis

Data Collection and Coding

Monitoring and Feedback

“Boss, would you mind repeating everything you said after, ‘Max, here’s the plan.’”

-Get Smart

A. Review of In-House Analyses

B. Annual Statistical Analysis

1. Coding Key Information2. “Bad Manager” Report3. Protection of Privilege4. Commitment

Decision-Making Processes

Notice and Opportunity

Standards and Consistency

“As a matter of human history, Captain, it has always been easier to destroy, than to create.”

-Leonard Nimoy as Spock in The Wrath of Khan

A. Job Application and Assignment Procedures1. Job Posting2. Job Descriptions3. Job Assignment Criteria4. Job Path Information5. Job Applications Required6. Job Assignment Approval Form

B. Revision of Hiring Guidelines

C. Review of Compensation Decisions and Criteria

D. Revision of Job Performance Evaluation System

E. Job Testing

F.F. Job Opportunity TrainingJob Opportunity Training

1. Manager Trainee Program1. Manager Trainee Program

2. EEO Training2. EEO Training

3. Addition to New Hire Orientation3. Addition to New Hire Orientation

4. Posting of Training Opportunities4. Posting of Training Opportunities

5. Creation or Expansion of Job Rotation Program5. Creation or Expansion of Job Rotation Program

6. Creation or Expansion of Company “University”6. Creation or Expansion of Company “University”

7. Review of Recognition Programs7. Review of Recognition Programs

8. Creation or Expansion of Mentoring Program8. Creation or Expansion of Mentoring Program

1398075

FUTURE, n.That period of time in which our affairs

prosper, our friends are true and our happiness is assured.

-Ambrose Bierce, The Devil’s Dictionary

“We appreciate your business.”

-Ron GaswirthGardere Wynne Sewell, LLP

Maximizing Lawsuit And Class Action Avoidance: Creating The

Right Work Environment

Q&A Session

All Panelists