Pros and Cons of employment litigation or lawsuits

I chose to write this little article just to raise your awareness of some risks that will probably be considered by you and your lawyer. The unique facts and circumstances of your case control everything. This cannot be over-emphasized. Everything is based on your unique facts and circumstances. I threw in a few of the Pros to try to balance out the Cons. For more info about the considerations as to whether suing is right for you, see Deciding what to do … suing, etc. But stay right here for awhile and learn about the downside of litigation.

Concepts to take from this article:

• Some people need to be very concerned about some of the risks of litigation, and other people do not have much to worry about. It’s all case by case.

• Some of the risks of litigation are present in most cases, and some of the risks are present only in some cases. The risks vary depending on the unique facts of the case.

• I’ve said elsewhere on this site, and I’ll say again: Most cases settle, whether out of court or at a Mediation. Smart employers who want to minimize their overall expenses in employment disputes will consider settling even before a lawsuit occurs. So don’t let the downside risks described below prevent you from talking to a lawyer and considering taking action.

• Your lawyer will work with you to weigh the Pros and Cons of litigation, in determining whether, and how, you should proceed.

• You might find my article about Things I like to see in cases of some interest, because that article was written considering my understanding of the Pros and Cons of litigating different types of cases. In my experience, some types of cases tend to have an overall less rocky road through the legal system.

Some Risks and Disappointments are commonly present, even outside of court, and even if no lawsuit is filed

• Legal disputes create much frustration and stress. Some people find themselves too emotionally fragile to handle the stress of trying to resolve an employment dispute. For more about stress, see my article Mental Health – Stress and Depression and Job Problems

• Legal disputes may be extremely time consuming to resolve. See Time Lines in Discrimination lawsuits for more detailed info.

• Expenses and attorney fees could become unbearable.

• Tax problems – see your tax professional for details. Most settlements and court awards in employment discrimination, wrongful termination, and contract cases seem to be taxable as if ordinary income as of this writing. Attorney fees might not even be deductible in your specific situation.

• Your former friends and associates at the company may abandon you. You will probably hear opinions about you that may disturb you. You’ll need a thick skin.

• Your opponent might be unwilling to settle out of court, or the Mediation may fail.

• If you are the plaintiff, you could be placed on the defense. It’s not common in discrimination-type cases, but it occasionally happens that when you start making legal threats against an opponent the opponent begins accusing you of wrongful things and threatening to sue you. It’s all case by case. If the opponent’s potential case against you is weak, then the accusation could be a form of improper retaliation and might actually strengthen your own case. Contract disputes, in my opinion, have the most potential to generate these kind of “counterclaims.”

Some Risks and Disappointments are commonly present especially if a lawsuit gets filed on your behalf

• Your privacy is compromised. You can’t easily hide your past in a lawsuit.

• You may lose the case. Statistically, in Federal court where most discrimination cases are tried, the employee loses most of the time if the case does not settle. Various organizations and groups attempt to track certain statistics in the Federal Courts. I watch for those reports and take note when I see what appears to be a useful study or statistic. Here are the latest statistics I have seen reported regarding how employment discrimination cases tend to do in the Federal Courts. First, most cases settle; Second, of those that don’t settle one-half or more are thrown out as too weak; Third, of those that go to jury trial the Company wins 3 out of every 5 cases; Fourth, of those jury cases that the employee wins, about 1 in 3 will be reversed in whole or in part on appeal.

• Your opponent may countersue you. This risk does not commonly materialize in employment discrimination cases, because it creates the appearance of retaliation. The risk of counterclaims is higher in contract cases. Especially in contract cases, “breach of fiduciary duty” is a common counterclaim against managers, alleging that you as a manager harmed the company in some manner. Companies make counterclaims sometimes against employees, primarily to help encourage the employees to settle their cases.

• The case might fail to settle at the Mediation.

• Damage awards may be much less than hoped for. If you win a big compensatory or punitive damage award, the courts tend to reduce the award, sometimes dramatically.

• If you win your trial court case in front of the jury, your victory can be reversed by the trial court judge or the court of appeals. Reversal seems to happen in about 1/3 or more of jury trial victories for employment discrimination plaintiffs.

• The State of Missouri has a special tax that in theory would allow the state to claim 50% of “punitive damages.” But the law only seems to apply to State Court cases —But most employment discrimination cases are in Federal Court where the special “50% tax” arguably does not apply. In addition, most cases settle, even those where “punitive damages” have been awarded (they might settle to avoid an appeal, for example). The special 50% tax has not been ruled to apply to settlements. In contract cases, there is no award of “punitive” damages, so the special tax doesn’t apply.

• If you lose the case in court, you will probably be automatically ordered to pay the winning opponent’s miscellaneous expenses and costs, such as their deposition expenses and other miscellaneous expenses.

• Depending on the type of case and the unique facts and circumstances, it’s sometimes possible that a losing plaintiff will be ordered to pay the winner’s attorney fees. This is rare in employment discrimination cases. In a contract case, an attorney fee award would be appropriate if the contract called for the loser to pay the winner’s attorney fees. Sometimes, a special statute or law permits the winner to claim at least a portion of its attorney fees from the loser – it’s all case by case.

• Sometimes, a court will rule that a plaintiff’s legal claim was “frivolous” and make the plaintiff pay the opponent’s attorney fees. This can happen in discrimination cases, as well as any other type of case. Lawyers don’t like to file cases that are likely to be found frivolous, so it’s fairly rare that your entire case will be found “frivolous” if you are represented by an attorney. It’s more likely that a judge may find that a portion of your case was “frivolous” (such as one claim directed at one defendant, out of a case involving several claims against several defendants).

• Courts may impose financial penalties on you and your attorney for reasons such as misconduct during the case, failure to cooperate with court orders, certain types of errors that the judge will not excuse, as well as for allegedly frivolous cases.

• If you lose the case, it’s always possible that you could be forced into bankruptcy because of being ordered to pay the items listed above.

• Most of the time, expect a court award (or settlement) in a discrimination or contract case to be taxable as ordinary income.

On the Plus side

Once again, everything is case by case, and these pluses below are not broken out by case type. The pluses are different for different types of cases. For example, in a non-compete case if you are the employee, then the best “plus” for you may be freedom from the non-compete rather than a victory with a damage award. The pluses listed below are focused more on wrongful termination and discrimination-type cases.

• Many cases get fully resolved without ever having to go to court. If you and your opponent are reasonable, then your situation can often be resolved efficiently without you having to incur the big risks and expenses of litigation.

• Most lawsuits settle at some point. It seems that more than 50% of employment lawsuits settle at the Mediation. Strong cases settle better than weak cases. Weak cases settle if both sides realize the case is weak. Strong cases settle well if both sides realize the case is strong.

• Even cases that appear fairly weak initially can settle well in the right circumstances.

• High defense expense often means that the company becomes willing to enter into a reasonable settlement under the circumstances. Litigation tends to be expensive for companies. Whether the company wins or loses, it usually has to pay a lot of money defending itself in court, for attorney fees and depositions and other things.

• In the right case, it’s always possible for there to be a big damage award. The statistics are against it, but it remains possible in the right case.

• There seems to be an emotional benefit for some people in taking action against an opponent who harmed them. People seem to feel better about themselves, more in control of their lives. I’m no psychologist, but I perceive this benefit. For some people, part of the healing process from an unfair termination or other mistreatment seems to be taking action to get some justice.

CONCLUSION: Your lawyer will work with you to identify the pros and cons that might apply to your unique facts and circumstances, perhaps including pros and cons that are not listed above, so that you are well informed and your eyes are wide open.

Article written by | Tim Willoughby