For the most part, employment cases settle. They do not go to trial. According to the American Bar Association's Vanishing Trial Project, In 1962, 11.5 percent of federal civil cases were disposed of by trial. By 2002, that figure had plummeted to 1.8 percent and the number of trials has continued to drop since then. (Bos & Glazier takes about 2 cases out of the 50 per year it accepts to trial, or 4% on average).
Why do employment cases settle?
All civil cases (and criminal cases) are likely to settle at some point during the litigation process. And settlements occur because the parties are able to reach agreement on what the cases are worth. But employment cases differ from most civil cases, including personal injury cases. In personal injury cases, the plaintiffs almost never receive attorney fees. The so-called American Rule provides that absent a statute or a contract, each side pays it own attorney. So the plaintiff's law firm takes its fee (usually one-third) from the total amount recovered.
But most employment cases are based on statutes that provide for recovery of attorney fees by the prevailing plaintiff, but not for the prevailing defendant. This means that employer counsel should advise their clients at the outset that the client may end up paying for two law firms, not just one. The potential obligation to pay the plaintiff's attorney fee means that strong cases with low damages are particularly likely to settle.
For example, an FMLA interference case will allege that the employer violated the statute or regulations. But often, the employee who was fired in violation of the law is able to find a new comparable job without a long period of unemployment. In that case the damages will be low, perhaps only $10,000. There is a strong incentive for the employer to pay that sum, including the attorney fees incurred by the employee's lawyer, once the employer counsel concludes that the case has merit. Failing to settle the case early can result in the employer paying 5 to 10 times the amount it would have paid in an early settlement.
When do employment cases settle?
There are three primary periods when employment cases are likely to settle: before suit is filed, after limited discovery, and after summary judgments motions are resolved.
Before Suit. Before we file suit, with only very rare exceptions, we send a demand letter to the employer. Most employers of any size then seek counsel to defend the threatened lawsuit. We almost always include a draft complaint (the document that starts a lawsuit) with the letter seeking a settlement. The letter and the complaint describe what we have done (met with the client, reviewed the available documents, and researched the law), and invite the employer or its counsel to contact us if there is interest in a pre-suit settlement. Most of the time, we do get a call from the employer counsel before our self-imposed deadline to file the lawsuit. The call usually leads to a discussion about settlement. Early settlements may benefit both the former employee and the former employer. From the employee's perspective, an early settlement provides needed income, reduces the stress associated with the litigation process, and avoids the risk of an adverse decision by the court.
After Limited Discovery. Employer counsel and employers are sometimes reluctant to settle before a lawsuit is filed. This is especially true if the employee's lawyer has a reputation to threatening lawsuits, but not always following through the threats. (Bos & Glazier does not have this reputation). In addition to waiting on receipt of the lawsuit itself, there may not be sufficient information available to employer counsel to decide on the likely outcome of the case. Written discovery (interrogatories and document production) provides the additional information. And sometimes, employer counsel wants an opportunity to size up the plaintiff in a deposition or see whether a summary judgment motion has a good chance of success. The risk to employer counsel in waiting until after some discovery before settlement is (1) the discovery may convince the employee's lawyer that the case is better than anticipated and the price of a settlement goes up, (2) the more time the employee's lawyer spends on the case, the higher the settlement value because the attorney fees increase, and (3) the client's emotional investment in the case goes up as well, especially after her deposition is taken.
After Summary Judgment Motions Are Decided. Sometimes employer counsel waits until after summary judgment motions (requests to the judge that the case be dismissed before a jury trial) are decided to engage in earnest settlement discussions. The benefit is that if the employer wins, the settlement value of the case goes down considerably, possibly to zero. The risk is two-fold. First, that more money is spent on discovery and preparing the motion and brief than would be spent in an early settlement. Second, if the motion is lost, the settlement value of the case goes up considerably and the employee's counsel has little reason to negotiate. At this point, most of the time that will be invested into the case has been spent. And if the trial judge has denied the motion, the plaintiff's counsel has likely convinced the judge that there is a reasonable probability that the jury may agree that the law has been violated.
The longer the case proceeds, the more likely it is to result in a trial.