Most lawsuits settle. Often early in the case, sometimes even before the lawsuit is filed. We usually encourage our clients to consider an early settlement. These are the reasons.
1. Lawsuits take a long time to resolve without a settlement. It is not unusual for a case to take 18 months to two years between the date the complaint is filed (a complaint is the document that starts a lawsuit), and when a first trial date is set. During that time, the defendant will seek information about the employee's work history, before after after the time the employee worked for the defendant employer. Depositions are taken (a deposition is when witnesses are questioned under oath the testimony is transcribed by a court reporter). Motions are filed (a motion is a request to the judge), including motions to have the case dismissed.
2. There are incentives for both sides to settle a case early. In most employment cases, attorney fees are available when the employee prevails. This creates an incentive for the employer to settle because it faces the prospect of paying attorney fees to defend against the lawsuit, and paying the attorney fees of the employee's attorney too. The attorney for the employer will need to explain this to the client and often the costs to defend the case may exceed the settlement offer. It makes economic sense to settle the case if the employer can avoid these costs and the risk of an adverse ruling or verdict. Later in the case, after substantial attorney fees are paid to the defense lawyer, the incentive to settle may be affected by the sunk cost fallacy. The sunk cost fallacy is the phenomenon whereby a person is reluctant to abandon a strategy or course of action because they have invested heavily in it, even when it is clear that abandonment would be more beneficial.
3. The mitigation of damages defense. Employees are required to try to minimize or mitigate their damages by looking for other comparable work. A refusal to accept a comparable job usually means that the employee's right to damages for lost wages and benefits will stop when a comparable job offer is declined. Early in the case, the employee is likely still looking for work and the future damages are unknown. What looks like a significant damages case may not turn out to be one if the employee finds a job that pays close to or more than the employee was earning at the defendant employer.
4. Nothing ventured, nothing gained. If the employer is not interested in an early settlement, the lawsuit is filed or continues and settlement can be explored later. But there is no disadvantage to exploring an early settlement. We always explain to employer counsel that an early settlement offer does not mean that future settlement offers will be in the same range as an early offer. The "price" to settle is never revealed to the judge or the jury.
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