Wage and Hour Cases May Fuel Uptick in Business Lawsuits

Though business litigation has declined in recent years, corporate lawyers predict that the frequency of suits may increase in 2009, according to a new survey of corporate attorneys by international law firm Fulbright & Jaworski.

The projected increase is likely to come from both a rising trend of wage and hour litigation and a change in federal law that makes it possible for employees to file disability-related lawsuits even if their disabilities are correctable through medication or assistive technology.

The study also found that although litigation is down, nearly four out of five companies reported being hit with a suit in the past year, and one out of five organizations face 20 or more of them. Additionally, the overall cost from lawsuits seems to be holding steady, with 45 percent of companies reporting that they are spending at least $1 million on litigation costs annually, a slight uptick from a year ago.

“With a new definition of who is disabled under the [Americans with Disabilities Act], we expect to see a significant increase in claims over the next year and a half,” said Butch Hayes, an Austin, Texas-based partner in Fulbright & Jaworski’s employment and labor practice.

Additionally, Hayes said that wage and hour-related litigation under the federal Fair Labor Standards Act has tripled in the past decade, and that trend shows no signs of abating.

“I think [plaintiff] lawyers are becoming more educated about what the laws allow and don’t allow,” he said. “Some lawyers now take wage and hour claims almost exclusively.”

Fulbright & Jaworski’s study had 358 participants globally, including 251 U.S. companies and 100 from the U.K. Forty-eight percent of the companies are publicly held, and 40 percent have annual revenue of $1 billion or more. (All of the findings cited in this story are for U.S. companies only.)

Pending employment-related lawsuits were cited by 47 percent of companies in 2008, making them slightly more common than contract disputes, in which 46 percent of companies were embroiled. An additional 29 percent faced personal injury lawsuits.

Overall litigation costs for U.S. companies basically remained stable in 2008, though the decrease in the frequency of lawsuits suggests that they are costing more. Thirty-nine percent of U.S. companies spent $500,000 or less on litigation, while 15 percent spent between $500,000 and $1 million, 29 percent spent between $1 million and $5 million, 7 percent spent between $5 million and $10 million, and 9 percent spent $10 million or more.

U.S. companies mostly gave themselves high marks for their management of records, which often becomes a crucial issue in employment lawsuits. Sixty percent of companies gave themselves a rating of 4 or 5 on a confidence scale, with 5 being the highest score in that area. Twenty-two percent rated themselves as fair, and 17 percent gave themselves a 1 or 2 rating, indicating a lack of confidence in their performance.

—Patrick J. Kiger

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