Settlement of lawsuit-good or bad idea

Many of our clients choose to settle discrimination lawsuits rather than fight, for various reasons such as costs, adverse publicity, etc. We always get confidentiality provisions in any settlement agreement. However, word tends to get around. We see with some clients that settlements tend to send a message to employees that the company is an easy target for some of this "legal blackmail litigation," and hence they are more likely to sue. As a result, settlements actually lead to more lawsuits. Any one have any experience with this?


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  • I've had plenty (too much?) experience in this area. It's commonly referred to as "the deep pockets" theory and it seems prevalent in big business. The attitude is that in (too) many instances the legal action isn't worth the attorney's fees and the time supervisors spend away from the workplace. This is becoming more and more of a concern by line supervisors because although there are confidentiality agreements between the parties, the word "settlement" implies there was fault on the employer's part. This also could have a detrimental effect on a supervisor's career if his/her future superior gains knowledge of the settlement but does not know the facts behind it. There are legitimate situations where employers should settle legal actions. Moreover, law suits are now a part of the cost of doing business because elements of that cost are factored into overhead which impacts the profit margin. With that said, to discourage frivolous actions and those in which the employer clearly isn't at fault, employers should draw the "line in the sand" more often than they are currently doing.

  • At my previous company, we chose to fight one or two where we spent more money on defense costs that it would have cost to settle. Our company developed a reputation for not being an "easy money" company and we had much fewer lawsuits. The key is to pick very good fact situations to ensure that you win the high profile ones. This discourages employees from bringing frivolous lawsuits and makes it difficult to find an attorney to represent them. Of course, those in which the company had fault, we settled quickly, with a confidentiality clause. I also would make sure that the employee knew that only the Head of HR, the CEO and my attorney knew about the settlement. His/her lawyer was bound by confidentiality, so if the news got out that we had settled, we would assume they had breeched the agreement and would sue to get damages and attorney fees.

  • We, a 550 employee bank, have adopted a policy of "Millions for defense, not one penny in tribute." We handle nuisance cases in-house and out source bad facts and high dollar claims. We work very hard to avoid a reputation for "easy pickin's." We also work very hard to maintain a discriminatory free environment.

  • One thing you always have to keep in mind is that sometimes the settlement is so small that confidentiality can be counter productive. For example, if a lawsuit has gone on for 2 years, and then settled with the ex-employee for less than 5K, the current employees are not going to think that the company is easy pickings. However, if the ex-employee tells the current employees "I settled the case but I'm not allowed to tell you how much I got", their imaginations can run wild. So confidentality should not be an automatic provision.

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