Deciding whether to settle an employment dispute is no easy
task. There are many factors to consider, including not only case
merits but also jurisdiction, expected workplace impact, anticipated
costs and the organization’s overriding HR and legal strategy. Those of
us who practice in this area need to make these decisions every day.
Below are the top ten issues the authors consider when deciding how to
handle a particular case.
1. Was a mistake made?
The first step after getting notice of a claim is to conduct an
immediate and thorough investigation. If a law was violated or if the
facts could be misinterpreted to suggest a violation, a quick resolution
may be desirable. Do not simply rely on the manager’s assertion that
“everything has been documented properly.” Try to obtain as much of the
actual documentation as possible, including email, where “smoking gun”
types of statements may lie. If your defense looks uncertain, settling
quickly, before discovery begins, may be your best bet to avoid
Something else to consider upfront is an unconditional offer of reinstatement, which will cut off pay damages. Although managers usually are reluctant to make such an offer for understandable reasons, the fact is that few plaintiffs will accept, yet it effectively minimizes potential awards and puts you in a better settlement position. Another way to limit damages in a federal case is a Rule 68 offer of judgment: “If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”
2. Will settlement have an impact outside the case at hand?
No case is settled in a vacuum. Even the tightest confidentiality
provision will not stop news of settlement with a current or former
employee from reaching the workplace or the local plaintiffs’ bar. Will
settling hurt workplace morale? Will it undermine the authority of
managers against whom claims were made? Will it invite more claims from
employees who presume that their peer received a big payout? On the
other hand, would a trial lead to embarrassment of managers or the
organization, create a significant business distraction or increase risk
of future claims as private facts become public record? These are
threshold considerations in any settlement decision. Note that while
settling too often or too early may lead plaintiffs’ counsel to consider
your organization an easy mark for a quick hit, a strict refusal to
negotiate may cost your company the chance to get out of a bad case
3. What judge has been assigned to the case?
Some judges will carefully consider motions for summary judgment and will grant them in appropriate cases; other judges are much more reluctant to grant summary judgment. Some judges will work actively with the parties to achieve a settlement early in the case no matter what the merits; other judges do not consider this to be an appropriate use of their resources. When a frivolous case is filed and you feel you have a strong summary judgment argument, your settlement evaluation must account for the type of judge assigned to your case. Make sure your local counsel can give you intelligence about your judge in jurisdictions with which you are not personally familiar.