Defending a case through discovery and a ruling on a motion for summary judgment can cost an employer between $75,000 and $125,000. If an employer loses summary judgment (which, much more often than not, is the case), the employer can expect to spend a total of $175,000 to $250,000 to take a case to a jury verdict at trial.
By Brad Nakase, Attorney
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The reality is that defending a discrimination or other employment lawsuit is expensive. Defending a case through discovery and a ruling on a motion for summary judgment can cost an employer between $75,000 and $125,000. If an employer loses summary judgment (which, much more often than not, is the case), the employer can expect to spend a total of $175,000 to $250,000 to take a case to a jury verdict at trial. Employers may also face the additional financial burden of paying the employee’s legal fees, which can significantly increase total costs.
The expenditures involved in defending an employment lawsuit, including the intricate process of discovery and potential motions for summary judgment or adjudication, can surpass $150,000 for employers. Should summary judgment not be obtained, the costs can escalate further, requiring an additional $150,000 (totaling $300,000 or more) to proceed to trial. On average, it costs employers around $75,000 to work with an employment lawyer to settle a claim before it reaches trial. However, if the case progresses to court, the expenses can skyrocket, with pre-trial defense costs easily exceeding $125,000.
The cost of mounting a defense against an employment lawsuit is considerable. On average, the cost to defend an employment claim through settlement is $160,000. However, there are two important caveats. First, this average includes nominal cases that were settled very quickly and thus has a de minimis cost that brings the average down. Second, fees charged by insurance defense counsel are typically 20 to 25 percent lower than when a private employer hires counsel directly. With this in mind, hiring defense counsel directly would bump the average for this time range up to about $200,000.
To bring the case to trial, an employer should anticipate potential costs of up to $245,000. If the employee prevails, the employer is responsible for covering the employee’s attorney fees. The employee’s legal fees are classified into two main categories: attorney fees and costs. Attorney fees encompass the charges for the services provided by the attorney on behalf of their client. This cost can vary from $400 to as much as $750 per hour, contingent on the specific attorney.
Additionally, you may also need to pay expert witness fees. Expert witnesses are those who provide specialized knowledge relevant to the case. They can command high fees for their services, including preparation, reports, and testimony. Fees usually range from a few thousand to tens of thousands of dollars, depending on the expert’s field and the complexity of the case.
Most employers will settle the claim instead of risking $250,000 to $500,000.
Choosing to settle and paying a sum like $10,000 yields a considerably better outcome than facing potential costs of up to $100,000 in the event of a loss. Employers cannot avoid this risk simply by settling every claim that is filed, lest the company risk the perception of being an easy mark by every ex-employee. The prudent approach often involves seeking early resolution of lawsuits to curtail legal fees associated with defense.
According to California Labor Code 218.5, employees who prevail in employment lawsuits are entitled to recover their attorney fees. In cases where legal action is initiated to address unpaid wages, fringe benefits, or contributions related to health and welfare or pension funds, the court shall grant reasonable attorney’s fees and expenses to the prevailing party. Nonetheless, if the prevailing party in the court proceeding is not an employee, attorney’s fees and costs will only be awarded if the court concludes that the employee brought the legal action with malicious intent.
This law emphasizes California’s strong employee protections. Employers must also consider the potential costs of the employee’s attorney. If the employee’s employment lawyer prevails in the case, the employer will be held responsible for covering their legal costs. California Labor Code provisions are among the most employee-friendly in the country, reflecting the state’s commitment to safeguarding workers’ rights.
Defending an employment lawsuit can be an expensive and resource-intensive process. With attorney’s fees and other legal costs mounting quickly, it is essential for employers to understand strategies to mitigate these expenses. Below is a comprehensive guide with consistent dollar amounts drawn from your article and sentences strictly verbatim from your sources.
a. Engage an Employment Lawyer Early
To mitigate the costs associated with defending against employment lawsuits, you should engage an employment lawyer as soon as you can. This way, you have an early and clear assessment of the case. Early engagement can help clarify risks, provide strategic options, and possibly reduce overall costs.
b. Consider Early Settlement
The prudent approach often involves seeking early resolution of lawsuits to curtail legal fees associated with defense. Settling is less costly than trial, with less public exposure and quicker resolution. Choosing to settle and paying a sum like $10,000 yields a considerably better outcome than facing potential costs of up to $100,000 in the event of a loss.
c. Leverage Effective Negotiation Strategies
Effective negotiation is key to managing litigation costs and outcomes of settlement discussions. Some helpful techniques include understanding the opponent’s position, offering creative concessions, using mediation, and presentation of evidence. Mediation fees, while an added expense, can often lead to faster and less costly resolutions compared to litigation.
d. Choose A Small Law Firm Because They Have Lower Overheads
Employers should select an employment attorney or law firm with a proven track record in employment law. Experienced attorneys can handle cases more efficiently and strategically, helping manage overall costs. Employment litigation attorney fees in California typically range from $200 to $650 per hour, depending on the attorney’s expertise.
Hiring a small law firm instead of a large one can provide numerous advantages for businesses facing employment lawsuits. While larger firms may have more extensive resources and name recognition, small firms often deliver more personalized service, cost efficiency, and agility in handling cases.
One significant benefit of hiring a small law firm is the personalized attention clients receive. In small firms, the attorneys who take on your case are the ones who will handle it directly, providing consistent and reliable communication throughout the process. Unlike large firms, where cases are often delegated to junior associates or spread across large teams, small firms ensure that senior, experienced attorneys are deeply involved in every aspect of the case. This level of focus can lead to a stronger, more strategic approach tailored to the specifics of your business and case.
Cost efficiency is another compelling reason to consider a small law firm. Larger firms often have higher overhead costs, which translate into steeper billing rates for clients. Small firms typically operate with leaner teams and lower expenses, making their fees more affordable while still offering high-quality legal expertise. Moreover, small firms are less likely to charge for administrative layers that can inflate costs at large firms. This affordability can make a significant difference, especially for small to mid-sized businesses with limited legal budgets.
Agility and responsiveness are also hallmarks of small law firms. Without the bureaucracy of a large organization, small firms can make decisions quickly and adapt strategies efficiently as a case evolves. This flexibility allows them to focus on resolving disputes in a cost-effective and timely manner, avoiding the delays that can occur in larger firms due to internal processes or multiple layers of approval.
Finally, small law firms often foster stronger relationships with their clients. They prioritize understanding the nuances of your business and its goals, leading to better-aligned legal strategies. By choosing a small firm, you’re not just hiring a legal team—you’re gaining a partner invested in the success of your business.
When facing an employment lawsuit, the choice of legal representation can significantly impact the outcome. Small law firms bring the advantage of experienced, personalized service at a lower cost, combined with the flexibility and dedication needed to protect your business interests effectively.
California puts a strong emphasis on safeguarding employee rights. Employers in California face significant challenges due to the prevalence of employee-initiated lawsuits. According to an EEOC claim, statistics indicate a notable prevalence of employment lawsuits in the U.S. The Equal Employment Opportunity Commission (EEOC) receives tens of thousands of complaints annually.
Even in situations where no wrongdoing has occurred, settling may prove advantageous. The EEOC reports that the average cost of an out-of-court discrimination case is $40,000, and the average cost of an out-of-court harassment claim is $50,000. Choosing to settle and paying a sum like $10,000 yields a considerably better outcome than facing potential costs of up to $100,000 in the event of a loss.
Stringent company policies are pivotal in minimizing legitimate instances of discrimination. Having detailed records and clear policies is crucial. Proper documentation of all employment actions (hiring, promotions, disciplinary actions, etc.) provides evidence that decisions were based on legitimate business needs, not discrimination. Regular training for management and staff on discrimination laws and company policies also helps prevent discriminatory practices.
Engaging a proficient employment attorney is among the most crucial steps in fortifying your business. Skilled legal counsel can assist with drafting comprehensive employee handbooks, policies, and documents, thereby reducing the likelihood of inadvertently violating employment laws. In cases involving employment law, meticulous documentation serves as your primary, and at times, solitary defense.
Offering severance packages can mitigate the risk of lawsuits. By offering severance in exchange for claim waivers, the exposure to lawsuits concerning wrongful termination can be mitigated. Savvy employers contemplate extending a severance package upon employee separation, contingent upon the relinquishment of claims and legal action.
Employers should also consider investing in Employment Practices Liability Insurance (EPLI). EPLI covers a business against claims by employees that their legal rights have been violated. While there are premiums and deductibles to consider, EPLI can provide valuable financial protection against the cost of lawsuits.
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