The Art of the Settlement

Most individual employment- discrimination lawsuits—including harassment and retaliation claims—do not make it to trial. Like civil suits of all kinds, they are much more frequently settled or dismissed on pretrial motion, such as when no version of the plaintiff’s facts would support a jury’s decision.

Parties choose to settle for many reasons, including:

• Preference for certainty versus uncertainty of outcome.
  
• Desire to save significant amounts of time, money and distraction.
  
• Ability to reach an agreement that all can live with.
  
• Interest in preserving privacy and confidentiality, although some states have begun to limit or even ban nondisclosure provisions in discrimination settlement agreements.
  

Another factor is the impact of local court rules that require all cases to first go through some form of alternative dispute resolution.

The likelihood that most employment cases will settle highlights the need for employers to engage in early case assessment. But what does that mean? And what is a rational and sustainable process for doing so?

Good Facts vs. Bad Facts

With the help of counsel, HR professionals should look closely at both sides of the case. If the bad facts—those that would be unfavorable to the employer—outweigh the good facts, the employer may opt for early settlement, says Maria Greco Danaher, an attorney with Ogletree Deakins in Pittsburgh. If there are enough good facts, an employer may choose to move forward with defending the lawsuit. 

HR professionals should be active partners with counsel in early case assessment. They are likely to have key information, such as the plaintiff’s history with the company and whether relevant witnesses still work there or, if not, whether they left on good or bad terms. HR professionals will also have insight into the impact litigation will have on both the business and the budget. And they may be able to judge whether offering a settlement on one claim is likely to invite other claims. “This information is a critical piece of early case assessment and a complement to the legal analysis that the in-house or outside attorneys can offer,” says Dawn Solowey, senior counsel with Seyfarth in Boston.

Case assessment, and ultimately a decision to settle a case, is about more than checking off boxes. Discrimination claims are often fraught with emotion on both sides, especially if the HR professional is the same person who made the decision that led to the complaint. “The factor that creates the most resistance [to settlement] is when the person who decided the adverse action is the person who is deciding whether to settle the case,” Danaher says. “The HR person doesn’t want to think of it as ‘Now we have to pay money. I must have made a mistake.’ ”

In broaching settlement discussions, Danaher strives to help her clients identify shared interests between the employer and the claimant as opposed to seeing only a binary choice: settle or don’t settle. “You start evaluating the case on day one, but you don’t start by talking about all or nothing,” she says. “It’s a creative, continuous process.” The communication skills of both counsel and the company’s representative are key to the effectiveness of this process, and a trusting relationship between them is essential.

Consistent Approach 

Employers facing numerous discrimination complaints would be wise to adopt a well-thought-out, consistent approach to settlement, Solowey says. “Even in a smaller organization that faces a small number of claims, it can be helpful to have a strategy so that you’re not just reacting ad hoc to each claim or threatened claim,” she says. Establishing a customized approach that’s organic to and reflective of the organization—its values, business needs and budget—takes a lot of the stress out of individual settlement decisions, Solowey adds.

Exactly who plays what role in initiating and developing such a strategy will vary. “Ideally, there’s a partnership between the HR professional and in-house or outside counsel,” Solowey says. “As outside counsel, I always welcome any creative thinking from the HR or in-house team.”

In some cases, deciding whether to settle a particular case might prompt a larger conversation. “The HR professional is in as good a position as anyone to initiate such a process,” Solowey says. She suggests opening the conversation with “How do we want to handle these more broadly?” or “Would it be helpful to put in place some internal guidelines to inform our approach to future cases?” 

Regardless of who initiates the process or ultimately calls the shots, key stakeholders need to be involved in setting the strategy, Solowey says. This would include any outside and in-house counsel, HR, and leaders of major business units or departments.

As part of the discussion, HR might suggest setting a goal to help clarify the organization’s approach to settlements going forward.

 Examples of possible goals include reducing overall defense costs on settlements and judgments, as well as protecting the company’s reputation. Meeting those goals will require reviewing various metrics over a specified period—for example, settlement payout ranges and averages, as well as the stage of litigation when settlements were paid. It also can be useful to review the company’s success rate in cases that were not settled and to calculate average costs of defense or judgment in those cases. Review of historical data also helps to set a goal for the average cost to resolve a claim. 

Whether the data is collected in-house or externally, Solowey says, “the key is to keep the metrics consistently updated and in a central repository so that when there’s turnover at the company, you don’t lose that institutional knowledge.”  

Margaret M. Clark, J.D., SHRM-SCP, is a freelance writer in Arlington, Va.

Illustration by Adam Niklewicz for HR Magazine.