Class-action lawsuits by workers against employers have risen dramatically during the COVID-19 pandemic and settlement amounts have hit record levels, a trend that is likely to continue in 2022, according to a new report.
The report by law firm Seyfarth Shaw, LLP highlights the biggest litigation threats employers face in these unprecedented times of economic upheaval and a tight labor market. While the types of class-action lawsuits comprise a wide range of allegations, the report found four areas that were particular threats to businesses.
Statutory suits included actions over breach of contract for employee benefits, antitrust law violations, and violations of anti-harassment and privacy laws. Class-action settlements jumped nearly seven-fold in 2021.
Much of that amount was to settle sexual abuse allegations against two universities. Large settlements were also reached for collecting fingerprint and handprint data without workers’ consent, and over allegations that employers colluded to limit wages.
The COVID-19 pandemic inspired employee lawsuits as businesses attempted to bring workers back on-site or implement hybrid work arrangements, according to Seyfarth Shaw.
Employer vaccine and masking mandates produced employee pushback. It is too early to know how large future settlements will be, but the large numbers of affected employees suggest that they will be sizable.
Allegations that employers violated the federal Employee Retirement Income Security Act more than doubled last year.
Half the settlements were for alleged mismanagement of 401(k) plans. Alleged breaches of fiduciary duties (such as overpaying administrative fees) and underfunding plans made up the rest.
Wage and hour
Minimum wage increases in many states have made potential lost wages more costly.
There is also more focus on companies’ alleged misclassification of workers as independent contractors. The trend of employees working remotely because of the pandemic may also spawn claims that employers are not paying them for all the hours they work.
Total settlements for wage and hour class-action lawsuits more than doubled to $641 million, from $295 million in 2020.
This includes claims such as gender discrimination related to pay, and sexual harassment. There were also large settlements of age and racial discrimination claims.
Some COVID-19-related suits alleged discrimination based on disability or religious beliefs, as workers argued that their health status or religion precluded them from getting vaccinated.
There were also charges of retaliation against workers who raised concerns about workplace safety or who sought disability or religious accommodations.
Businesses are vulnerable to employee lawsuits on any of the above grounds, even when they take preventative steps. Even groundless suits are expensive to defend and can result in hundreds of thousands of dollars in legal fees.
Insurance can help protect employers against ruinous lawsuits. Employment practices liability insurance covers allegations of discrimination, harassment, invasion of privacy, and may cover claims of wage and hour violations.
Employee benefits liability insurance covers claims of mismanagement of benefit plans, while employee dishonesty insurance may cover thefts committed by plan administrators.
Umbrella or excess liability insurance policies provide additional coverage for these types of lawsuits.
If you’re a small business owner, contact us today to discuss these risks and how to protect your business. VMA has been helping small business owners since 1935 and currently writes $30 million in health and commercial insurance. Contact VMA’s Director of Sales, Shannon Wolford at email@example.com or 415-710-0568.