Are Employment Class Actions Dead After Walmart ATT

Are Employment Class Actions Dead After Walmart & AT&T? & Other Tales from World of Employment Exposure RIMS Annual Conference April 15 -16, 2012

Today’s Discussion Leaders • Nicole Franzese/Best Buy • Laura Maechtlen/Seyfarth Shaw LLP • Tom Hams/Aon

RIMS - The Brave New World Of Employment Class Actions - View From The Defense RIMS Annual Conference April 15 -16, 2012

Some Key Terms For Today’s Discussion • Rule 23(a) Requirements – Numerosity – The individuals who would comprise the class must be so numerous that joinder of them all to the lawsuit would be impracticable. – Commonality – There must be questions of law and fact common to the proposed class. – Typicality – The claims or defenses of the representative parties must be typical of the claims and defenses of putative class members. – Adequacy Of Representation – The representative plaintiffs and their counsel must be capable of fairly and adequately protecting the interests of the class.

Some Key Terms For Today’s Discussion (Cont’d) • Rule 23(b) Requirements – (b)(1) – Decision as to one class member’s claim dispositive of all others – (b)(2) – Injunctive/equitable relief – (b)(3) – Money damages

Some Key Terms For Today’s Discussion (Cont’d) • Rule 23(b)(3) Requirements – A class may be certified under Rule 23(b)(3) if the court finds that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. – To qualify for certification under Rule 23(b)(3), a class must meet two additional requirements: [1] common questions must predominate over any questions affecting only individual members; and [2] class resolution must be superior to other available methods for the fair and efficient adjudication of the controversy. – Rule 23(b)(3) applies to cases where the primary relief sought is money damages. Each class member is entitled as a matter of due process to personal notice and an opportunity to opt-out of the class action.

Introduction • Overview Of 2011/2012 Developments – A Transformative Year! • Our Topics Today Relative To Employment Discrimination, Wage & Hour, And Government Enforcement Class Actions

Key Trends In 2011/2012 • An increase in wage & hour class actions, especially those brought under the FLSA. In 2012, will the wave crest? • ERISA class actions took center stage in 2011; and 2012 is expected to be another key year on the ERISA front. • Developments in Rule 23 and § 216(b) case law is causing an evolution of new case theories, defense litigation strategies, and class certification approaches. • Change and flux are the new watch words in the class action world

Headlines Of 2011 Relevant To Employers • Wal-Mart Stores, Inc. v. Dukes – in a 5 -4 opinion, the Supreme Court held that Plaintiffs failed to satisfy the Rule 23(a) commonality requirement. • AT&T Mobility LLC v. Concepcion, et al. – subordinated state law to the Federal Arbitration Act (FAA) and allows the broad use of arbitration and class action waiver clauses in consumer and employment contracts. • End-Of-Year Statistics – (i) Employment discrimination filings increased from 14, 559 lawsuits in 2010 to 14, 771 lawsuits in 2011 – (ii) More EEOC charges were filed in 2011 than ever before (99, 947 charges)

Wal-Mart Stores v. Dukes • Impact of SCOTUS ruling on “class certification architecture” • Impact of SCOTUS ruling on damages recovery • Unanswered questions/issues inherent in the SCOTUS ruling • Anticipated “second generation issues” from Dukes

AT&T Mobility v. Concepcion • How SCOTUS ruling impacts class action waivers in the context of workplace arbitration agreements • Plaintiffs’ strategies to “work around” Concepcion – initial 2011 case law, and predictions for 2012

Pre-emptive Defense Strategies • The “second bite at the apple” defense tactic based on Dukes • A shining example - Pilgrim v. Universal Health Care, 660 F. 3 d 943 (6 th Cir. 2011) • How defense strategies are transforming and the early “returns” from federal courthouses

Toolkit Issues • Are workplace arbitration agreements worth it? • Pros of Arbitration – Following the AT&T Mobility decision, it is clear (at least for now) that arbitration agreements can include a class and collective action waiver that effectively prevents the filing of such actions either in court or in arbitration. – With regard to routine litigation matters, arbitration provisions generally result in reduced litigation costs. – Typically, arbitration results in faster resolution than traditional court litigation. – Arbitration usually includes limitations on discovery and reduces discovery and related litigation burdens on the company.

Toolkit Issues • Pros of Arbitration – Arbitration reduces the likelihood of a “runaway” verdict, and offers less risk of staggering damage awards of the type that might be awarded by a jury. – Arbitration is more confidential, and proceedings are typically private or at least not as likely to attract publicity. – Arbitration offers greater finality, given the lack of appeal rights.

Toolkit Issues • Cons of Arbitration – While the possibility of an effective waiver of class or collective actions is compelling, the AT&T Mobility decision is brand-new, and it remains to be seen whether and how Congress may respond. – Employees or consumers may file a lawsuit anyway, and enforcing an arbitration agreement in court and compelling a dispute to arbitration can add to overall litigation costs. – An arbitration policy generally will be ineffective and unenforceable with regard to the filing of administrative charges, and cannot prevent the Department of Labor, the Equal Employment Opportunity Commission, or similar agencies from bringing suit on behalf of employees. – Arbitrators are paid by the hour or by the day. Arbitration proceedings are far less likely to be decided by a dispositive motion than are court proceedings.

Toolkit Issues • Cons of Arbitration – Administrative and arbitrator fees – which often are paid by the company – are rising and can be significant for multiple day hearings. – Plaintiff challenges to the enforceability of an arbitration clause often proceed to the appellate court level, generating significant legal fees prior to reaching the merits of the dispute. – Arbitrators are less likely to accept procedural defenses and more likely to allow hearsay and irrelevant witnesses. – Arbitrators typically are more prone to issue poorly reasoned decisions. In addition, some feel pressure to “even the scorecard” to appear more neutral statistically, or are inclined to “split the baby” notwithstanding the law. – Reviewing courts are extremely reluctant to overturn adverse arbitration decisions or reduce large arbitrator awards under the existing standards of review. – Consumers or employees may perceive that mandatory arbitration has removed or infringed upon their rights.

Design Considerations • Contents of Agreement • Not “One Size Fits All” • Choice of FAA or State Arbitration Law • Grievance Procedure • Mediation • Mandatory Carve Outs • Class Action Waiver • NLRA Waiver • Cost of Arbitration, Including Reallocation • Mutuality • Inclusion of Related Entities and Persons

Additional Toolkit Issues • Ensure robust policies to ban discrimination and encourage internal appeals • Ensure objective elements in pay-setting and performance evaluations • Preemptively, in a privileged way, analyze adverse impact • Recruit diverse candidate pools • Avoid quotas

RIMS – Impact of the Brave New World from Broker Perspective RIMS Annual Conference April 15 -16, 2012

EPL Legal Trends Update • The Government – EEOC & OFCCP Continue To Be Aggressive • Reduced backlog of charges by 10% thanks to increased staffing • Increase monetary recoveries to historic levels • Charge filings reach historic high – Long-term Unemployed as Protected Class?

EPL Legal Trends Update • ADA Claims Continue to Surge – Disability charges up over 17% in 2010 and up 69% since 2005 – John Hendrickson’s Top 5 Lessons From Recent ADA Class Litigation: • An Inflexible Period of Disability Leave, Even if Substantial, is Not Sufficient to Satisfy an Employer’s Duty of Reasonable Accommodation • The Appropriate Lengths of Leave Under the ADA Requires an Individualized Analysis – Even When the Employer has a Generous Leave Policy • Separating Leave Administration – Like the Administration of Worker’s Compensation Benefits or Disability Benefits – from ADA Administration is Risky for Employers [“Lessons” - continued]

EPL Legal Trends Update [“Lessons” - continued] • Clear Lines of Communication Regarding Reasonable Accommodations are Critical Not Only with Employees on Leave but Also with Their Health Care Providers, Supervisors, and Managers • The EEOC Occupies a Unique Role in Litigating These Cases

EPLI Large Loss Trends 1994 10 Year span 2000 to 2010 • Would Novartis Survive Post Wal-Mart? 2012 In Ms of $

EEOC Charge Patterns 1992 - 2011 Number of Charges Total charges hit historic high: 99, 947 Notes • Retaliation overtakes Race • ADA Claims soar Source: EEOC Charge Data System National Database 24

EEOC Monetary Benefits Patterns Monetary Benefits ($M) Total recoveries hit historic highs: $364. 7 M* Notes * Total recoveries by the EEOC in 2011 increased by $45, 300, 000! This was over a 14% increase in recoveries from 2010 and another record high year of recoveries. Increased staffing allowed the EEOC to reduce its backlog of cases by over 10% for the first time in history, contributing to the major increase in recoveries Source: EEOC Charge Data System National Database 25

Workforce Trend Issues Gender Pay Gap The new census data has bolstered the risk faced by large employers relative to this issue. Combined with the systematic initiative now being employed by the EEOC, most large employers very well may see this issue tested within their organizations. Any unexplained disparity will almost certainly be pursued with class action lawsuits with the support of the EEOC. Unemployment and Age The effects of the recent recession have hit older workers harder than ever before. As the unemployment, COBRA and other benefits available to this unemployed populations has been ending, this has been accompanied by charges or lawsuits alleging a disparate impact and may explain in large part the 60% increase in EEOC charges. With large employers having such a diverse population, including older employees, the exposure to this will be realized by many large employers (and in several cases, it already has). This is also impacting employers on claims by applicants that are older. Source: U. S. Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey.

Market Update – Employment Practices Liability Capacity Coverage Limits Retentions Pricing • Overall capacity remains adequate for most accounts. • Coverage remains consistent and broad between most primary markets • Aggregation is being monitored by both insurers and insureds • Retentions generally stable but may increase in some pockets • Rates hardening is spots and remaining aggressive in others

EPL Market Pricing Index Year-Over-Year Change Q 1 2002 – Q 4 2011 | Base year 2001 = 1. 00 EPL Pricing Index Full – 5. 8% 2011. 98 2010 1. 04 28

EPL Market Pricing Index Quarterly Change Q 1 2002 – Q 4 2011 | Base year 2001 = 1. 00 EPL Pricing Index Q 4 11. 6% Q 4 2011 0. 96 Q 4 2010 0. 86 First evidence of rising pricing in many years is driven by anomalies and real increases: • Pricing increases are occurring in the smaller employer segment of the market where the increased frequency of claims has significantly impacted loss ratios because of very low retentions • Anomalies also exist in these numbers driven by some larger employers reducing their limit as a result of the Walmart decision. These clients often have received premium decreases on the limits they maintain but the overall rate per million of the program has increased due to lower limits purchased, the Index reflects this as an increase Most clients are still experiencing flat pricing or small decreases • 29

Distribution of Class Actions (2011)

W&H Class Actions by Sector

W&H Class Actions by Jurisdiction

W&H Class Actions - Nature of Claim

Questions