Seyfarth Synopsis: This is the second in a continuing series of blog posting on key trends impacting employers identified in our 2017 Workplace Class Action Litigation Report. This posting discusses and analyzes key class action settlements, and their implications for employers.

Snapshot Of 2016 Settlements

The monetary value of the top employment-related class action settlements declined significantly in 2016 after they reached all-time highs in 2014 and 2015. The plaintiffs’ employment class action bar and governmental enforcement litigators successfully translated their case filings into large class-wide settlements, but they did so at lower values than in the two previous years. The top ten settlements in various employment-related categories totaled $1.75 billion in 2016, which declined from $2.48 billion in 2015 and $1.87 billion in 2014. Whether this is the start of a trend or a short-term aberration remains to be seen as 2017 unfolds.

Lower Class Action Settlement Numbers In 2016

As measured by the top ten largest case resolutions in various workplace class action categories, overall settlement numbers decreased in 2016 as compared to 2015.

This manifested a trend that began with the U.S. Supreme Court’s decision in 2011 in Wal-Mart Stores, Inc. v. Dukes , 564 U.S. 338 (2011). By tightening Rule 23 standards and raising the bar for class certification, Wal-Mart made it more difficult for plaintiffs to convert their class action filings into substantial settlements.

The settlement statistics for 2016 underscore this trend and the impediments to transforming case filings into settlements of cases on a class-wide basis. This also reflects a process whereby there has been a maturing of case architecture considerations, as plaintiffs’ lawyers have “re-booted” their strategic approaches to take account of Wal-Mart, and crafted refined class certification theories with better chances of success.

That phenomenon is still being played out, as well as manifesting itself in settlement dynamics.

Considering all types of workplace class actions (employment discrimination, wage & hour, ERISA, and statutory claims), settlement numbers in 2016 totaled $1.75 billion, which decreased significantly from 2015 when these settlements were at an all-time high of $2.48 billion.

This also represented a significant decrease over 2014 levels, when the aggregate settlement numbers totaled $1.87 billion.

The Story Behind The Numbers

In terms of the story behind the numbers, breakouts by types of workplace class action are instructive. There was an upward trend for wage & hour class action settlements, and a significant downward trend for resolutions of employment discrimination and ERISA class actions, as well as governmental enforcement litigation.

This is shown by the following chart for 2016 settlement numbers:

Click here to view table. 

By type of case, settlements in private plaintiff statutory workplace class actions experienced the most significant decrease.

The top ten settlements in this category decreased to $114.7 million, which was a significant decline from $713.85 million in 2015, but an increase from $74.03 million in 2014. The following chart shows this nearly seven-fold decrease:

Click here to view table. 

Most telling, however, the “Wal-Mart effect” is shown by the pattern for employment discrimination class action settlements in 2016, as well as a comparison of the settlement figures with previous settlement activity over the last decade. This trend is illustrated in the following chart:

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In 2016, the value of the top ten largest employment discrimination class action settlements of $79.81 million was the second lowest figure since 2010, and followed the trend that started in 2011 (after Wal-Mart was decided) that showed decreases in settlement amounts over three years of that 4-year period. On a comparative basis, the settlement figure for 2016 was the second lowest over the past six years.

This trend, however, did not hold for wage & hour class action settlements. In 2016, the value of the top ten wage & hour settlements was $695.5 million, a significant increase over 2015. This is most telling in examining the last four years, for 2016 represented almost a four-fold (after two years of declining numbers in 2013 and 2014) in the value of the top wage & hour settlements as compared to 2014. This reflects that Wal-Mart has had far less of an impact in this substantive legal area, as FLSA settlements are not explicitly tied to the concepts on class certification addressed in Wal-Mart (and instead, are based on the standards under 29 U.S.C.§ 216(b)).

This trend is illustrated by the following chart:

Click here to view table. 

Relatedly, settlements in government enforcement litigation experienced a significant downward trend. The top ten settlements in 2016 totaled $52.3 million, a substantial decrease even from 2015, when settlements hit one of their lowest points in the past eight years. This trend is illustrated by the following chart of 2016 settlements:

Click here to view table. 

ERISA class action settlements also were down, as the top ten settlements totaled $807.4 million in 2016.

This figure represented a decline from $926.5 million in 2015.

While the 2016 aggregate settlement number was nearly six times greater than in 2013, it entailed a significant decrease from 2014 (when settlements were $1.31 billion). Nonetheless, ERISA class action settlements this past year were fueled by several mega-settlements.

This trend is illustrated by the following chart:

Click here to view table. 

Implications For Employers

Settlement trends in workplace class action litigation have been influenced by many factors.

In the coming year, settlement activity is apt to be influenced developing case law interpreting the Supreme Court’s decision in Tyson Foods, the impact of the Trump Administration’s labor and employment enforcement policies, and case filing trends of the plaintiffs’ class action bar.