Wrongful Termination Lawsuits Under FEHA: A Costly Gamble for Employers

Wrongful termination lawsuits under California’s Fair Employment and Housing Act (FEHA) can be treacherous terrain for employers. One of the biggest dangers of taking a case to trial is the potential for substantial attorney’s fees awards to prevailing plaintiffs. These fees can quickly overshadow the original dispute and serve as a powerful tool for plaintiff attorneys. The recent case of Pollock v. Kelso provides a stark reminder of these risks and highlights why employers should approach FEHA litigation with caution.

The Pollock v. Kelso Case: A Wrongful Termination Lawsuit Financial Cautionary Tale

In Pollock v. Kelso, the plaintiff alleged sexual harassment and race-based discrimination under FEHA. Although the underlying claims were ultimately settled confidentially, the litigation over attorney’s fees proceeded. The court awarded over $493,000 in attorney’s fees to the plaintiff’s counsel, a sum that included a 1.8 multiplier to reflect the risks associated with taking the case on contingency. This massive award demonstrates how attorney’s fees can dwarf the damages sought in employment disputes.

Despite challenges from the defendant, the court upheld the award, emphasizing the wide discretion afforded to trial judges in determining the reasonableness of fees. This case underscores how attorney’s fees can escalate over years of litigation, even when the claims themselves are resolved through settlement.

The court’s decision also revealed an important dynamic in FEHA cases: the emphasis on protecting employees’ rights and the high threshold defendants must meet to avoid fee awards. Employers should be mindful of these realities when evaluating their defense strategies.

Attorney’s Fees: A Powerful Weapon for Plaintiffs in Wrongful Termination Lawsuits

Under FEHA, prevailing plaintiffs are entitled to recover reasonable attorney’s fees. This provision serves several purposes, including incentivizing attorneys to take on cases that might otherwise be financially unviable. For employers, however, it creates significant risks:

1. Escalating Costs: Attorney’s fees often increase dramatically as litigation drags on. In Pollock v. Kelso, the years-long case resulted in hundreds of thousands of dollars in fees, even though the underlying claims were eventually settled. The ability of attorneys to continue billing throughout protracted litigation increases the financial pressure on employers to settle early.
2. Fee Awards Are Not Capped: Unlike damages, attorney’s fee awards under FEHA are not subject to any statutory cap, meaning employers face potentially unlimited liability. Even in cases where the damages sought by the plaintiff are modest, the attorney’s fees can far exceed the value of the underlying claims, creating a disproportionate financial burden for the employer.
3. Inclusion of Hours for Unsuccessful Claims: Courts often award fees for all hours reasonably expended on the litigation, including work on unsuccessful claims, as long as they are related to the broader case. This means employers may be required to pay for the plaintiff’s legal work even on issues that were ultimately dismissed, further inflating the fee award.
4. Multiplier Effects: Courts can apply multipliers to fee awards in contingency cases, significantly increasing financial exposure for employers. In Pollock v. Kelso, a 1.8 multiplier was applied to reflect the risks plaintiff attorneys face when taking cases without guaranteed payment. These multipliers amplify the financial stakes for employers, especially in high-profile or complex cases.
5. Leverage in Settlement Negotiations: The looming possibility of a substantial fee award incentivizes plaintiff attorneys to push cases forward, knowing that a successful outcome could yield significant compensation beyond their client’s recovery. Employers, on the other hand, face mounting pressure to settle early to avoid the risk of being saddled with an exorbitant fee award at trial.
6. Deterrence Factor: Attorney’s fees provisions also serve as a deterrent, increasing the stakes of defending against FEHA claims. Employers must weigh the risk of incurring significant legal costs against the potential benefits of taking a case to trial, often leading to a more cautious and expensive approach to litigation.

Why Wrongful Termination Lawsuit Trials are Dangerous for Employers

Taking a FEHA case to trial presents several unique risks for employers, including:

1. Unpredictability of Outcomes
   Even with strong legal defenses, the dynamics of litigation and trial can yield unexpected results. Courts often lean toward protecting employees under FEHA, which increases the risk of adverse outcomes for employers. This pro-employee orientation means that even minor errors in workplace practices or communications can lead to significant liability at trial.
2. Reputational Damage
   Public trials can attract unwanted attention, exposing sensitive allegations like harassment or discrimination. Even if the employer ultimately prevails, the reputational harm may linger. Allegations of discrimination or harassment, particularly when tied to FEHA claims, can erode customer trust, hurt employee morale, and tarnish a company’s image in the marketplace.
3. Attorney’s Fees and Long-Term Costs
   Attorney’s fees often compound the financial burden of litigation, especially when courts apply multipliers. Factors influencing multipliers include:
   • Contingency Fee Agreements: Courts may apply a multiplier to reward plaintiff attorneys for taking on cases without guaranteed payment, reflecting the financial risks they face.
   • Complexity and Novelty of Issues: Cases that involve complex legal or factual questions, such as systemic discrimination or novel interpretations of FEHA, may justify a higher multiplier to recognize the additional skill and effort required.
   • Public Interest in Enforcing FEHA Rights: Courts often view FEHA litigation as serving the public good by enforcing anti-discrimination laws, which can lead to enhanced fee awards to encourage attorneys to bring such cases.

Breakdown of Multiplier Impacts:
In Pollock v. Kelso, a 1.8 multiplier was applied to the attorney’s fee award. For example:

1. • Without a multiplier, attorney’s fees of $275,000 would remain at that amount.
   • With a 1.8 multiplier, the total fee award increases to $495,000, representing a 180% increase in financial exposure. This exponential growth in fees can make the overall cost of a case unmanageable for employers, especially when combined with other litigation costs such as expert fees, discovery expenses, and defense counsel fees.
2. Compounding Settlement Pressure
   As trials approach, the potential for adverse outcomes—including high attorney’s fees—escalates. Employers often face increasing pressure to settle as they weigh the risk of a large fee award or unpredictable jury verdict. By this stage, the employer may already have incurred significant costs, including lost productivity, operational disruption, and ongoing defense fees.

The Pollock v. Kelso case illustrates this dynamic, where the inability to resolve the attorney’s fees battle after settlement highlights the long-term financial exposure employers face when litigation is prolonged or taken to trial.

Settling Early: A Smarter Approach

One of the key takeaways from Pollock v. Kelso is the importance of resolving disputes early to minimize financial exposure. Employers who delay settlement often face mounting attorney’s fees and reduced bargaining power. Early resolution provides:

• Cost Savings: By avoiding prolonged litigation, employers can limit their legal expenses.
• Control Over Outcomes: Settlements allow employers to negotiate terms rather than risk a trial’s uncertainty.
• Reduced Disruption: Quick resolutions enable businesses to refocus on operations without the distractions of ongoing litigation.
• Protection of Confidentiality: Settling early often allows employers to negotiate confidentiality clauses, reducing public exposure of sensitive claims.

Proactive Steps to Reduce Wrongful Termination Lawsuits

Employers can take several comprehensive steps to mitigate the risks of FEHA litigation and the potential for substantial attorney’s fees awards. By adopting a proactive approach, employers can better protect themselves against costly and disruptive legal disputes.

1. Create and Enforce Robust Policies
   • Anti-Discrimination and Anti-Harassment Policies: Develop clear and comprehensive policies that define unacceptable behavior and outline procedures for reporting and addressing complaints. Include detailed examples of prohibited conduct and ensure policies are written in plain, accessible language.
   • Training Programs: Conduct mandatory training for all employees, including managers and supervisors, on recognizing and preventing workplace harassment, discrimination, and retaliation. Update training regularly to address new legal developments and reinforce accountability.
   • Policy Enforcement: Ensure policies are consistently enforced across all levels of the organization. Failure to apply policies equally can lead to claims of favoritism or discrimination. Designate HR or compliance officers to oversee enforcement.
2. Maintain Accurate Documentation
   • Employment Records: Keep detailed records of all employment decisions, such as hiring, promotions, and terminations. Include documentation of performance reviews, corrective actions, and any accommodations provided to employees.
   • Complaint Records: Maintain a log of complaints, investigations, and resolutions. Ensure all documentation is factual, free from subjective language, and created contemporaneously to events.
   • Consistency in Documentation: Standardize recordkeeping practices to avoid discrepancies that could be used against the employer in litigation. Use templates or checklists to ensure uniformity.
3. Promptly Address Complaints
   • Timely Investigations: Conduct immediate and thorough investigations into all complaints of harassment, discrimination, or retaliation. Assign neutral, trained investigators to ensure fairness and credibility.
   • Transparency and Communication: Keep the complainant informed of the investigation’s progress and resolution, while maintaining appropriate confidentiality. This demonstrates the employer’s commitment to addressing issues and reduces frustration or mistrust.
   • Corrective Actions: Take swift, appropriate corrective actions if misconduct is substantiated. This can prevent escalation and demonstrate to employees that the company takes complaints seriously.
4. Consult Legal Counsel Early
   • Risk Assessment: Engaging experienced employment counsel early allows employers to evaluate the potential risks of a dispute and develop a sound strategy. Counsel can provide guidance on documentation, internal investigations, and potential liability.
   • Settlement Exploration: Early consultation can also facilitate discussions about settlement options before litigation becomes contentious or costly. Legal counsel can help structure settlement agreements that protect the employer, such as including confidentiality clauses or non-disparagement provisions.
   • Policy Review and Updates: Regularly review workplace policies and practices with legal counsel to ensure compliance with evolving FEHA requirements and other employment laws.
5. Consider Mediation or Arbitration
   • Mediation Benefits: Mediation offers an opportunity to resolve disputes confidentially and amicably, often at a fraction of the cost of litigation. It allows both parties to craft tailored solutions without the unpredictability of a trial.
   • Arbitration Clauses: Employers may consider implementing arbitration agreements, where legally permissible, as part of employment contracts. Arbitration is generally faster and less expensive than trials, and outcomes are typically private. However, ensure arbitration agreements comply with California’s strict legal requirements to avoid invalidation.
   • Proactive Alternative Dispute Resolution (ADR): Offer ADR as an early step in dispute resolution to address issues before they escalate into formal legal claims.

Key Takeaways for Employers

Employers can mitigate the risks of FEHA litigation by taking proactive steps:

1. Create and Enforce Fair Workplace Policies: Establish clear anti-harassment and anti-discrimination policies to prevent potential claims.
2. Document Decisions Carefully: Maintain thorough records of employment decisions to defend against potential claims of discrimination or retaliation.
3. Act Promptly to Resolve Disputes: When a dispute arises, explore settlement options early to avoid the costs and risks of prolonged litigation.
4. Understand Attorney’s Fees Risks: Recognize that a trial under FEHA can result in significant attorney’s fees awards, even if the claims themselves are settled or dismissed.
5. Proactively Assess Workplace Culture: Regular audits of workplace culture and employee satisfaction can identify and address potential issues before they escalate.

FREQUENTLY ASKED QUESTIONS ABOUT WRONGFUL TERMINATION LAWSUITS AND FEHA TRIALS

Why are attorney’s fees so significant in FEHA cases?

Attorney’s fees provisions under FEHA incentivize attorneys to take on cases and ensure plaintiffs can afford representation. These fees can quickly escalate, especially in prolonged litigation.

What is a multiplier, and why was it applied in the Pollock v. Kelso case?

A multiplier increases the attorney’s fee award to account for the risks attorneys face in contingency cases. In Pollock v. Kelso, a 1.8 multiplier was applied due to the contingency nature of the representation.

How can settling early benefit employers?

Early settlements minimize financial exposure, reduce legal expenses, and allow employers to avoid the unpredictability and reputational damage of a public trial.

What steps can employers take to reduce the risk of FEHA litigation?

Employers can establish clear workplace policies, document employment decisions, address complaints promptly, and seek early legal counsel to mitigate risks.

Can employers recover their attorney’s fees if they win a FEHA case?

Only if the court finds the plaintiff’s claims were frivolous, unreasonable, or groundless, which is a high bar to meet under FEHA.

Conclusion

The Pollock v. Kelso case is a stark reminder of the financial and reputational dangers of taking FEHA cases to trial. For employers, the potential for substantial attorney’s fees awards makes litigation an inherently risky proposition. By addressing workplace disputes promptly, prioritizing early settlements, and maintaining a proactive approach to compliance, employers can avoid the pitfalls of protracted litigation and protect their bottom line. In today’s legal environment, a strategic focus on prevention and resolution is essential for minimizing risks and fostering a healthy, compliant workplace.

Contact the Ruggles Law Firm at 916-758-8058 to Evaluate Your Potential Lawsuit

Matt Ruggles has a thorough understanding of California employment laws and decades of practical experience litigating employment law claims in California state and federal courts.  Using all of his knowledge and experience, Matt and his team can quickly evaluate your potential claim and give you realistic advice on what you can expect if you sue your former employer.

Contact the Ruggles Law Firm at 916-758-8058 for a free, no obligation consultation.

Blog posts are not legal advice and are for information purposes only.  Contact the Ruggles Law Firm for consideration of your individual circumstances.