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Pre-Litigation Settlement in a “Wrongful Discharge” Case

As I continue my series of Posts intended to explain the process of pursuing a “wrongful discharge” case, today’s subject is Pre-Litigation Settlement.  (See my February 28th Post for Step 1 in the process.) STEP 2:  PRE-LITIGATION SETTLEMENT. After identifying possible legal claims in a wrongful discharge case, I usually prepare a letter to the former employer (if time allows).  The purpose of the letter is to detail the facts of the case from my client’s perspective and outline the possible legal claims that my client will pursue.  If my client agrees, I offer the employer the opportunity to engage in pre-litigation settlement negotiations.  By “pre-litigation” I mean, before we file any sort of legal claim whether an administrative claim or a law suit.  You may ask why an employee who has been unlawfully terminated from their job would agree to negotiate a settlement before filing a claim.  Not every client is willing to settle at this stage, but those who are usually make that decision because they wish to avoid the costs associated with litigation.  For example, a disability discrimination case can take two years or more to complete.  While the case is pending, the client is required to attend meetings, participate in the discovery process, and be subject to deposition.  Many people decide they do not want to devote huge chunks of their time to pursuing a case and re-living unpleasant events.  Then, of course, there is the financial cost, including the cost of filing, the cost associated with discovery, and expert witness fees.  Even when we take the case on a contingent fee, the costs add up.[1]  As a result, many clients make the decision to attempt settlement early in the process so that they can move forward with their lives. In employment cases, if you win at trial, the damages available usually consist of lost pay, lost benefits, punitive and/or liquidated damages and attorney’s fees.  Damages for emotional distress are also sometimes available.  So, the first thing to determine when assessing the value of a case for settlement is damages. I calculate the client’s lost pay and benefits.  We look at the likelihood that the client will be able to replace their job, including pay and benefits, and if so, how long it will reasonably take to do that.  We look at the strength of our case and our evidence.   Do we have witnesses willing to testify?  Do we have a strong paper trail?  We must also evaluate the employer’s response.  What is the employer’s stated reason for termination and how strong is their evidence?  When advising my clients on a settlement amount I urge them to consider the cost/benefit analysis from the employer’s perspective.  Like it or not, they have to put themselves in the employer’s shoes.  Does the settlement amount my client demands make sense from the employer’s perspective or would it be cheaper for them to litigate the case?  This is a difficult perspective for some clients because they have to divorce themselves from the emotion of the case. Besides a dollar amount, I also ask my client to consider other settlement terms, for example, would they consider reinstatement to their former position?  We may also want to ask the employer to pay for health insurance continuation. Usually, when I present a settlement proposal to the employer I expect a rejection with a counter-offer.  This begins the negotiation process.  I wish I could tell you that there is a science behind this process, but the truth is, it doesn’t always make sense.  Each side tries to persuade the other that their case is weak and to negotiate the best settlement for their client.  There may be several “rounds” of negotiation before we reach a compromise.  The employer is going to ask for certain terms and conditions like confidentiality, non-disparagement and a complete waiver of claims.  We, in turn, will seek neutral employment references and similar terms. Sometimes, if the parties are too far apart, we just cannot reach agreement at this stage of the process and we have to move forward with our legal claims.  Depending on the claims, we will either file an administrative charge or go straight to court.  That brings me to the next step in the process of pursuing a wrongful discharge case. My next post will discuss the details of filing administrative charges with government agencies like the EEOC and NLRB. Stay tuned….    

[1] In a contingent fee case, attorney’s fees are based on a percentage of the judgment or settlement obtained.

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