Profiting from Politics
“Our passion is justice” is the catchphrase of TV-hawking personal injury firm Bachus & Schanker. Last month, Bachus & Schanker announced its expansion into another burgeoning “passion” apart from car crashes and slip-n-falls: employment law. According to Darin Schanker, Bachus & Schanker founding partner, expanding their personal injury practice into employment law is simply “logical,” and with the addition of longtime Denver plaintiff’s employment lawyer Elwyn Schaefer, his firm looks forward “to benefiting from the high energy and outstanding results his firm is known for” (i.e., money). More here, http://goo.gl/dOj1YC.
While Bachus & Schanker looks forward to profiting from its new employment law practice, Colorado employers should start asking serious questions . . . quickly, particularly BEFORE the Colorado General Assembly opens its new legislative session on January 8, 2014.
On October 8, 2013, Senate Democrats elected Bachus & Schanker attorney Morgan Carroll as their President, a key leadership and public policy position in Colorado’s legislature. According to Bachus & Schanker’s website, Ms. Carroll represents employees in employment litigation. She is a member of the Colorado Trial Attorneys Association (CTLA) and the Plaintiff Employment Lawyers’ Association (PELA), and is committed to “leveling the playing field for ordinary people to exercise their rights.” http://www.coloradolaw.net/html/carroll.html.
Last year as a Senate Democrat, Ms. Carroll co-sponsored HB-1136, which significantly ratchets up the damages employees can recover by accusing their employers of discrimination, harassment and retaliation (collectively, “discrimination”). More here, http://goo.gl/2D61yr. Under HB-1136, which takes effect on January 1, 2015, employees alleging discrimination under Colorado law can recover more money from employers as compensatory (i.e., emotional pain, embarrassment) and punitive damages. Since 1991, these same remedies (e.g., compensatory, punitive damages) have been available under federal law against employers with 15 or more employees, covering the vast majority of the American workforce. Nevertheless, in passing Title VII nearly 50 years ago, and enhancing its remedial scheme with the Civil Rights Act of 1991 (CRA 1991), Congress sought to insulate small employers from the staggering expense of civil litigation and exempted them as a matter of public policy.
In her public comments, Ms. Carroll insisted that Colorado law must replicate the federal scheme for employers with 15+ employees, and must “close the gap” to provide greater remedies to “victims” of employers with 14 and fewer employees (i.e., small employers). More here, http://goo.gl/sZW5Yi. Yet ironically, in signing HB-1136 into law, Governor Hickenlooper expressly noted that the low caps on compensatory/punitive damages for small employers (e.g., $10K for 1-4 employees, $25K for 5-15 employees) will make discrimination matters involving them unattractive to personal injury attorneys using contingent fees, thereby raising legitimate questions about whether HB-1136 was about helping “victims” of small employers in the first place. In fact, the results of HB-1136 reveal its underlying goals: to switch the litigation forum from federal courts, where judges routinely dismiss meritless employment claims on summary judgment, to Colorado state courts, where beleaguered judges grappling with huge dockets and unfamiliar subject matter (e.g., EEO law) allow most matters to careen toward jury trials until the bitter end.
Nevertheless, according to Ms. Carroll, HB-1136 will not hurt Colorado’s employers because proof of discrimination often requires a “smoking gun” that very few plaintiffs have. Indeed, the EEOC and the Colorado Civil Rights Division (CCRD) find discrimination in less than 5% of allegations. Ms. Carroll and other HB-1136 proponents even argued only “bad actor” employers that commit or tolerate discrimination have something to lose under HB-1136; “innocent” employers can avail themselves of a good faith defense to avoid punitive damages. Ms. Carroll publicly acknowledged that actual discrimination is rare, and exceedingly difficult to prove.
Exploiting Employers’ Cost-of-Defense Conundrum
Although discrimination is exceedingly DIFFICULT to PROVE, it is extremely EASY to ALLEGE. And under HB-1136, employers start losing money and accumulating risk as soon as the allegation is made. HB-1136 mimics CRA 1991’s attorneys’ fees provisions, which require employers to pay the attorneys’ fees of a prevailing employee as a matter of course. Accordingly, under this scheme, plaintiffs’ attorneys such as Bachus & Schanker can recover BOTH (a) 33%-40% of the judgment as a contingent fee; AND (b) hourly attorneys’ fees based on an exaggerated rate and an inflated hourly time estimate, a real windfall. Employers, by contrast, can recover their substantial defense investment only upon a showing that the lawsuit was patently frivolous or prosecuted in bad faith, a finding Colorado judges virtually never make (even when they should). In the federal EEO enforcement system upon which HB-1136 is modeled, $700K in attorneys’ fees to the plaintiff’s lawyer, based on a $27K judgment, have become commonplace. More here, http://goo.gl/3EoA1m. Meanwhile, the employer must not only bear this incredible expense, but also the weight of its own non-recoverable defense fees, which typically exceed $100K for litigation.
As a litigator for “victims,” Ms. Carroll surely understands employers’ cost-of-defense conundrum. In fact, anticipated cost-of-defense drives employers’ settlement deliberations more than any other factor, particularly charge merit. For example, in EEO Legal Solutions’ recent survey of the EEOC’s mediation process, over 600 HR professionals, employment lawyers and small business owners reported that EEOC mediators HAMMER cost-of-defense (82.21%), and then exaggerate the risk of EEOC enforcement activity such as reasonable cause determinations (72.84%), systemic investigations (61.30%), and even EEOC prosecutions (68.99%), which would naturally prompt employers to pay MORE. Astonishingly, the EEOC later characterized its historic collections from employers in FY2013 ($372.1m) as evidence of “enforcing the law more effectively.” Check out our study for a little insight into what EEOC mediators are saying to employers behind closed doors, http://goo.gl/sR792n.
Thus, in the federal system that HB-1136 seeks to replicate, employers immediately walk into a cost-of-defense conversation, even when they have done nothing wrong whatsoever. Given the highly inferential, “squishy” nature of discrimination disputes, the question is really never whether the employer did anything provably wrong, but rather, how much the employer is willing to pay to avoid the suffocating cost of proving itself right. This reality enables plaintiff’s counsel to demand settlements of $50K to $75K, again, even when the employer’s legal liability is far from established. This reality also enables plaintiffs’ firms like Bachus & Schanker to churn quick cost-of-defense settlements from employers and EPL carriers, without having to prove much of anything . Employers are STUCK, as is our progress toward full equal employment opportunity under enforcement models like CRA 1991 and HB-1136. More about that later; stay tuned.
Also in her public comments, Ms. Carroll claimed that in the 42 other states with an HB-1136 counterpart, employers have not gone out of business or suffered an uptick in discrimination litigation (um, not exactly; stay tuned). Nevertheless, her firm, Bachus & Schanker just expanded its employment law practice by adding a well-known plaintiff’s warhorse and his associate, and looks forward to benefitting from his “outstanding results”? In fact, during HB-1136’s deliberations, several legislators publicly commented on the apparent conflict of interest inherent in Ms. Carroll’s sponsorship of and avid advocacy for HB-1136, considering that HB-1136 would directly help her (as a plaintiff’s attorney) personally to recover more money from employers in discrimination disputes. http://goo.gl/ap37Md. Perhaps for that reason, Bachus & Schanker’s crowing about its recent expansion into employment law seems incredibly brazen.
Now that Ms. Carroll has ascended to a leadership position in Colorado’s General Assembly, will she continue to advance a one-sided, if not personal agenda, or can employers expect justice in her public policy positions? Time will fully tell, but employers need to start paying careful attention now or get ready to pay the consequences, as with HB-1136.
Merrily Archer, Esq., M.S.W., December 30, 2013
Addendum: some readers may commit what social-psychologists call “fundamental attribution error” by attributing these perspectives solely to political party status, pecuniary interest, or some latent racism/sexism/ageism/etc. Actually, HB-1136 stands to benefit attorneys on both sides of the employment bar, like any other increased risk or regulation. More fundamentally, I’ve been a registered Democrat for nearly 30 years, but now count myself among the growing legion of politically purple people who value intelligent public policy over party obedience. I earned my M.S.W. from Washington University in St. Louis on the Roger Baldwin Fellowship, while also earning my law degree. I’ve looked at issues of workplace discrimination and inclusiveness as an EEOC Trial Attorney, Biglaw defense attorney for 12 years, social worker, and more recently, as a small business owner and researcher. I believe religiously in the value and necessity of equal employment opportunity, but have concluded, based on these various perspectives and research, that private litigation schemes like CRA 1991 and HB-1136 have done little to further it. Now, with that out of the way, let’s have a meaningful policy debate without all the victim/villain rhetoric.