Big change proposed for Wisconsin employment claims

Employers and employees take note. Under a provision in the budget bill pending before the Wisconsin Legislature (AB 64), Wisconsin employment law would change in significant ways. The proposed change would make statutory “offers of settlement” available in claims brought to the Department of Workforce Development (DWD) that allege violations of the Wisconsin fair employment law, family and medical leave law, or organ and bone marrow donation law. Unlike common settlement offers, a statutory offer of settlement is one that follows a specific process set forth and governed by a particular statute. Under current Wisconsin law, statutory offers of settlement are only available in certain court proceedings, but not in administrative proceedings like those brought before the DWD.

Overview

Assembly Bill 64 creates statutory offer of settlement procedures allowing parties to such employment-related complaints to make settlement offers to resolve claims. Of course, employers and complainants were always free to make settlement offers in employment-related cases; however, the procedures being proposed would significantly up the ante when statutory offers are made. Most notably, and similar to offers of settlement in other forums, when an employer makes an offer of settlement and the complainant declines the offer, the bill provides for cost and fee shifting if the complainant fails to obtain a more favorable award than the employer initially offered. More specifically, if the award that the complainant ultimately obtains is not more favorable than the employer’s unaccepted offer, then the complainant must pay their own attorneys’ fees and costs incurred after the offer was made plus the employer’s post-offer costs and reasonable attorneys’ fees.

Costs of defending employment claims can be significant

Under the current law, and with certain types of discrimination, harassment, and employee leave claims, it is not uncommon for an employer’s total potential defense costs and fees to exceed the employer’s maximum claim exposure. In most cases, an employer cannot recover those defense costs and fees — even when it prevails. In contrast, when a complainant prevails against an employer, the employer is often ordered to pay the complainant’s attorneys’ fees. Some employers believe that this fee and cost model can encourage unmeritorious claims in which demands are made for amounts just below the employer’s cost to defend the claim. Similar to current statutory offers of settlement in place for Wisconsin court proceedings, the statutory offer of settlement process being proposed for administrative claims is intended to encourage parties to explore early case resolution in a more cost-effective manner.

Timing of offer would be critical

The bill would permit employers to make statutory offers of settlement to the complainant beginning 10 days after a complaint is filed until 10 days prior to the commencement of the administrative merits hearing. The complainant would then have 10 days to accept the offer. As noted above, if the complainant ultimately fails to obtain a more favorable award than the offer, the complainant would have to cover their own post-offer “costs” and the employer’s post-offer “costs.”

Under the bill, the term “costs” is quite broad and includes reasonable attorneys’ fees, court reporter fees, investigative costs, filing fees, reasonable travel expenses, and other similar fees related to the proceeding.

With the potentially significant defense costs and fees in mind as noted above, employers would do well to consider making statutory offers of settlement early in a DWD proceeding if this bill becomes law.

Offer of settlement could also be made by complainants

The bill would also give complainants the right to make an offer of settlement to the employer. If the employer declined the offer and did not ultimately obtain a more favorable award, then interest would be applied to the complainant’s final award from the date of the complainant’s offer until the judgment date. The interest rate applied retroactively would be 1% more than the prime rate in effect on the date of the settlement offer. Under current employment laws, including the Wisconsin Fair Employment Act, complainants who prevail are typically awarded their reasonable attorneys’ fees. This bill would not change that aspect of Wisconsin law. If this proposal becomes law, complainants might take a closer look at whether federal court is a better forum for certain employment claims.

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Terms of offer confidential and inadmissible for other purposes

Whether tendered by an employer or complainant, the bill would allow an offer of settlement to be made subject to a confidentiality requirement and other conditions common to settlement negotiations, including the execution of a written settlement agreement containing various releases and waivers. Under the bill, statutory offers of settlement would not be admissible for any other purpose.

Limited recovery for complainants with “Terms & Conditions Only” award

Though rare, successful complainants sometimes obtain an award that does not include reinstatement, monetary relief, or another substantive result. In such cases, the complainant establishes a violation of the law but the award is limited to a cease and desist order, or other injunctive relief. Under the bill, complainants obtaining that type of limited recovery after receiving a statutory offer of settlement that included money would be barred from recovering their post-offer attorneys’ fees or other costs. This aspect of the bill would represent a significant change in Wisconsin law.

Stay tuned

It is hard to know at this early stage in the budget process how the Wisconsin Legislature will respond to this proposal. Employers and employees will likely not have an answer until mid-to-late summer.

Although our firm takes no position on whether this proposal is good public policy or not, we will continue to follow it very closely as our client employers, their employees, and anyone interested in Wisconsin employment laws should.  

Mike Gotzler is a founding partner of Clark & Gotzler, Attorneys at Law, where Kathleen Garvey McNeil is also an attorney. Clark & Gotzler is a firm devoted exclusively to representing and advising employers on all employment-related matters.

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