A litigation hurricane is a-brewing, according to legal experts, and the winds are just beginning to blow. According to the "5th Annual Workplace Class-Action Litigation Report," compiled by Chicago-based firm Seyfarth Shaw LLP, "a perfect storm of workplace litigation" is forming as a troubled economy crashes against the "employee-friendly" Obama administration.

The Lilly Ledbetter Fair Pay Act was President Obama's first presidential bill signing, setting the stage for future employment laws and amendments, Seyfarth asserts.

"With the stroke of a pen, [the Fair Pay Act caused] a ripple effect in terms of compliance obligation, how long employers need to keep records and [augmenting] the size or period of liability, as opposed to prior law," says Gerald Maatman, Jr., general editor of the report.

According to Seyfarth, the top 10 ERISA class action settlements entered into or paid in 2008 totaled $17.7 billion, up from the $1.818 billion settlement tally of the previous year.

The firm attributed the exponential increase to more stock drop cases, where ERISA plan participants challenged the perceived lack of employer stock as an investment option, and plan administration suits challenging excessive advisory fees and other mechanics of the plan.

EBN compiled the following list detailing how current and future legislation will affect employers in 2009 with advice from labor and employment lawyers on how employers can prepare for new or expanded regulations.

Employee Retirement Income Security Act

Financial instability instigated a rise in class-action filings seeking recovery for 401(k) losses. The growing number of laid-off workers is expected to file more age discrimination and Worker Adjustment and Retraining Notification Act lawsuits in 2009.

David Ortiz, CFP, a 401(k) plan management specialist at Berenfeld Financial Services LLP in Miami, Fla., offers a compliance checklist for employers and fiduciaries to guard against ERISA litigation:

• Ensure all your plan documents are up-to-date. Write an investment policy statement and document every meeting.
• Confirm all fiduciaries understand their responsibilities.
• Hold periodic meetings to review responsibility, salary and loan deferrals to avoid litigation under the provisions of section 404(c) under ERISA.
• Review fees to ensure they are reasonable. Provide employees with up-to-date plan positions.
• Maintain a process to respond to claims.

Maatman claims that employers can protect themselves against legislative expansion with fundamental 'blocking and tackling' and taking steps to invest in resources that educate managers about discrimination and compliance.

WARN

WARN requires employers need to post written notice 60 days previous to mass layoffs or plant closings, and provide pay unless there is an unforeseen company emergency, which has not yet been defined by court precedent.

Claims under WARN are "getting a lot of play," says Maatman, and have become the "tort of the day" because of how easy the claims are to make. WARN has seen an uptick in claims filed since the beginning of the decade and, according to experts, the trend will most likely continue into 2009 and beyond.

Fair Labor Standards Act

Suits appearing in federal courts filed under FLSA were at the forefront of workplace litigation, surpassing all other workplace suits. Wage-and-hour litigation continues to increase exponentially with the most significant growth found at the state court level, especially in Calif., Fla., Ill., N.J., N.Y., Mass., Pa., and Texas.

Authors of the Seyfarth Shaw study postulate that "given the trickle-down phenomenon of class-action settlements and the increased awareness of wage-and-hour issues by workers, it is expected that the pursuit of nationwide FLSA collective actions will continue in 2009."

Not only is the scope of the cases expanding, so are the targets. In previous years plaintiffs targeted Fortune 500 companies, but as corporations like Wal-Mart (which lost $187 million for alleged wage-and-hour violations) have improved compliance, plaintiffs have gravitated to smaller companies. The Seyfarth Shaw report predicts that plaintiffs will begin to prosecute investment management companies and fund managers in the near future.

Seyfarth Shaw analyzed 650 major class-action and collective-action court decisions from 2008, in terms of gross settlement dollars in private-plaintiff and government-initiated lawsuits, as well as injunctive-relief provisions in consent decrees.