Employment Practices ‘Trifecta’ Fuels Litigation

John Wallace
June 5, 2009 | COMMENTS

Today's economic realities, a record number of discrimination charges, and recent legislative changes are causing more credit unions to log time in court. As credit union leaders take important steps to manage their operations—staff reductions, benefit changes, or hiring new employees—these measures are fueling litigation more often than in the past.

Credit unions aren't immune to employment practices lawsuits. And the financial consequences can be devastating, with multimillion-dollar settlements. According to CUNA Mutual Group estimates, credit unions' employment practices losses increased more than 30% in 2008. “The current economic and legislative environment has undoubtedly increased exposure for credit unions,” says John M. Christenson, CUNA Mutual's associate general counsel. “This trend will very likely continue for at least the next two to three years.”

In fact, the number of workplace discrimination charges filed in the U.S. have increased 26% since 2005, according to data released by the Equal Employment Opportunity Commission (EEOC) in March 2009. EEOC statistics indicate 95,402 total discrimination charges were filed in fiscal 2008, a record number for the agency, representing a 15% increase from 2007. Race-related charges continue to make up the most significant portion of charges (35.6%). Age-related charges showed the most significant increase over 2007 (28.7%), followed by retaliation-related charges (22.6%).

This steady increase in charge filings is accompanied by a jump in the monetary demands of the complaints being filed.

For example, when unemployment rates are high and credit union employees are terminated or leave willingly, they may have greater difficulty finding a new job. Former employees' unemployed status increases their likelihood of filing complaints. With today's economic turbulence, those complaints typically come with a larger price tag.

This trend of increasing employment practices litigation has come to light with the latest national data from EEOC. According to the commission's acting chairman, Stuart J. Ishimaru, “The EEOC has not seen an increase of this magnitude in charges filed for many years. While we do not know if it signifies a trend, it is clear that employment discrimination remains a persistent problem.”

In addition to the economy, recent changes in legislation also increase a credit union's exposure to employment-related lawsuits, most notably the addition of the Lilly Ledbetter Fair Pay Act and changes to the Americans With Disabilities Act (ADA).

Amendments to ADA , which became effective Jan. 1, 2009, essentially revise and more broadly apply the definition of disability. The Lilly Ledbetter Fair Pay Act, which amends the Civil Rights Act of 1964, was signed into law Jan. 29, 2009. It expands the time period in which a claimant can file suit for unequal pay.

Together, the turbulent economy, rising unemployment rates, and legislative activities have created a trifecta for employment practices that increases litigation exposure for credit unions.

John Wallace is product manager for CUNA Mutual Group. This article orginally appeared in CreditUnionMagazine.com and is reprinted with permission.