Why Do Employers Settle?

I have been handling employment disputes for over 30 years. During that time, little has changed. There are a few more laws protecting employees than there used to be. But basically everything else is the same. I represent both employees and employers. I enjoy doing so and I think my clients benefit from me having a first hand perspective on what the other side is probably thinking, or what its strategy is. Most (but not all) employee clients are hoping for a quick settlement. That is not always something that can be accomplished. But if that is the goal, it is helpful to understand why employers settle cases. There are a variety of potential reasons, and knowing which ones may be applicable to your situation gives you an advantage in your negotiation. In no particular order, employers settle cases for these reasons:

1. Do the right thing. Sometimes (but not often) an employer will sympathize with the employee, realize the employee was not treated fairly, and offer a settlement to compensate the employee. An example of this is when ownership investigates and determines that a middle manager treated an employee poorly or unfairly. The employer may attempt to rectify the situation by offering the employee a severance package.
2. How much is this going to cost? Frequently, an employer will settle a employee’s claim to avoid the cost of litigating the claim. Litigation is expensive, particularly in the case of employee protection claims where, if it loses, the employer may be ordered to pay the employee’s attorney’s fees in addition to its own. Avoiding the cost of defending a lawsuit is a common (and reasonable) basis for settling an employee’s claim.
3. Exposure. This should be obvious. Employees will consider settling cases that they are likely to lose. This may be a good time to mention that a settlement is generally also a compromise. If an employer with exposure to a loss at trial is able to avoid that less and compromise a claim, settlement is a good option.
4. Disruption. Sometimes the employer’s business cannot afford the disruption of a lawsuit. Perhaps the business is being evaluated for a merger or sale. Perhaps the underlying facts of the employee’s claim would be uncomfortable for management or ownership. If an employee’s claim is going to disrupt business, an employer will generally consider settlement as a business alternative.
5. Publicity. For some (but not most) businesses, an employee’s claim can cause negative publicity. An employer seeking to avoid possible bad publicity will often pursue an early confidential settlement.

There is no “one way” to handle an employee’s case and there is no “one way” for an employer to defend it. Having experienced counsel is very important.