A flood of post-pandemic litigation is forming. A field guide to what’s ahead.
By Russ Banham
Corporate Board Member magazine
The end of the Covid crisis will bring a lot of things—a rebounding economy, shrinking unemployment, thriving consumer demand.
And, this being America, it will also bring lawsuits. Lots and lots of lawsuits.
“Every board needs to anticipate what could be an uptick in Covid-19-related employee lawsuits for wrongful termination, unpaid sick leave and privacy invasion,” says Melanie Steiner, a member of the board at US Ecology, a provider of environmental services to commercial and government entities, and an attorney.
Maybe more than an uptick. Through January 13, 2021, 1,360 Covid-19-related employment lawsuits had been filed in federal and state court, according to statistics compiled by law firm Jackson Lewis By April 19, 2021 that number had grown to 2,107, including 87 class-action suits—up from 70 three months earlier. Overall, 821 are related to disability, leave and accommodation, 513 are retaliation or whistleblower complaints.
“At the beginning of the pandemic, the economy was in a tailspin, court proceedings had been curtailed, and trials ground to a halt,” says George Buermann, partner and vice chair of the environmental law practice at New York law firm Goldberg Segalla. “Many plaintiff attorneys were reaching out to in-house counsel to resolve their clients’ litigation, but the economic uncertainty drove down settlement demands and corresponding offers, as trials were simply not a realistic option in the near future.”
As courts reopen, the opposite is playing out in 2021: Both settlements and jury awards are expected to bounce back up. “We’re bound to see an uptick in white-collar investigations and antitrust and anti-competition cases, in addition to an array of unusual and complex employment lawsuits related to the coronavirus,” says Julie Myers Wood, CEO of security and investigations consulting firm Guidepost Solutions, the former Assistant Secretary of Homeland Security during the Obama administration and a board member at GEO Group. “It’s critical for boards to get in front of these legal and regulatory issues now, in advance of civil litigation resuming.”
Buermann urges directors to go beyond working with their in-house counsel to be proactive about blunting anti-corporate sentiment. “Establishing a good corporate identity and selecting the right corporate spokesperson as the face of the company to present to a jury and public is critical,” he says.
Here Come the Covid Suits
Although few job discrimination lawsuits have been filed in federal and state courts, they’re coming. Both plaintiff and defense attorneys anticipate a significant volume of lawsuits alleging age discrimination this year, as older laid-off workers realize they’re not being called back. The federal Age Discrimination in Employment Act bars discrimination against employees age 40 and older.
Steiner also is concerned about potential corporate risks caused by Covid-19, such as privacy invasion lawsuits brought by employees that allege the employer surveilled their mobile devices. Another potential exposure for companies and boards involves so-called “Covid long-haulers,” employees returning to work with lingering physical and mental health issues.
A recent study of more than 3,700 long-haulers in 56 countries found more than half were unable to work on a full-time basis for six months. “The question for boards is if these employees fit the definition of a ‘reasonable accommodation’ as per the Americans with Disabilities Act,” said Steiner, who is also the former chief risk officer at large American clothing company PVH Corporation, whose brands include Tommy Hilfiger, Calvin Klein and IZOD.
Were this the case, companies might need to provide shorter work hours and lighter workloads to these individuals while still paying them full salaries. Attorney Kevin Taylor, a partner at law firm Zukerman Gore Brandeis & Crossman in New York, also brought up this potential liability. “I expect to see litigation this year filed by employees who maintain the reason was Covid had diminished their ability to perform, and the company didn’t reasonably accommodate their long-term symptoms, such as letting them work from home,” he says.
Taylor also sees a brewing legal issue for companies as employees return to physical workspaces for at least part of the time. While many employees would bend over backwards to be vaccinated against Covid-19 infection, a smaller cohort has no such plans. “Employers may be able to require employees to get a Covid vaccination as a condition of returning to work, but if the person objects, companies will run into all kinds of potential issues,” he says.
Under the Americans with Disabilities Act (ADA), employers must ensure that all workers not pose a direct threat to the health and safety of other employees. Taylor said that employers have a strong argument that vaccinations will protect every employee from infection, making it compliant with ADA rules. “But if a particular group of people refuse to be vaccinated on religious grounds, the employer may need to find a reasonable accommodation, such as remote work from home,” he says.
The alternative is to risk the possibility of a wrongful job termination lawsuit based on discriminatory religious grounds.
Plenty of Cases to Go Around
It isn’t just employees who are suing companies. Covid-19 has produced dozens of consumer class-action lawsuits alleging price gouging, nonpayment of refunds for lack of promised services (such as closed fitness centers) and business interruption insurance denials. Negligence-based personal-injury class -action lawsuits also have been filed against cruise lines and nursing homes among other entities.
Then there’s cyber. At least 25 data-breach class-action lawsuits filed by consumers also are on the docket in 2021, according to law firm Morrison & Foerster. Altogether, the number of data breaches increased a whopping 270 percent in 2020 from the prior year. Much of the litigation involves theft of payment card information, social security numbers and sensitive medical data.
Again, Covid-19 is the focus in many of these cases. Hackers unleashed a torrent of email phishing scams to lure unsuspecting employees working at home into clicking on malware-infected links. The fake emails offered opportunities to buy needed supplies like face masks; some looked like official correspondence from the IT department offering help using virtual work and collaboration tools. “Working from home using routers and modems with passwords that haven’t changed in years increases the risk of phishing scams providing an entry point into the corporate IT network,” says Taylor.
According to security company Barracuda Networks, 9,000 of the nearly 470,000 phishing incidents it detected for clients in the first three weeks of March were related to Covid-19—a 667 percent increase in a single month’s time. It takes months for consumers to learn that their sensitive personal data has been stolen. Once they glean the fact, plaintiff attorneys round them up into a class-action complaint.
“Cyber is one of those areas that pass the materiality threshold, requiring some reporting on the related security,” says Andrea Bonime-Blanc, CEO of consulting firm GEC Risk Advisory and member of the board of the Cyber Future Foundation, which seeks a more trusted and secure cyber space.
Last year, with courts closed, companies were given a reprieve from these varied legal headaches. This year, plaintiff attorneys filing Covid-19-related lawsuits have timing and public emotion weighing in their favor.
New Administration, New Rules
If all this weren’t enough, boards also must be on guard for the federal government’s renewed vigor to prosecute alleged corporate crimes. “There’s no question that the current administration will ramp up white collar investigations involving antitrust allegations, anti-money laundering, healthcare fraud, collusion and other anti-competitive tactics,” says Wood.
Bonime-Blanc agreed. “We’re entering a different era now that Trump is no longer in charge,” she says. “Biden has made it clear that he will be much more proactive when it comes to public company financial statements, reporting and disclosure, with greater emphasis on ESG (environmental social and governance) risks, especially discrimination issues.”
Two new civil enforcement programs have been created at the federal level to hold companies and boards accountable for corporate compliance—the Office of Decree Enforcement and Compliance and the Civil Conduct Task Force. And new regulations are in the works, such as possible enactment of the Insider Trading Prohibition Act, which would codify insider trading as a statute for the first time. Moreover, the president’s picks to lead the Justice Department (Merrick Garland) and the SEC (Gary Gensler) affirm the likelihood of more robust regulatory enforcement. Both men have earned reputations as hardheaded investigators of corporate malfeasance.
“Board directors can expect increased government oversight and enforcement proceedings,” says Dan Bailey, partner at law firm Bailey Cavalieri in Columbus, Ohio. “For a long time, regulators have wanted the gatekeepers of companies—board directors responsible for oversight of corporate behaviors—to be more of an enforcement target. The former administration gave this lip service. The current one is a different story.”
Joined with the other lawsuit-fueling forces, a harsher corporate compliance enforcement agenda in the White House will help put an end to the pandemic-induced courtroom pause. Brace yourselves.
Russ Banham ([email protected]) is a contributing writer to Corporate Board Member.