COVID Exposing Small Businesses to ‘Staggering’ Number of Employment Lawsuits

A disproportionate share of employment lawsuits related to COVID-19 have been filed against small businesses, reversing the usual trend of the deepest pockets attracting the most litigation.

The Fisher Phillips law firm discovered when it updated its COVID-19 employment law litigation tracker that private employers with fewer than 500 employees were the defendants in 65% of COVID-19 lawsuits relating to employment, according to a blog posted Monday by attorney Melissa Camire and two colleagues.

Melissa Camire

The Fisher Phillips blog says that employers with fewer than 50 workers were defendants in 38% of those suits.

In comparison, private employers with fewer than 500 workers employ 52.02% of the nation’s workforce. Employers with fewer than 50 workers employ 31.77%, according to Bureau of Labor Statistics data for the first quarter of 2020.

Camire said the disproportionate share of lawsuits against smaller employers is “staggering.”

“Anecdotally, we typically see litigation filed against larger employers because they are a bigger target for plaintiff’s attorneys who know they have deep pockets and are usually willing and financially able to resolve claims,” she said in an email. “The smaller the employer the greater the odds they won’t have sufficient resources to defend against a claim or pay out a large judgment or settlement.”

Congress may have laid the groundwork for the surge in small business lawsuits with passage of the Families First Coronavirus Response Act, which took effect April 1. The law requires employers to provide up to 80 hours paid leave to workers who contract COVID-19 or need time off to care for a family member with the disease, and up to 12 weeks of extended family and medical leave for employees needing to care for children whose school is closed or whose regular daycare provider is unavailable.

Private employers with more than 500 employees — and those who employ health care workers and emergency responders — are exempt from the FFCRA. Republicans insisted on the large employer exemption as a condition for passing the bill, according the Center for American Progress, a progressive group.

The Fisher Phillips litigation tracker shows that issues with remote work and leave requests were the most common type of dispute in COVID-19 employment lawsuits, making up 282 of the 1,078 complaints filed so far.

“These large companies might not be subject to FFCRA lawsuits, but we’re still seeing hundreds of other types of non-FFCRA claims – which means it seems remarkable that the smallest employers are bearing the brunt of these claims,” Camire said.

Jeffrey Polsky

Jeffrey D. Polsky, a partner with the Fox Rothschild law firm in San Francisco, said he isn’t surprised by the report that small businesses are grappling with a disproportionate share of employment-law lawsuits, given that the FFCRA exempts large employers.

Polsky said litigation filed by the state of New York added to the confusion. A federal judge overturned regulations adopted by the Department of Labor to implement the new law. He said the Department of Labor had adopted modified rules, but it remains to be seen if they will hold up to litigation. In fact, he and other attorneys said its also unclear whether the New York federal judge’s ruling applies only in New York or nationwide.

Polsky said small business owners are struggling in the meantime.

“These small businesses are just reeling,” Polsky said. “They are trying to keep their doors open and trying not to the lay off workers. The legal requirements they are dealing with are subject to change almost daily.”

Polsky noted that the California legislature passed a bill that removes the large-employer exemption under state law. The FFCRA itself will become moot when it expires on Dec. 31 — even if the litigation spurred by the law survives.

Polsky offers this advise to employers: “Do what you can to keep your workers and your customers safe. Pay attention to the guidelines that are constantly being handed down and revised. If you are making a good faith, reasonable effort, that should be enough.”

The updated Fisher Phillips litigation tracker also breaks down the number of COVID-19 employment lawsuits in each state, adjusted for population. The data shows that New Jersey has the highest litigation rate, with 5.07 cases per 1 million people. Connecticut comes in second with a 2.8 cases per 1 million and Kentucky third with 2.24 per 1 million.

“New Jersey generally has some of the most comprehensive and employee friendly leave laws and anti-discrimination protections in the country along with a very active plaintiffs’ bar,” Camire said in her email. “I suspect that combined with the fact that New Jersey has been very hard hit by COVID (particularly early on in the pandemic) is behind the numbers we are seeing there. New Jersey cases are on the upswing, so this may further impact the number of cases filed in the state.”

Illinois, Minnesota and North Carolina are the states where businesses are the least likely to be sued, with litigation rates of less than 0.2 cases per 1 million people.

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