INTRODUCTION

Without a doubt, sexual harassment and discrimination claims against the employer have increased in this decade. The more employees a company has under its employ, the greater the exposure to these claims. We live in a time with increased awareness and sensitivity toward sexual harassment and discrimination. As a result, more and more juries on sexual harassment and discrimination cases have awarded incredible damages to the aggrieved party with legitimate claims.

In March, April and May of this year alone, the following verdicts were rendered: $10.8 and $6.1 million to an employee and supervisor, respectively, for their claims of race discrimination and retaliation. See Lane v. Hughes Aircraft, Co., 59 Cal.Rptr.2d 882; Female employee was awarded $815,000 in a sexual harassment hostile environment suit. See McQuagge v. The Hendrick Automotive Group, Alameda County Superior Court, No. 7481846; A 55-year-old terminated employee was awarded $1.35 million by a jury in an age discrimination claim. See Keiffer v. Bechtel Corp., San Francisco County Superior Court, No. 974305; An employee whose complaints of racial harassment were ignored was awarded $893, 400 by a Sacramento jury. See Gatewood v. Department of Transportation, Sacramento Superior Court, No. 538211; Two African American employees of the L.A. Department of Public Works were awarded $1.5 million for nonpromotion based on race discrimination. See Brown v. City of Los Angeles, Los Angeles County Superior Court (Central), No. BC065276.

It follows that among the many valid claims made, there has to exist a certain amount of frivolous claims made by employees eager to jump on the litigation bandwagon. This has, in turn, seemingly prompted the employer into vigorously defending these cases to the bitter end, more readily than not. This division has resulted in one thing: immense attorney fees and payouts for both sides of the litigation coin!

The time has come for both employees and employers to explore other avenues of resolving these disputes; avenues that will result in more favorable outcomes for all parties involved. This article will then focus on mediation as a favorable means for alternative dispute resolution in employment sexual harassment and discrimination claims, as well as, how to successfully mediate the same.

PART 1. WHY MEDIATE?

CO$T - THE MONEY FACTOR

There currently exists very few policies of insurance which would cover an employment sexual harassment or employment discrimination claim. Several of the major policies currently being offered have extremely high deductibles which often exceed the amount by which a claim can be resolved in its early stages.

When determining whether or not an Employer/Defendant should mediate a sexual harassment claim, the projected cost of attorneys' fees alone is an important initial criteria. Civil Code §§1021.5, 1032, 1033.5, Government Code §12965(b) provide for an award of attorney fees in these claims. See also Rojo v. Kliger, (1990) 276 Cal.Rptr. 130; Commodore Home Sys., Inc. v. Superior Court (1982) 32 Cal. App. 3d 211; Title VII expressly states that prevailing parties may recover attorney fees as part of recoverable costs against any defendant, including government entities. 42 U.S.C. 2000e-5(k). Plaintiff-employee in an age discrimination claim was entitled to attorney fees, pursuant to both state and federal law; Crommie v. State of Cal., Public Utilities Com'n, N.D.Cal.1994, 840 F.Supp. 719; See also Bouman v. Block, C.A.9 (Cal.)1991, 940 F.2d 1211, certiorari denied ,112 S.Ct. 640, 502 U.S. 1005, 116 L.Ed.2d 658.

As a result, if liability is ultimately determined in favor of the employee, attorneys' fees on top of damages will be awarded against the employer by the Court. If no liability on the part of the employer is found, the employee must pay all costs. Whether the employee must also bear the burden of defense attorney fees is within the Court's discretion.

Specifically in the case of a prevailing employee, even if the damage judgment is relatively minimal, the amount of assessed attorneys' fees can likely be substantial. In Davis v. KGO- T.V., Inc, 58 Cal.Rptr.2d 13, a terminated reporter in an age discrimination case received $290,030 in attorney fees alone. Once liability is determined in favor of the employee, a seemingly diminutive case at the commencement of the claim can prove to yield substantial attorney fees awarded against the employer. Therefore, once the losing employer has taken into account, both the employee's attorney fees and its own costs of defense, the employer ends up with significant out of pocket losses.

Consequently, the equation involves simple mathematics: Will defending a sexual harassment/discrimination claim based on 'principal' result in the payout of more money in attorney fees than choosing to mediate at an early stage in the game? The answer -- quite possibly "yes." Mediation, specifically before the filing of a lawsuit, can often be justified as a prudent economic decision once this potential for attorney fees awards are taken into consideration.

PUBLICITY:

Virtually all settlements involve a written confidentiality agreement. Nonetheless, the resulting effect of a confidentiality agreement is often times rendered worthless if it is obtained after a year or more of extensive litigation. After aggressive discovery has been conducted and numerous depositions taken, the underlying facts are generally well-known to third parties whom are not precluded from disseminating the information under the subject confidentiality provisions.

Moreover, if the case ultimately proceeds to trial, it is likely that some amount of public exposure in the press will likewise be generated. No doubt, a substantial Plaintiff's verdict will have a significant adverse impact on the Defendant company. However, even if the company is successful in obtaining a defense verdict, the public perception and image of the company may be tarnished for a long time to come. As a result, going to trial is usually a no-win situation for the company conscious of its public image. In contrast, mediation at an early stage is arguably a win-win situation, so as to avert possible injurious publicity in both cases.

EMPLOYEE MORALE:

If the case proceeds to the deposition stage, it is not uncommon that numerous employees will be deposed. Many of these may be minor witnesses with very little understanding of the underlying claims and who usually desire not to get involved. It can be devastating for a loyal, dedicated employee to testify at a deposition or trial in an honest manner that is ultimately detrimental to the financial interest of the employer.

The reality is simply that every employee is essentially being asked to take a position either for or against the company. This implication is normally indirect and not a result of anything that the employer has expressly said or done. Nonetheless, the long-term effect on the morale of each employee placed in this situation is, rest-assured, not beneficial to the company.

Furthermore, the discovery process generally involves a substantial amount of management's time and resources. They are often requested to gather documents, attend and/or review depositions, prepare summaries of the status of the litigation, and appear with counsel at mandatory Court appearances. There is, of course, a tangible economic loss to the company when its employees are required to expend valuable time responding to litigation demands.

DAMAGE CONTROL:

Settlement of a bonafide claim at an early stage reduces the risk of opening up the litigation floodgates. In the event a valid claim of sexual harassment and discrimination did in fact exist in the workplace, the potential for additional subsequent claims is substantially increased due to the "shoptalk" generated by the litigation discovery process. In Aguilar v. Avis Rent-A-Car System, Inc., 53 Cal.Rptr.2d 599, an employer was flooded with twelve individual employee lawsuits alleging racial harassment and discrimination. The jury found for a total of nine employee-plaintiffs, and against the remaining three.

Many individuals with valid claims would not come forward and submit a claim against the company, especially if the situation has been rectified, unless prompted to do so by the awareness created during litigation. It is apparent that in this instance, it is the employer who reaps the great advantage of early mediation, as its exposure to subsequent employee claims could well be limited to the initial complainant.

YOU REMAIN IN CONTROL OF THE OUTCOME:

Of course, the actual facts of a particular case will ultimately determine liability and damages awarded. However, the open-ended nature of damages and the whims of twelve lay jurors are no doubt the greatest value to an employee's claim. What a jury might do is of greater concern than what a jury should do in many cases.

Experienced employee's counsel understand that once they get past the Summary Judgment stage, it's often better to "roll the dice" than to settle for an amount that by all objective standards would appear reasonable. If the case goes to trial by judge or jury, the only expected award can be in monetary terms. The mediation process instead allows for a resolution that permits the parties to structure a settlement which encompasses terms in addition to, or in lieu of, a straight lump sum cash payment. This could include reinstatement, out placement training, structured settlement payments, favorable letters of recommendation, non-disparagement clauses, confidentiality provisions, language relative to taxability issues and more.

Realistically each case should be reviewed on its merits. However, in light of the above, does it really make sense to "roll the dice" on an "all or nothing" verdict? Most likely not. Mediation, then, lets you remain considerably in control of the outcome, as it provides a forum in which each side has an opportunity to accept or reject what otherwise would be a jury decision.

PROVIDES A FORUM WHICH PERMITS THE PARTIES TO BE REASONABLE:

The mediation process will provide each side with a forum in which to make a more rational decision detached from the emotional or "principal" aspects of the claim. Often times an employee feels vindicated by merely being afforded an opportunity to tell his/her story directly to the offending party and company. After the employee has vented his/her concerns in the mediation setting, the employee often feels like he/she has had his/her "Day In Court." With this frame of mind, the employee may thereafter be more apt to rationally and realistically agree to settle the claim.

The converse of this is also true. Management, after having had an opportunity to evaluate: (1) the potential validity of the employee's story firsthand, including the strengths and weaknesses of the employee's position and (2) the employee as a witness, including all strengths and weaknesses of the employee's demeanor for trial testimony, the employer may realize that a prompt settlement is in the employer's best interest.

Once the parties have placed themselves in the mediation forum, a change of frame of mind emerges. This change greatly enhances the likelihood that all parties involved will be receptive to each other's positions and experience a meeting of the minds. In turn, this change greatly enhances the possibility of a win-win situation for all parties involved.

PART II. HOW TO MEDIATE THE EMPLOYMENT DISPUTE

PLAY IN THE SAME BALLPARK:

Come to the table with reasonable expectations. If the gap between the parties' respective positions is too wide, it is unlikely that mediation can bring about a resolution. For example, an employee who believes the proverbial "Million Dollar Case" is in hand, is likely not conducive to mediation when the employer will not pay a dime over $15,000. Placing parties with this frame of mind into the mediation forum may well prove to be a waste of everybody's time, effort and money.

CAVEAT: I am not suggesting that the parties need actually exchange monetary figures before agreeing to mediation. In fact, if specific numbers are discussed beforehand, it can actually be a hindrance to an ultimate resolution. What I am saying, however, is that the attorneys for each side must be aware of whether or not each of their respective perceptions of the case are in the same general vicinity.

There are no hard and fast rules in this game, but conversations with your client and opposing counsel should give you a general impression as to whether or not the case can be settled at mediation. Experienced counsel need not discuss specific dollar figures with each other to assess each side's perceived valuation of the case. Ask yourself: Are the players playing in a little league, minor league, or major league ballpark? If both players appear to be in the same league, then by all means, play ball!

If you suspect you are faced with a case typical of the scenario illustrated above, you may want to exercise a certain degree of client control before taking the case to mediation. Waiting until mediation to exercise client control or to even become aware of the need for client control will prove to be detrimental to the ultimate resolution of the case, whether in the mediation forum or otherwise. By guiding your client's perception of the case into a more reasonable and realistic ballpark at an early stage and before the mediation session, your chances of a successful early resolution via mediation will undoubtedly be amplified.

KNOW YOUR CASE:

It is important that you fully educate the Mediator by way of a formal Mediation Brief before the hearing date. Make every effort to submit your brief to the Mediator at least seven days before the session commences. Note that it is generally preferable not to exchange briefs with opposing counsel prior to the hearing date. However, on occasion, depending on the circumstances, the parties may agree to exchange briefs during the mediation session.

While preparing the Mediation Brief and supplemental materials, keep in mind that the Mediator should be as educated as possible about both the merits and pitfalls of your case. Obviously, this means that you (and your client, as discussed above) should be as educated as possible in this regard, as well. You're well advised to agree paying the Mediator for an additional hour or two to make certain that all submitted materials are fully read and examined by the Mediator prior to the mediation session.

Submitted materials should include medical evaluations and expert opinions, including a diagnosis and prognosis. Witness declarations are also helpful. In fact, I often make arrangements for third party witnesses to be available by telephone in the event the Mediator desires to communicate directly with a key witness.

Remember: The better you know your case, the better the Mediator will learn your case. In turn, the Mediator will be able to better serve the parties by assisting them in bringing about a settlement which satisfies both sides.

CHOOSING A MEDIATOR:

Although you should expend all time and resources necessary to educate the Mediator on the particular facts, merits and pitfalls of the case, you don't have time to educate a Mediator on the ever changing law in employment disputes. Therefore, a successful mediation requires a Mediator already sufficiently knowledgeable on the subject matter at hand.

There are Mediators who handle exclusively employment-related matters and I strongly suggest utilizing his or her services. It is advisable to speak with other attorneys who have used a proposed Mediator in the past in an effort to ascertain their opinion of the individual's attributes as a Mediator of employment disputes.

A Mediator who handles employment-related matters exclusively will be able to judge the merits of the case more efficiently and be able to advise you and your client thereon. A good Mediator will tell you when you have a lousy case. On the other hand, if the facts warrant it, a good Mediator will exert as much effort and pressure as necessary on the other side to argue the merits of your claim. Keep in mind that the Mediator's ability to establish a rapport with both the employee and the employer, so as to gain the respective parties' trust, is much more important than whether the Mediator is perceived to be pro-employee or pro-employer.

Finally, the Mediator must have what I call "staying power." Don't undermine your chances of settlement simply because darkness has set in. I have settled many cases during mediation well beyond 6:00 P.M. Although any good Mediator deserves to be paid for all time expended on the case, it is unfair and undermining to your case to terminate the formal proceedings at 5:00 P.M. if the parties are still talking.

Selecting a Mediator with employment-related expertise, the ability to candidly tell it like it is, the ability to be articulate and establish a rapport with both sides, and the necessary "staying power" will surely guarantee a favorable outcome in mediation.

HAVE THE PROPER PLAYERS PRESENT:

It is important that you confirm in writing who will be attending the mediation session beforehand. I strongly suggest obtaining written confirmation that the individuals attending will have full authority to settle the matter. If the parties arrive with only limited authority, a resolution is unlikely. Speaking from experience, there is nothing more frustrating than having negotiated a matter to the point of apparent resolution, only to find out that approval for further movement is required by an absent individual.

Moreover, even if the ultimate settlement authority rests within an individual that can be reached by a mere telephone call, the prospect of a resolution is likewise diminished. The absence of that party's firsthand knowledge of the ins and outs of the negotiations, which often times are quite emotional, makes it is all too easy for that absent individual to reject a particular settlement figure.

BE PATIENT:

Once the mediation session has begun, don't rush to talk money. Setting the stage and evaluating the environment is essential to reaching an ultimate settlement. I've been involved in numerous conferences where money has not been discussed until 4:00 or 5:00 PM in a full day mediation session. All such cases have ultimately settled favorably.

It is worth your while to hash it out for a full day mediation session. Half day mediations are usually a waste of time, unless specific numbers have previously been negotiated and the parties are merely entrenched between two reasonably close amounts. If you jump out of the gate with a demand for $200,000 on a case that everyone knows is only worth $25,000, you may have effectively precluded reaching a resolution at any number.

By immediately lashing out with a high settlement number, you may well be sabotaging your case. Once the other side blatantly rejects the offer, what may happen is that you'll become far too entrenched in your position and associate the initial demand with your pride, principal and/or your ability to evaluate and settle a case. In turn, you might become reluctant to then come back with a much lower or higher and more reasonable figure, so as not to seemingly undermine your ability as an attorney and negotiator.

Instead, first establish a rapport with opposing counsel and determine his/her client's frame of mind. An experienced mediator can give you valuable insight in this regard. Only after getting a feel for the other side's position, may you begin disclosing specific dollar figures. In essence, test the waters before you dive in, otherwise you might get burned.

HOLD 'EM:

Hold some cards for the final round. The discovery process will generally reveal most, but not all of your major evidence. Therefore, you are likely to have and you will need to have a "Trump Card" that can be played near the end of the negotiation process. If you are ultimately to be successful, you need to convince the other side that your case is stronger than they originally believed. By the time you reach this stage of the mediation process, that extra push will likely lead you to a specific dollar figure closer to the one you had mind when you came to the table.

CAVEAT: Depending on the status of the case, don't give the Defendants free reign to discovery during the mediation session, unless there exists a very reasonable likelihood of settlement. This is where you'll need to trust your instincts. Proceed carefully, by artfully letting the other side know the nature of the potentially damaging evidence, without disclosing all of the details. Some cases require you to play you full hand in the hopes the matter will settle. Experience is required by counsel at this level of participation. Counsel must know "when to hold 'em and when to fold."

DON'T LEAVE WITHOUT SIGNING:

It is important that the parties sign an enforceable agreement or memorandum of understanding before departing a mediation session, if a resolution is reached. All true compromises hurt a little. A "Monday morning quarterback" can kill a reasonable resolution if no enforceable agreement was signed the day before. I often come prepared with a standard agreement, including Mutual General Release provisions, confidentiality provisions, taxability language, etc. The specific document can be modified by handwritten interlineations or by a separate addendum. At a minimum, an enforceable Memo of Understanding should be executed by all parties, expressly including a Code of Civil Procedure §664.6 enforceability provision.

TAKE A STANCE (BE PREPARED FOR TRIAL):

Ultimately a bottom line figure should be disclosed. Inevitably this will arise late in the day with the parties fairly well-entrenched in their respective positions. Play this card carefully and only after full deliberation of the situation. Your reputation is on the line-don't waiver. If it's truly your final position, say so and hold firm. If it settles, great-if not, stand by your word and proceed to trial. The long-term benefits, win or lose, will ultimately be returned.

CONCLUSION

For the employee, the mediation forum offers an early opportunity to be heard at a time when everything is fresh in mind, as opposed to waiting close to two years for a trial date. It offers a more private and comfortable setting to be heard in, as it averts the emotional anguish of trial testimony and formalities.

For the employer, the mediation forum offers an opportunity for firsthand evaluation of the potential validity of the employee's claim and of the employee's demeanor as a trial witness. It offers an opportunity to avert injurious publicity, a decrease in employee morale, a backlash of subsequent employee claims and a potentially high verdict.

Finally, mediation offers both sides a strong likelihood for early resolution of an employment dispute without having to delve into a never-ending sea of attorney fees. If you have a sexual harassment or discrimination claim on your hands, you are strongly advised to consider the factors I have delineated herein and elect the alternative dispute resolution forum of mediation. The earlier in the litigation process that mediation is entered into, the better the short and long-term benefits that will emerge.

Robert D. Coviello has maintained a private practice in Orange County for over 21 years. His firm accepts cases involving wage & hour, wrongful termination, and all types of unlawful harassment & discrimination. He is a frequent speaker at seminars designed to educate employers and their counsel on employment matters. Recent topics include: Avoiding & Defending Discrimination Charges, Investigating the Sexual Harassment Complaint, and Mis-Classification of Employees. Among other things, Mr. Coviello sits as Chair of the Labor & Employment Law Section of the State and Orange County Bars, is a member of the National Employment Lawyers Association and serves as a Neutral on the Employment Panel of the American Arbitration Association. Perla J. Duvel is an Associate Attorney with Mr. Coviello's firm. She is a member of the Labor & Employment Law Section of the Orange County Bar and has handled a variety of wage & hour, sexual harassment, wrongful termination and employment discrimination claims. Ms. Duvel frequently investigates these matters and has spoken at seminars on the issues of Investigating Employee Sexual Harassment Claims and Conducting Job Interviews without Violating Law.