A bill recently proposed in Wisconsin could seriously change litigation strategy and settlement considerations for many employment claims filed with state agencies.  Assembly Bill 64 would amend the Wisconsin Fair Employment Act (“WFEA”), the Wisconsin Family and Medical Leave Act (“WFMLA”), and the relatively new Organ and Bone Marrow Donation Law (“OBMDL”) by empowering both the complainant and an employer to make a statutory offer of settlement.  Failing to accept such a settlement offer could result in significant financial consequences.

Statutory Offers of Settlement

Complaints under the WFEA, the WFMLA, or the OBMDL are handled by the Wisconsin Equal Rights Division (“ERD”).  If the investigator assigned the case finds probable cause that a violation occurred, the case is certified to a merits hearing with an administrative law judge (“ALJ”).  Unless the case is settled or withdrawn, the ALJ conducts a hearing, decides whether there is liability and if so awards damages and other applicable relief.  Available remedies include reinstatement, back pay, and front pay. In addition, a successful complainant can recover attorney fees and costs incurred in prosecuting the case. 

Assembly Bill 64 would permit employers to make statutory offers of settlement to the complainant beginning 10 days after a complaint is filed until 10 days prior to the commencement of the merits hearing. Once the employer makes the settlement offer, the complainant would have 10 days to accept.  If the complainant who did not accept such an offer ultimately failed to obtain a “more favorable award” than the offer, the complainant would recover only “pre-offer costs” and not any “post-offer costs.”  In addition, the complainant would be required to pay the employer its “post-offer costs.” The “costs” at stake, which could be substantial, would include reasonable attorneys’ fees, filing fees, subpoena fees, copying costs, court reporter fees, reasonable investigative costs, reasonable travel expenses, and all other similar fees and expenses related to litigating the complaint. 

To be considered “more favorable” than the settlement offer, the ALJ’s award must include: (1) an order for reinstatement, or for some other substantive or tangible benefit besides a mere finding that the law was violated, that was not provided for in the settlement offer; or (2) a monetary award to the employee that, exclusive of pre-offer costs and post-offer costs, that exceeds the compensation provided for in the settlement offer.  Settlement offers made under the proposed law would need to be in writing and specify the terms of the offer clearly in order to be effective.   

The settlement offer could be made subject to a confidentiality requirement and such other reasonable conditions, including execution of appropriate releases, indemnities, and other documents, as are typical in such settlement agreements.  Once an offer is accepted, the parties would be required to engage in good-faith negotiation regarding the remaining terms of the settlement.  A settlement offer would not be admissible for any other purpose. 

Complainants would also have the right to make settlement offers under the proposed bill.  If a complainant made an offer that the employer did not accept and ultimately obtained a “more favorable award,” prejudgment interest would be added to the final award, calculated from the date the complainant’s offer was received.  Such prejudgment interest would be imposed at an annual rate equal to 1% more than the prime rate in effect on the date of the settlement offer.  An employer’s risk in rejecting a complainant’s settlement offer would therefore depend primarily on the time that elapsed between the offer and the date of the ultimate award.

Limitation of Remedies

Assembly Bill 64 would limit recoveries in cases where the complainant establishes a violation of law, but does not obtain reinstatement, monetary relief, or another substantive award.  The complainant would also be barred from recovering attorneys’ fees or other costs.  For example, if the ALJ only ordered the employer to cease and desist from engaging in certain practices, the complainant would not be able to recover attorneys’ fees and costs. 

Implications for Wisconsin Employers

If Assembly Bill 64 becomes law, its provisions regarding settlement offers and remedy limitations could be expected to alter litigation and settlement strategy in the ERD in ways that could significantly benefit employers.  A complainant refusing a reasonable offer of settlement would be taking a very large risk, since failure to obtain a more favorable award would result in forfeiture of the complainant’s post-offer costs as well as liability for the employer’s post-offer costs, including attorneys’ fees.  If enacted, therefore, the new law would encourage complainants to accept reasonable offers.  Because an employer would be able to make an offer of settlement at an early stage of the case, the proposed law could help to resolve complaints in an expeditious and cost-effective manner.

At this point, Assembly Bill 64 is only a proposal by the Joint Finance Committee for the 2017-2019 budget.  Before a budget bill becomes law, it must be approved by both the full Assembly and the full Senate, and it is certainly possible that each will propose amendments along the way.  Once the Legislature approves a budget bill, it will need to be approved by Governor Walker before becoming law.  Budgets are supposed to be finalized by July 1, so it could be some time before we know whether these proposed changes to the WFEA, the WFMLA, and the OBMDL will become effective.

We will continue to monitor this bill and report on significant developments.