Under provisions in Governor Walker’s budget bill, complaints adjudicated by the Equal Rights Division under the Wisconsin Fair Employment Act, the Family and Medical Leave Act, the Organ Donor Leave Act, the Health Care Workers Protection Act and other laws would undergo a drastic procedural change that threatens enforcement of these employee protections.  Sections 1389 and 1459 would allow an employer to serve an “offer of settlement” on an employee or job applicant who has filed a discrimination or retaliation complaint in the Equal Rights Division (ERD) as early as 10 days after he or she has filed the complaint and as late as 10 days before a hearing.  If the employee does not accept the offer within 10 days after it is served, it is deemed declined.

If the employee does not accept the employer’s offer, continues to hearing, and does not receive a “more favorable award” from ERD, he or she (a) does not receive any attorney fees and cost reimbursement that the judge awards  and (b) must pay the employer’s attorneys’ fees and costs from the date of the offer.  Even though recovery of attorneys’ fees is a remedy under these laws, these fees are not considered when determining if the employee received a “more favorable award.”  This will be so even if the employee otherwise wins the case.   Faced with the risk of paying tens of thousands of dollars in employer’s attorney fees, few employees will be able to take the risk of declining an offer no matter how insufficient it is to remedy the alleged violation regardless of the merits of their claim.

The employer would also not have to pay the employee’s attorney fees if the employee accepts its offer.  It would only have to pay whatever it offered.

Wisconsin law adequately addresses frivolous administrative claims

In justifying the need for the ERD offer of settlement proposal, the DWD has claimed it is necessary to eliminate frivolous claims.  In fact, Wis.Stat. §227.483, which applies to ERD hearings, already provides a procedure for addressing frivolous claims:

(1) If a hearing examiner or the tax appeals commission finds, at any time during the proceeding, that an administrative hearing commenced or continued by a petitioner or a claim or defense used by a party is frivolous, the hearing examiner or tax appeals commission shall award the successful party the costs and reasonable attorney fees that are directly attributable to responding to the frivolous petition, claim, or defense.

A finding that a claim is frivolous must be based on a finding that the claim “was commenced, used, or continued in bad faith, solely for purposes of harassing or maliciously injuring another” or that “the party or the party’s attorney knew, or should have known, that the petition, claim, or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification, or reversal of existing law.”   Wis. Stat. §227.483(3).  These are the same standards for determining whether a claim is frivolous in a civil action under Wis. Stat. §802.05.  Under each procedure, an ALJ or the court makes a determination whether the claim is frivolous and justifies an award of attorneys’ fees.  This is done on the basis of the entire record and only after the parties have had an opportunity to be heard on the issue.

In contrast, under the proposed ERD offer of settlement, an employee bears the risk of paying the employer’s attorney fees without any finding that her claim is “frivolous” and, indeed, even when the claim is found to have merit, simply on the basis that the ultimate award is not “more favorable” than the offer.   Rather than weeding out frivolous claims, the risks inherent in the proposed ERD offer of settlement will likely deter claimants from proceeding through the ERD enforcement process regardless of the merits of those claims.

Proposed ERD Offer of Settlement Process Significantly Different Than Wisconsin and Federal Court Counterparts

The rules of procedure in both federal and Wisconsin courts provide for defendants’ “Offers of Judgment” that differ significantly from the proposed ERD Offer of Settlement.

Federal Rule of Civil Procedure 68 and Wis. Stat. §807.01 both require that the successful plaintiff’s attorney fees be included as an item of “costs” in the calculation of his or her total recovery that is compared to the offer if the plaintiff is suing under a fee-shifting statute.  Marek v. Chesney, 473 U.S. 1 (1985); Pachowitz v. LeDoux, 2003 WI App 120, 265 Wis. 2d 631, 666 N.W.2d 88.  In fact, in Wisconsin a defendant’s offer of judgment is invalid under §807.01 if it does not explicitly refer to attorney fees available to the plaintiff under a fee-shifting statute.  Pachowitz. 

Even where a civil-rights plaintiff in a federal case wins but does not recover as much as the defendant offered, every federal court of appeals that has addressed the issue, including the Seventh Circuit, has recognized that Rule 68 does not permit the defendant to recover its attorney fees.  See, e.g., Payne v. Milwaukee County, 288 F.3d 1021 (7th Cir. 2002); see also Hescott v. City of Saginaw, 757 F.3d 518 (6th Cir. 2014) (collecting cases).   A defendant who is sued under one of the federal anti-discrimination laws cannot recover its attorney fees unless it can prove that the plaintiff’s suit was frivolous.  Christiansburg Garment Co. v. EEOC, 434 U.S. 412 (1978).

Although the question has not been addressed in a Wisconsin court, there is no reason to believe that “costs” would include defendant’s attorney fees under Wis. Stat. §807.01 either.

Civil Rights and Liberties Section of Bar Opposes ERD Offer of Settlement

Wisconsin’s existing frivolous claims statute adequately protects employers from frivolous ERD claims.  The proposed ERD offer of settlement provisions pose a significant threat to ERD enforcement of  Wisconsin’s anti-discrimination, family and medical leave, healthcare worker and other employee protections.  Consistent with this concern, the Civil Rights and Liberties Section of the Wisconsin bar has passed a resolution to oppose the proposed ERD offer of settlement provisions.

Please note that this blog was originally published on the State Bar of Wisconsin’s Labor & Employment Blog which can be found here. If you believe you may have been subjected to illegal discrimination in the workplace, please contact one of our offices as soon as possible to set up a time to speak to an attorney. 

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