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Effective January 1, 2020, employers can no longer require new employees to submit to binding arbitration for the purpose of resolving workplace disputes.  As a result, virtually any workplace claim or lawsuit will now force employers to defend themselves in court to the satisfaction of a jury comprised solely of employees. The inherent anti-employer bias, and inordinate expense, of this process is what made arbitration so valuable.

As employers recover from the shock of this new law, the pressing question is: what protection remains available to employers? This article will focus on practical, battle-tested strategies that can serve to effectively offset the loss of arbitration. When applied prudently and with discipline, these can be as effective as arbitration policies in preventing lawsuits, by discouraging plaintiffs’ lawyers from accepting cases against your business.

In General

Historically, the greatest risk of a lawsuit for employers has always involved workplace terminations.  Discharging employees is, unfortunately, necessary from time to time, and employers must have confidence that they can make this difficult decision without fear that they will face the crippling expense and risk of a lawsuit.  The question is:  how can terminations be carried out with the decisiveness often demanded by disciplinary infractions while, at the same time, actually discouraging – instead of inviting – a lawsuit.  The answer: by setting up the discharge in such a way as to make it clear to any lawyer reviewing your actions that initiating a lawsuit would be a certain loser, and thus, unprofitable.

This is no small task, given that such cases will be determined by juries inherently sympathetic to the employee. In order to accomplish it, employers must understand some of the mechanics of the relationship between employees and the lawyers that represent them.  First, unlike defense lawyers, plaintiffs’ lawyers are not paid by the hour.  Instead, these lawyers take employment cases on a contingency fee basis, which means they are compensated by a percentage of any settlement or jury verdict ultimately recovered.  As a result, these lawyers are very selective about which cases they take, and will normally accept only those cases that will be easy to prove against employers perceived to have the ability to pay significant damages. The more successful the lawyer, the more selective he/she will be.

This means that only those cases that allow an award of punitive damages, or payment of attorneys’ fees to the prevailing party, will offer a sufficient prospect of lucrative recovery to entice plaintiffs’ lawyers.  This makes claims for wrongful termination, workplace harassment (including bullying), discrimination, retaliation and overtime/wage-hour violations priority targets of successful plaintiffs’ lawyers.

Protective Strategies

Not surprisingly, it is incumbent on employers to bring special precautions to those workplace disputes that plaintiffs’ lawyers will find most attractive, beginning with the above-enumerated list.  Different precautions are indicated whenever the employer receives a complaint, in any form and from any source, relating to workplace harassment, discrimination or retaliation.

If employers are vigilant about immediately seeking expert legal counsel when these events develop, or whenever a dispute involves an employee suspected of being litigious, a strategy can be developed which will facilitate prompt removal of the offending employee from the workplace, perhaps with the use of a disciplinary suspension.  This allows the employer to demonstrate decisive leadership to the work force, while creating a window of opportunity to carefully evaluate pertinent documents and gain the cooperation of employee-witnesses.  This process allows the employer to identify the most legally-defensible basis for discipline.  Once this is accomplished, it is imperative that any and all communications, whether oral or written, be scrupulously consistent with the strongest legal basis for discipline identified.

Another extremely effective tool in the employer’s arsenal is to strategically contest any unemployment claim made by an employee the employer believes may initiate a legal challenge.  With the assistance of legal counsel, an unemployment hearing offers a golden opportunity to take the surprise “deposition” of the employee claimant, in a setting where all testimony is recorded for future use.  If properly conducted, these and other stratagems will have the effect of making legal representation of a terminated employee extremely unattractive to any prospective lawyer, thus precluding a lawsuit.

Is it worth it?  Given that jury trials typically cost employers the better part of a $1 million in defense costs alone, the answer appears clear.  “An ounce of prevention is worth a pound of cure.”


Jay G. Putnam is a Petaluma labor lawyer who has specialized in representing California employers for over 38 years. His practice is devoted to preventing lawsuits against his clients, without sacrificing workplace authority or management prerogatives. He has a remarkable record of success: Not one employer-client acting on his advice has been sued in over 38 years.

For those clients who have arrived with pending lawsuits, Putnam has established an excellent track record of success as well.

You are invited to visit Mr. Putnam’s website, where you will find in-depth discussion of the most common mistakes made by California employers, and how to avoid them. 

This newsletter is not intended as a substitute for legal advice and its content is provided for discussion purposes only.  Any suggestions or recommendations must be assessed by competent legal counsel to be sure the unique requirements of each workplace are properly considered.

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