The California Supreme Court may be poised to rewrite the rules on what costs an employer can recover if it wins a discrimination case.

It’s no secret how difficult it is for prevailing employers to recover attorneys’ fees in discrimination cases. Successful plaintiffs get them routinely. But since the courts don’t want to discourage employees from pursuing potentially valid discrimination claims, a defendant can’t recover its fees without showing that the claims were frivolous or unreasonable. It’s a very hard standard to meet. Proving that the plaintiff is a liar of the flaming slacks variety won’t necessarily get you there.

For years though, there have been some minor costs – filing fees, certain transcript fees, fees paid to subpoenaed witnesses – that the prevailing party almost always gets to recover. But that may be about to change. As reported in Law360 (subscription required), the California Supreme Court will hear argument in two weeks in Williams v. Chino Valley Independent Fire District. The issue will be whether a discrimination defendant gets to recover those costs routinely (like virtually every other type of defendant) or whether that recovery is subject to the same heightened standard as attorneys’ fees (i.e. the defendant can only recover if it shows the claims were frivolous, unreasonable, or groundless).

In fact, plaintiffs who bring meritless claims face very little downside. An unsuccessful employer defendant faces a huge financial liability if it loses. An unsuccessful employee plaintiff faces very little. Depending on the outcome of Williams, those plaintiffs may have even less of their proverbial skin in the game.

What can employers do?

• The best option is to avoid employment claims in the first place. Just within the last several months, we’ve discussed here, here, here, and here how to do that.
• If you can’t avoid a lawsuit, there are a variety of ways to try to make plaintiffs potentially responsible for all or some of your attorneys’ fees, such as requests for admissions, offers of judgment, and sanctions motions. Also, if you can’t increase the plaintiffs’ downside, try to decrease their upside. Mandatory arbitration agreements reduce the likelihood of the plaintiff obtaining an exorbitant, emotion-fueled recovery.

I understand the goal of encouraging plaintiff’s to bring (and their attorneys’ to take on) valid claims. But if a plaintiff has no financial downside, taking a shot at a windfall verdict will almost always seem more attractive than a reasonable settlement.