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In the past year, large settlements of "pattern or practice" employment discrimination claims against several major companies, and the largest civil rights class action suit in American history against Wal-Mart Stores, have prompted questions about what employers can do to avoid being the next target. This article lists key indicators in determining whether a company is in danger of class litigation.

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Federal courts most likely will see an increase in age discrimination cases with so-called disparate impact claims, but employers will be able defend themselves successfully in many of them as a result of a recent U.S. Supreme Court decision. The High Court on March 30 held that disparate impact claims -- those that allege that a facially neutral policy adversely affects a protected class -- can be brought under the federal Age Discrimination in Employment Act (ADEA). <i>Smith v. City of Jackson<i>, No. 03-1160.

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Recent rulings of importance to you and your practice.

Employers that obtain credit reports or conduct background checks on applicants or current employees must be aware of recent changes to the Fair Credit Reporting Act (FCRA) and amendments made to FCRA by the Fair and Accurate Credit Transactions Act of 2003 (FACTA). FCRA imposes obligations on employers who procure "consumer reports" (defined to include information bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics and mode of living) and/or "investigative consumer credit reports" (which include information obtained from personal interviews with neighbors, friends or associates) from a third-party consumer reporting agency for an employment purpose -- including hiring decisions and evaluations of employees for promotion, reassignment or retention. Employers that fail to comply with FCRA's obligations risk civil liability, federal agency action, and possible corresponding state action.

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Recent rulings of importance to you and your practice.

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It seems fitting to recall Samuel Morse's first telegraph message now that his telecommunications progeny Bernie Ebbers, former chief executive of WorldCom, has been convicted on all nine counts claiming that he helped mastermind an $11 billion accounting fraud at his former firm, now known as MCI. Ebbers had been charged with one count of conspiracy, one count of securities fraud, and seven counts of filing false statements with securities regulators. He could serve up to 85 years in prison. Meanwhile, another senior executive of a major corporation has been undone -- not by business fraud, but by a personal affair.

There are significant differences in the rights afforded to an insured under a disability insurance policy depending upon whether the insurance is provided pursuant to an individual policy or under an employer-sponsored plan covered by the Employee Retirement Income Security Act of 1974 (ERISA), 29 USC ' 1001 <i>et seq</i>. While individual policies are traditionally governed by applicable state common law contract principles, ERISA preempts any and all state laws "insofar as they may now or hereafter relate to" a covered disability plan, and such state laws encompass "all laws, decisions, rules, regulations, or other state actions having the affect of law, of any State" as well as statutory provisions and common law claims.

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In February, President Bush signed his first piece of "tort reform" legislation, the Class Action Fairness Act (the Act), into law. The Act expands federal diversity jurisdiction to encompass most large class actions, including employment law related class actions. One area of employment litigation that the Act may likely impact is in the wage and hour class action context where, as discussed below, litigants file wage and hour class actions in state court while also pursuing Fair Labor Standards Act (FLSA) collective actions in federal court.