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Insight: Retailers Concerned About Class Actions and Employment Litigation

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For nearly two decades, our firm has conducted its annual Litigation Trends Survey, analyzing litigation trends to assess the state of the legal landscape and consider their impact on organizations.

The 2021 survey gathered responses from more than 250 general counsel and in-house litigation managers across the United States. We found that most participants felt their teams had largely mastered the new normal of remote and hybrid working, but were concerned that a host of evolving trends posed financial and reputational risks to their organizations.

Participants were asked to identify three types of disputes that concerned them the most. Retail companies’ in-house lawyers have identified class action lawsuits

52% vs. 24%) and labor and employment disputes (47% vs. 27%) more frequently than all respondents. We’ll dive into the reasons behind these answers.

Class Action Risks
Retailers are understandably concerned about class action lawsuits, given the growth in filings over the past few years. Plaintiff-friendly jurisdictions like California, Illinois, and New York allow “without prejudice” claims under their deceptive marketing practices laws. These laws are interpreted broadly in favor of consumers and allow consumers to sue for anything they claim is illegal, unfair or deceptive. It is difficult to have a case dismissed before trial, and courts often resolve doubts in favor of certification classes to determine “common” questions of law or fact.

Plaintiff attorneys use strategies designed not necessarily to win at trial, but to survive a motion to dismiss and gain class certification, in order to create settlement leverage. Class action lawsuits – with their one-sided and often burdensome discovery – can be very expensive and create staggering potential liability. It’s no wonder a class action lawsuit is, as the California Supreme Court put it, an “extremely rare beast” and most companies are forced to settle to avoid seeing ruin. economic.

Retailers face a wide range of potential claims in consumer class action lawsuits. We discuss some examples below.

Labeling and other product-based claims
Retailers face a wide range of complaints about the labeling of the products they sell, with particular exposure for private label products bearing a retailer’s own brand. Some cases focus on technical labeling violations – such as additional labeling required for food products marketed as “no added sugar” or failure to comply with California law requiring disclosure that a registration form product certificate is not required to obtain warranty service – regardless of whether consumers are actually deceived.

Other cases assert that claims made about supplements or cosmetics are “drug” claims that require premarket approval from the FDA, again without proof of harm to consumers.

Plaintiff’s attorneys are very keen on making “natural” and “pure” label claims, often claiming that these claims are interpreted by consumers to mean that there are no artificial ingredients in the product. One case line claims that foods labeled as having “natural flavors” are mislabeled if they contain citric acid, even if citric acid is not used as a flavoring agent.

And consumer litigation over environmental/sustainability claims is growing rapidly, including lawsuits against brands making “organic” and “sustainable” claims on their products. The presence of artificial ingredients or product components with such claims exposes the company to potential liability.

Some companies face claims because they have made statements about their company’s commitment to sustainability, and complainants claim that the presence of undesirable chemicals (such as PFAS substances) in products or Environmentally harmful or unethical supply chain practices make sustainability claims misleading.

Finally, retailers face more traditional claims in class action lawsuits, including heavy metals, phthalates and PFAS substances in food, drugs, cosmetics and children’s products.

Data Breach and Privacy Claims
Many retailers collect a lot of data about their customers, whether through mailing lists, loyalty programs, smartphone apps or e-commerce platforms. Several high-profile data breach cases have shown the dangers of exposing this data to threat actors. Data breach class action lawsuits are filed daily in the United States and can be costly to bring and resolve.

More states are beginning to follow California’s lead with the CCPA to regulate how companies collect personal information and require disclosure of how a company uses personal information and allow consumers to opt out of this collection and ask companies to delete their data.

Pricing litigation
Retailers have seen a wave of litigation over their pricing practices. Some cases allege that retailers mislead consumers when they display false comparison prices for department stores and specialty stores selling the same products.

Other cases claim that the factory outlets sell inferior products to those sold in the main brand stores and falsely claim that the price discount is for comparable goods. Still other cases claim that ‘sale’ prices violate misleading advertising laws, where retailers constantly hold ‘sales’ so that there is no ‘regular’ price for their products. .

Labor and Employment Litigation
Retailers, like many other employers, have faced a steady stream of employment class action lawsuits over wage and hour issues, and by all indications these claims have been amplified by the pandemic and are growing. will continue for the foreseeable future.

Common issues include timekeeping errors in timesheets or misclassification of workers, which continue to be costly mistakes for employers. California employers continue to be burdened with PAGA lawsuits, which California courts have ruled are exempt from mandatory arbitration agreements.

Claims directly related to COVID include lawsuits over vaccination warrants, reasonable accommodations, and terminations. Employers are also impacted by disputes over booster shots, leave policies and OSHA COVID requirements. To top it off, working remotely has also brought potential issues with overtime, misclassification of workers, or privacy issues.

Take away
Retailers are rightly concerned about the threats of class action lawsuits and employment litigation. These cases will likely continue to be a major source of anxiety and disruption when they occur, and in many ways represent the unfortunate cost of doing business in modern society.